One drugstore formed an alliance with drug producers and primary wholesalers in Beijing on Monday, aiming to profit from high sales while providing consumers with lower-price drugs.

Chen Jinliang, board chairman of Tiantian Hao Drugstore Co. Ltd, said the move would sidestep intermediate suppliers and form a transparent and direct supply channel, the savings from which would be passed onto customers.

The alliance was initiated by the Hangzhou-based drugstore, a newcomer to the capital's pharmaceutical market, and was joined by around 20 drug manufacturers and wholesalers.

They included renowned producers Minsheng Pharmaceutical Group, Sanjiu Medical and Pharmaceutical Co., Guangzhou Baiyunshan Pharmaceutical Co., Guizhou Shenqi Pharmaceutical Co. and wholesalers Beijing Fengkecheng, Beijing Jingxinlong.

From August 25, according to the agreement, 3,000 of the most popular products will have their prices cut, some by as much as 90 percent.

The prices of 500 kinds of drugs will be set at wholesale price levels, a first for China, and is expected to result in huge savings for customers.

Niu Zhengqian, vice general manager of Beijing Fengkecheng, said cut-price drugstores can still make profits through large-scale sales despite cutting profit margins from around 15 to 7 or 8 percent.

Tiantian Hao's strategy would have a notable impact on other drugstores in its vicinity, said Niu, but its effect on citywide prices would be quite limited.

Beijing chain drugstores' sales income was 2.6 billion yuan in 2004, and the market is dominated by large firms like Yibao Quanxin Drugstore, Jinxiang Drugstore and Tongrentang Drugstore.

Zhang Zhengrong, general manager of Jinxiang, said they will not be following suit in reducing drug prices.

High drug prices in hospitals and big drugstores are a common source of complaint across China.

(China.org.cn by Yuan Fang, August 25, 2005)