Traditional Pharma Embraces Internet Hospitals After 25 Years of Offline Growth

In the first half of this year, VCBeat analyzed the development status of 497 internet hospitals as of April 30. While comprehensive internet hospitals held an absolute advantage in terms of quantity, specialized internet hospitals carved out unique growth opportunities by leveraging their professional expertise. By late October, the National Health Commission reported that the number of internet hospitals had reached 900, and we have witnessed the rise of more specialized internet hospitals. Our continuous tracking of specialized internet hospitals has brought Shiqiang Internet Hospital, known for its specialized services in andrology, and its mobile diagnosis and treatment platform “Huihui Health,” which supports its online services, into VCBeat’s focus. Meanwhile, Shiqiang Pharmaceutical, the enterprise backing its development, has also drawn our attention.

After 25 years of offline development, this traditional pharmaceutical company has now fully embraced the internet hospital model. What drove this strategic decision? How has the company charted its growth path, structured its innovative business portfolio, and advanced its internet hospital initiatives? VCBeat conducted in-depth field research and interviews, and will subsequently publish a series of articles providing a comprehensive analysis of the explorations and strategic considerations undertaken by this enterprise—originally focused on the manufacturing, R&D, and sales of pharmaceuticals—in building its internet hospital platform.

With keen business acumen and a diligent, pragmatic approach, Yu Luping, founder of Shiqiang Group, started in the pharmaceutical sector and steadily expanded the company. Its headquarters’ intelligent business park is located in Hangzhou National High-Tech Industrial Development Zone (Binjiang), covering an area of 33,000 square meters. The group employs over 3,000 people and operates 280 offices domestically and internationally. Currently, its business spans three major sectors: pharmaceuticals, education, and overseas study consultancy.

 Shiqiang Group Headquarters

Shiqiang Pharmaceutical’s division also started with product distribution and gradually evolved into a large-scale pharmaceutical enterprise integrating drug manufacturing, R&D, and sales. Its flagship product, Fufang Xuanju Capsules, has achieved significant market share and brand recognition in the field of andrology. However, as traditional pharmaceutical companies face development bottlenecks for various reasons today, how to revitalize has become a critical issue that Shiqiang Pharmaceutical must contemplate and address—ultimately,Shiqiang Pharmaceutical has embarked on an internet transformation, fully embracing internet hospitals.

And this is precisely one of the exemplars of internet transformation among traditional pharmaceutical companies.

In 1995, Yu Luping gave up his well-paid job and chose to venture into business. In the same year, the company became the exclusive Zhejiang provincial distributor of "Xuanju Oral Liquid," a traditional Chinese medicine product specializing in the treatment of andrological conditions. While distributing the product,Shiqiang Pharmaceutical began attempting to build its own branded product, “Compound Xuanyu Capsules.”In 2000, this endeavor succeeded when the product “Compound Xuanyu Capsules” officially obtained national production approval.

Shiqiang Pharmaceutical swiftly engaged in pharmaceutical production. After entering into an agreement with a Beijing-based pharmaceutical company for contract manufacturing, Shiqiang Pharmaceutical evolved from merely distributing the "Xuanju Oral Liquid" to transitioning toward contract production of its own branded product, "Compound Xuanju Capsules." However, the challenges it faced were also quite prominent:

On the one hand, the agreement stipulates that Shiqiang Pharmaceutical must independently purchase new product equipment to achieve capacity growth, which significantly increases its cost burden; on the other hand, by outsourcing product processing and manufacturing to third parties, Shiqiang Pharmaceutical is unable to exercise real-time control over the product quality and production capacity of Fufang Xuanju Capsules. For the aforementioned reasons,In 2004, Shiqiang Pharmaceutical, which was experiencing strong growth momentum, opted to build its own manufacturing facility.

 
Shiqiang Pharmaceutical’s modern production and R&D base is located in Tonglu, Hangzhou National High-Tech Industrial Development Zone, China. It comprises two manufacturing sites with a total land area of 113,000 square meters.

Shiqiang Pharmaceutical also began to strategize the development of its own sales team during this process. Initially, Shiqiang Pharmaceutical opted to recruit sales representatives with extensive prior experience in pharmaceutical sales and promotion to market its products. However, it soon became apparent that, due to a lack of confidence in Shiqiang Pharmaceutical’s growth prospects, these sales personnel often adopted a “quick-buck” mentality, aiming to make a fast profit before leaving. Despite substantial expenditures, the marketing outcomes were unsatisfactory.

In view of this,Shiqiang Pharmaceutical has shifted its talent development strategy to recruiting suitable candidates from recent college graduates, gradually building a sales team that aligns with and embraces the company’s philosophy.Ye Dan, who currently serves as the President of Shiqiang Pharmaceutical, was among the first batch of fresh graduates to join the company. Recalling her early days, she said, “When I first joined in 2006, the total headcount was only a little over 80. Today, the pharmaceutical division has grown to more than 2,000 employees, most of whom have stayed with Shiqiang Pharmaceutical since graduation.”

With the factory and sales team established, Shiqiang Pharmaceutical has everything in place; all that remains is the final crucial element.

In 2006, the Shiqiang Pharmaceutical factory was completed and officially began production of Compound Xuanju Capsules, marking the onset of a golden period of development for Shiqiang Pharmaceutical.In 2008, its sales revenue exceeded RMB 100 million for the first time. In the following years, sales continued to double year after year, with the current annual sales of its flagship product reaching RMB 1 billion.

