Alibaba Blazes a Trail with Online Health Care Pilot
(Beijing) – Villagers in the central province of Hubei recently spoke with doctors hundreds of kilometers away through the Net and then had prescriptions delivered to their doors as part of China's emerging Internet health care service.
Like many fishing villages, Hongshiyuchang has poor public transportation and is far away from major public hospitals. Villagers usually have to spend hours on a bus to get to doctors in nearby cities, but now these isolated villages are having some of their health care needs met by Internet companies.
On January 18, a pilot launched by the e-commerce giant Alibaba Group Holding Ltd. in Hongshiyuchang attracted many villagers who wanted to test out the new medical service. One villager, Hu Tianshun, said that after making a reservation and putting details of his health history online, he was interviewed by a doctor in Wuhan, the capital of Hubei, in a video call. After the diagnosis, the doctor placed an electronic prescription so Hu could order medicine in Alibaba's online shops. Hu got his drugs the next day, and completed the transaction by paying the deliveryman.
Hongshiyuchang is among the several villages that are part of the Alibaba pilot. Over the past two years, the company has provided various services on its e-commerce and payment platforms that allow users to make hospital appointments, buy medicines and pay their medical bills.
"We want to build a health care product sales platform that links manufacturers, wholesalers and retailers to offer various medical products and services to customers," said Ni Jianwen, vice president of Alibaba's health business division.
Other Internet companies are also eyeing the online health care sector. Tencent Holdings Ltd. has invested more than US$ 100 million in the medical service provider We Doctor Group, also known as Guahao. In December, We Doctor launched the country's first Internet-connected hospital in Wuzhen, in the eastern province of Zhejiang.
According to market research group iResearch, the country's online medical service sector had revenue of 10.9 billion yuan in 2014, up from 200 million yuan in 2009. The figure for last year would be about 16 billion yuan, iResearch predicted.
Alibaba announced its Future Hospital strategy in May 2014. The first stage of the plan is to offer online reservation, payment and health check reports for users. Next, the company wants to sell prescription drugs and delivery services. Finally, Alibaba plans to cooperate with medical institutions and equipment manufactures to offer disease prevention and health management services based on its data analysis technology.
Alibaba says its online and mobile platforms have allowed 400 major hospitals nationwide to offer reservation and payment services to more than 50 million people. The pilot in Hubei would be part of the second stage of the Internet company's plans.
Alibaba's Hubei pilot has partnered with the Central Hospital of Wuhan, a major public hospital. Central Hospital agreed to offer medical inquiry services from 13 of its departments, including gastroenterology, endocrinology and dermatology.
"The cost to cooperate with Alibaba is not high," said Sun Changlin, the Communist Party chief of the hospital. "We just established an Internet office and assigned doctors from different departments to take up rotating duty for the online inquiries."
The partnership with Alibaba is part of the hospital's plan to divert some of its patients to smaller hospitals to reduce its workload, Sun said. It is a response to central government's reform plans announced last year that call for using Internet technology to direct patients to different medical institutions based on their needs to reduce the pressure on big hospitals and improve the efficiency of medical resources.
Sun said the partnership with the Internet giant generates no profit for his hospital, but he expected benefits down the road because "Alibaba can bring valuable traffic to the hospital."
Tencent also wants to be part of the trend. In September, We Doctor announced a plan to invest US$ 300 million to set up an online medical service platform within five years that would link 1,600 hospitals nationwide in offering offer online reservations, diagnoses and payment services.
In December, We Doctor launched its Wuzhen Internet Hospital to offer online medical services. It is based at the Tongxiang No. 3 People's Hospital, in Jiaxing, Zhejiang Province, in which We Doctor holds a controlling stake.
However, Sun said online medical services face limits because "many diagnoses need to be checked onsite, so Internet hospitals mainly focus on referrals and chronic disease management."
Liu Qian, an independent Internet medical service analyst, said that how well Internet companies help hospitals redistribute patients remains a question because the relationships between medical facilities are complicated.
Another obstacle facing Alibaba and Tencent is how to get their medical services covered by the national medical insurance system. Ni said due to the different regional policies, Alibaba's drug sales receipts sometimes are not accepted by local medical insurance authorities, creating difficulties for people buying medicines from the Internet firm.
Before it partnered with Central Hospital, Alibaba sought cooperation with hospitals in Beijing and the northern province of Hebei, but failed, said a source close to the matter. The problem was that "Alibaba can't offer benefits to the hospitals," he said.
For hospitals, partnering with Alibaba to offer online prescription means they would allow patients to buy medicines from the Net firm's online pharmacies, giving up a business that accounts for nearly 70 percent of a public hospital's revenue.
The cooperation with Central Hospital was timely. In August, Wuhan severed the links between hospital income and drug sales. Instead, public hospitals in the central city were allowed to raise their prices for medical services to offset the loss.
The most important aspect of Alibaba's pilot in Wuhan is the access it gives Alibaba to a doctor writing prescriptions, the source said. "Electronic prescriptions can form a great medical database that is likely to create business value," he said.
Nearly 90 percent of prescription drugs sales are controlled by hospitals. If they are opened up to the market, total sales, including prescription drugs and over-the-counter (OTC) medicines, will hit 3 trillion yuan, predicts UBS Securities. OTC sales currently stand at about 200 billion yuan.
As part of the Hubei pilot program, Alibaba cooperates with Haoyaoshi Pharmacy Co., a subsidiary of China's largest private medicine distribution company, Jointown Pharmaceutical Group Co. After prescriptions are placed by doctors at the Central Hospital, Alibaba will send the orders to Haoyaoshi's online store and then deliver the medicines to villagers.
A person close to Jointown said deliveries handled under the pilot are being done for free, with Jointown and Alibaba sharing the costs. The question is how long this can be sustained.
"Logistics need big volumes to reduce costs," said Liu, the analyst. "If the volume can't increase quickly, it will be difficult to sustain."
And competition in the new field is already grower fierce. The China Medical Pharmaceutical Material Association said that between 2010 and 2013, online medicine sales in the country grew 250 percent every year on average. And the number of online pharmacies has risen accordingly, to 249 in 2014 from 35 in 2010. Some 10 billion yuan worth of medicines were sold online in 2014.
Alibaba's major e-commerce rivals, JD.com and yhd.com, have both gotten licenses from the government to sell medicines online. "With so many competitors joining in the game, it will be difficult for Alibaba to dominate the market," Liu predicted.
Alibaba will also face challenges with replicating the Hubei pilot elsewhere. An industry expert said it will need to find more partners to expand the pilot, but the arrangement with Central Hospital has many special features. "It will be difficult to find partners with those same features," the expert said.
(Rewritten by Han Wei)
- WeChat 'Glitch' Allows Family to Raise over 2 Million Yuan in 80 Minutes
- China's VAT Rebate Reform Aims to Boost Local Government Fiscal Strength
- Share Splits Raise Stock Market Suspicions
- China Faces Severe Coal Transport Capacity Shortage
- Audi Scraps Plans for New China Dealer Network
- Regions Found to Have 'Critical' Heavy Metal Emissions Now Clean Up Act
- Official PMI Spikes as Producer Prices Rise, Exports Surge
- China Adds 10% Consumption Tax for Superluxury Cars
- News Calendar, December 5-11
- Caixin's Manufacturing Indicator Dips to 50.9 in November
- Sign up to receive our free daily newsletter