Sinopharm, Mitsubishi Tie Up to Create Chinese Medical Supplier

Sinopharm Group Co., China’s top drug distributor, teamed with Japan’s Mitsubishi Corp. (8058) to form a medical supplies distributor to slash the rising cost of healthcare in Asia’s biggest economy.

Sinopharm MC Hospital Services Co., based in Shanghai, will add to the two Beijing-based pharmaceutical wholesalers the partners took over this year with Tokyo-based Medipal Holdings Corp. (7459), Mitsubishi said today in a statement.

Healthcare is a growing market for Japan’s trading houses, with Mitsubishi already the biggest medical supplies provider at home. Mitsui & Co. (8031), Mitsubishi’s biggest domestic rival, made its largest investment outside commodities in 2011 by paying $1.1 billion for a minority stake in Kuala Lumpur-based IHH Healthcare Bhd (IHH), Asia’s top hospitals operator.

Led by Japan, South Korea and China, Asia is the fastest aging region in the world and is set to account for 60 percent of the world’s elderly by 2030, according to Mitsui. China will have 300 million people 65 and over by that period, while its rural market for healthcare is growing at 18 percent a year, Boston-based Lux Research said in a report last year.

The medical supplies market in China grew to 157 billion yuan ($25.8 billion) last year, more than double the 69 billion yuan in 2008, according to Mitsubishi.

A “complex distribution network” of drug sellers that may be 100 times larger than Japan’s and inefficient management are behind China’s push to cut medical services costs, Mitsubishi said.

China’s Ministry of Commerce in May warned of a rapid rise in drug distribution costs in the country. Hong Kong-listed Sinopharm is controlled by state-owned China National Pharmaceutical Group Corp.

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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