Cardinal Health has agreed to sell its Chinese pharmaceutical distribution business to Shanghai Pharma for $557 million, Reuters reports. The sale was driven by Cardinal’s concerns about forthcoming changes to drug distribution politics. As outlined in Panjiva research of November 14 there appears to be significant growth potential in Chinese pharmaceutical imports, with shipments equivalent to $12 per capita currently, just 1/18th the level of those in the U.S. While the Chinese government may want to promote domestic production, it does indicate the scale of growth opportunity.

Shanghai Pharma had already been aggressively building market share in terms of industry imports. Panjiva data shows its imports of pharmaceuticals have grown by 29.8% annually year-to-date on three years ago, compared to the industry overall which expanded by 9.2%. The industry is significantly fragmented however, with the top 10 importers holding a share of just 39.8% in total. Further consolidation can be expected, with Shanghai Pharma already looking for new opportunities, Bloomberg reports.

Chart compares imports of pharmaceuticals to China by Shanghai Pharma (blue) vs. the industry average (orange) on a quarterly trailing basis. Source: Panjiva