Restrictions on the pharmaceutical retail business in Beijing are expected to be eased this year, which could trigger price wars as many enter the lucrative market.

The Beijing Municipal Drug Administration will make the procedure of applying for opening medicine stores much easier in July, Beijing Star Daily reports.

Approval is expected for stores if there is no similar shop within 350 meters. The distance condition will not be enforced in busy commercial streets such as Xidan and Wangfujing, said sources, which means there could be more than one within a radius of 350 meters.

"Right now, for example, the drug administration can reject an application to control the total number of drug stores in the city," an industry insider told China Daily Sunday.

There are fewer than 2,000 drug stores in Beijing but according to international practice, there should be one per 5,000 residents in a metropolis, said Star Daily - which would put the figure at 2,600.

But even before the expected influx of new stores, competition is already hot in the sector.

At least 13 newly opened medicine stores in Beijing have announced lower prices than the average since 2002, when Deweizhi Medicine Shop opened its first "low price" shop.

Many chain stores that have adopted a low-price, low-profit strategy in other regions are now aiming for the medicine retail market of the capital city.

However, industry insiders point out that the mainstay in drug sales is still those with comparatively long histories which stick to their prices.

The main cheap items that the "low price" medicine shops sell are those for minor illnesses such as common cold.

Yiyuantang Drug Store began selling a cold medicine for 1 yuan (US$0.12) while similar medicine costs at least over 10 yuan (US$1.2) in many others.

While Beijing Deweizhi Medicine Shop announced a 25 per cent slashing of prices compared with other stores, the discount is not for every item, the insider said.

A manager of a medicine store said Sunday that he would not lower prices. And neither are the four major chain drug stores in Beijing - Tongrentang, Jinxiang, Yong'antang and Beijing Medicine - likely to do so, he added.

He also revealed that most stores that sell at low prices are more motivated by market share than profit.

"The structure of drug retailing and consumption is changing but also showing signs of maturity and stability in Beijing. Once the mix is set, it is not easy to be changed," he said.

There will be no major price shake-up if the main four chain stores that dominate the Beijing market do not adopt any change, he said.

He also urged better supervision over low-price drug stores.

(China Daily March 8, 2004)