China Jo-Jo Drugstores, a Chinese retailer and wholesaler of pharmaceutical and health care products, has acquired a rival chain.

The acquisition was of the 11-store strong Hangzhou Sanhao Grand Pharmacy Chain Co.

China Jo-Jo sells products direct to customers online and through its own-branded stores

While Sanhao is a small chain, it is strategically important to China Jo-Jo: Of the 11 stores, four have the qualification of Designated Medical Institutions for Social Health Insurance (SHI) and four others have passed the qualification tests. SHI Program is China’s national health insurance plan aimed to provide universal health insurance coverage to Chinese citizens. Only pharmacies with SHI qualification can serve SHI participants, thus acquiring SHI qualification would substantially enhance a pharmacy’s revenue and profitability.

“For example, the sales related to SHI accounted for about 55 per cent of China Jo-Jo’s total sales in fiscal 2014,” the acquiring company said in a statement.

China Jo-Jo plans to relocate or remodel the majority of the acquired pharmacies during upcoming months. After the restructuring of Sanhao Drugstores, the management expects it to generate about RMB 30 million (or US$4.8 million) revenue in calendar year 2015.

Lei Liu, chairman of China Jo-Jo said the synergistic acquisition of Sanhao Drugstores will increase the company’s total store count to over 60.

“We also set our eyes on some key geographic locations in Hangzhou which allow us to expand our store penetration. We believe the investment will bring satisfactory economic benefits to our shareholders in the coming years.”