The Sword of Damocles in Internet Healthcare Falls: Medicine as Medicine, Drugs as Drugs, and AI as Technology
After three years, the “other shoe” has finally dropped on the regulation of internet-based medical consultations.
On October 26, the National Health Commission released the “Announcement on Soliciting Public Comments on the Detailed Rules for the Supervision of Internet-Based Diagnosis and Treatment (Draft for Comment)” (hereinafter referred to as the “Draft”), which covers multiple aspects including supervision of medical institutions, personnel, business operations, quality and safety, and regulatory responsibilities in internet-based diagnosis and treatment.
Data from the National Health Commission shows that since the first internet hospital in China was established in Wuzhen in 2015, the number of internet hospitals in China has exceeded 1,600 as of June this year. For the rapidly developing internet healthcare industry, the introduction of the Draft Opinion will mark an end to the past “wild growth” and usher in a phase of standardized, high-quality development.
The implementation of the detailed rules in the “Draft Opinion” has simultaneously sent a clear signal: internet-based diagnosis and treatment must achieve maximum “homogeneity” with the services provided by physical medical institutions, thereby repositioning internet-based diagnosis and treatment to its core role of “delivering serious medical care.”
The future implementation of new regulatory rules will also have varying degrees of impact on various medical institutions and enterprises providing internet-based diagnosis and treatment services. Overall, the comprehensive oversight sought by the Draft Opinion significantly raises the entry threshold for the industry, which benefits internet-based diagnosis and treatment platforms with robust technological and operational foundations that primarily provide serious medical services. Meanwhile, it poses severe challenges to the prescription drug-related businesses of platforms whose core operations are pharmaceutical e-commerce.
The Draft Opinion proposes explicit prohibitions on certain internet-based diagnosis and treatment activities and prescription practices. “Physicians must undergo real-name authentication prior to patient consultations to ensure that they personally conduct the consultations. Other personnel or artificial intelligence (AI) software are prohibited from impersonating or substituting for physicians in conducting consultations.” This requirement restricts current market practices where AI technologies are used to provide consultation services, thereby preventing various platforms from employing unlicensed practitioners or AI software as tools for patient consultations and prescription issuance.
“The occurrence of issues such as unauthorized compilation of prescription data and retroactive prescription writing is prohibited,” “The personal income of healthcare professionals must not be linked to revenue from pharmaceuticals and medical tests,” and “Physicians are not allowed to designate specific locations for the purchase of medicines and consumables.” This signifies an “isolation” between internet-based diagnosis and treatment services and drug sales activities, preventing internet healthcare platforms from “distorting” clinical services into marketing tools for prescription drugs. It also poses challenges to certain market segments, including the outflow of prescription drugs from hospitals and Direct-to-Patient (DTP) pharmacy operations.
The Draft Opinion implements digital oversight across the entire process of internet-based diagnosis and treatment, aiming to foster industry-wide development in China under a unified regulatory framework. Once the detailed rules of the Draft Opinion are implemented, entry barriers for the sector will rise, leading to the exit of small, fragmented, and less competitive players. Large-scale internet diagnosis and treatment platforms with sophisticated technological infrastructure and mature operations—characterized as “high-end, specialized, and advanced”—will benefit from the industry’s standardized management.
As proposed in Article 14 of the Draft Opinion, medical institutions shall share information on medical personnel engaged in internet-based diagnosis and treatment activities with the provincial-level regulatory platform. Article 20 stipulates that electronic prescriptions, prescription audit records, and prescription review records of medical institutions shall be traceable, and data interfaces shall be opened to the provincial-level regulatory platform.
In addition, the Draft Opinion sets forth multiple requirements for the information technology platforms of internet hospitals. For instance, it stipulates that institutions providing internet-based diagnosis and treatment services must establish dedicated departments to manage medical quality, medical safety, pharmaceutical services, information technology, and other related operations. It further requires that electronic medical record (EMR) data generated during internet-based diagnosis and treatment be shared with the EMR system of the affiliated physical medical institution, thereby achieving integrated online-offline quality control. Moreover, it proposes the implementation of cybersecurity measures and compliance with Level 3 or higher of the Multi-Level Protection Scheme (MLPS) for platform information security.
The above requirements all impose demands on the digital capabilities of entities providing internet-based medical consultation services. Therefore, possessing appropriate digital health infrastructure, along with relevant technical capabilities and operational management experience, will become a critical prerequisite for compliant operations.
The classification of internet hospitals and the definition of their scope of diagnosis and treatment proposed in this Draft Opinion continue the rules established in previous documents. Aligned with a series of policies favorable to industry development, it serves to protect the standardized, healthy, and sustainable growth of the internet healthcare sector while supporting innovative new business models.
In August 2019, the National Healthcare Security Administration issued the Guiding Opinions on Improving Pricing and Medical Insurance Payment Policies for “Internet+” Medical Services, proposing that “in principle, online and offline medical services shall be subject to unified management.” In March 2020, the National Healthcare Security Administration and the National Health Commission jointly released the Guiding Opinions on Promoting “Internet+” Medical Insurance Services During the Prevention and Control of the COVID-19 Pandemic, reiterating that “in principle, online and offline medical services shall be subject to unified management.”
Following the formal implementation of the newly released “Detailed Rules for the Supervision of Internet-based Diagnosis and Treatment,” the establishment of unified standards for internet-based diagnosis and treatment services, along with the realization of data interconnectivity and sharing, will further facilitate large-scale reimbursement of such services by the basic medical insurance fund. Under a nationally standardized framework for internet-based diagnosis and treatment, healthcare security authorities can more readily incorporate compliant and standardized online diagnostic and therapeutic activities into the scope of online medical insurance coverage.
This development will serve as a new boost for internet hospital platforms that have already been integrated into online medical insurance payment systems across various regions. In fact, whether services are covered by medical insurance has become the “gold standard” for assessing the “value” of online diagnosis and treatment services. The inclusion of medical insurance, as the largest single payer, will clearly facilitate the further expansion of China’s online diagnosis and treatment service market.
It is also worth noting that the regulatory guidelines do not impose requirements on the scope of charges or pricing for internet-based medical consultations. This implies that the guidelines delegate pricing authority to the institutions providing such services. Specifically, public medical institutions adopt non-profit pricing in line with public hospital standards, while market-oriented third-party platforms operate according to market principles. This arrangement is also beneficial for for-profit internet-based medical consultation platforms in building their own competitiveness.