Shiqiang Pharmaceutical encountered a bottleneck in 2017.As national policies drive overall drug price reductions, profit margins for pharmaceuticals have further narrowed, resulting in sluggish growth.

In addition to policy-related pressures, Shiqiang Pharmaceutical had long recognized another issue constraining its development—Sales revenue is primarily derived from core products, and attempted to resolve them. In the early stages of its contract manufacturing development, Shiqiang Pharmaceutical once sought to expand its product portfolio through independent research and development (R&D) of innovative products. However, this endeavor did not yield tangible results. On one hand, the overall sales performance of its flagship products remained robust, reducing the urgency for new product introductions; consequently, the company directed more time and energy toward promoting and selling its existing products. On the other hand, pharmaceutical R&D is characterized by prolonged cycles and significant technical challenges, with most efforts ending in failure. For instance, one product under development has been in R&D for ten years and remains in Phase III clinical trials.

In the event of R&D strategy failure,Shiqiang Pharmaceutical has also ventured into drug distribution.Thanks to the Shiqiang Pharmaceutical sales team, its distributed products often faced supply shortages, with limited production capacity becoming a major bottleneck; meanwhile, some of these distributed products were eventually acquired by listed companies. This has also hindered Shiqiang Pharmaceutical’s progress in its distribution business.

For founder Yu Luping, limited product categories are not the only challenge facing Shiqiang Pharmaceutical. In an era where compliance standards for pharmaceutical sales representatives are becoming increasingly standardized, hidden irregularities—previously enabled by inadequate corporate oversight—will have a significantly adverse impact on the company’s development.The formalization of the profession has become one of the major challenges at hand.

Actually,As early as 2008, Yu Luping began to contemplate the digital transformation.Also in 2008, Hangzhou Shiqiang Education Technology Co., Ltd. was established under his leadership through an “Internet + Education” development strategy. However, in that same year, Haodf Online had just begun introducing its “appointment-based additional registration” service, and its overall operational outlook remained uncertain. At that time, DXY’s co-founders were even forced to mortgage their properties to secure loans for sustaining operations. Meanwhile, WeDoctor’s predecessor, Guahao.com, would not emerge until two years later. Chunyu Doctor did not officially launch until 2011.

“Due to the lack of policy regulations and guidance, online prescription issuance is not permitted, nor is the express delivery of medications.” The unclear prospects and ambiguous policies have kept Yu Luping in a wait-and-see stance. For Shiqiang Pharmaceutical,The real turning point came in 2018.In that year, the National Health Commission and other departments successively issued policies such as the "Administrative Measures for Internet-based Diagnosis and Treatment (Trial)", the "Administrative Measures for Internet Hospitals (Trial)", and the "Specifications for the Management of Telemedicine Services (Trial)". These policies clarified the primary scope of internet-based diagnosis and treatment services and permitted third-party platforms (internet enterprises) to obtain practice licenses for internet hospitals, provided they were affiliated with physical hospitals.

The introduction of policies related to internet hospitals has given Yu Luping hope. Establishing an internet hospital holds the promise of resolving two long-standing issues that have plagued him:First, the issue of income transparency. Internet hospitals can reasonably compensate physicians for medical services and handle tax payments, thereby generating transparent income for doctors while enabling pharmaceutical representatives to focus more on academic promotion. Second, the limitation in product categories. Procurement of various medications through hospital terminal platforms can diversify product offerings.

Shiqiang Pharma, with rapid follow-up strategies,In April this year, Shiqiang Internet Hospital was launched, with a core positioning in the specialty of andrology.Currently, its launched internet hospitals include Hainan Shiqiang Internet Hospital and Tonglu Shiqiang Internet Hospital. For Shiqiang Pharmaceutical, the comprehensive transformation to embrace internet hospitals is tantamount to a “second startup.”

For pharmaceutical companies that have traditionally excelled in offline channels, the transition to the internet has not been without its growing pains. For Shiqiang Pharmaceutical, the biggest challenge actually stems from a lack of understanding within its internal sales team, who struggle to comprehend the company’s current strategy of fully embracing internet hospitals. Nevertheless, for Shiqiang Pharmaceutical, the time has come when transformation is no longer optional but imperative.Embracing internet hospitals is not merely about seeking new growth drivers; it is the key to whether Shiqiang Pharmaceutical can survive in the coming decades.

To accelerate the development of its internet hospital, Yu Luping personally broke down the overall tasks and set clear performance targets for department heads. To foster better team collaboration, Shiqiang Pharmaceutical provided all employees with a three-month period for consideration; choosing to stay meant unconditionally aligning with the company’s strategic adjustments.

In this atmosphere of unity, the number of doctors registered on Hainan Shiqiang Internet Hospital and Tonglu Shiqiang Internet Hospital rapidly exceeded 20,000, with nearly 8,000 active physicians.During the transition, Shiqiang Pharmaceutical is also conducting evaluations. Statistics show that its revenue growth is basically on par with the period when it previously operated offline channels, but the growth trend is significant.Tong Jianjiang, General Manager of the Promotion and Publicity Center at Shiqiang Pharmaceutical, pointed out, “Given that the number of physicians remains unchanged while the number of products on the platform increases, sales growth is inevitable.”

In fact,Shiqiang Medicine fully embraces internet hospitals, with doctors and patients being the most direct beneficiaries.

Some doctors have complained to Tong Jianjiang that patients who purchased 24-hour online consultation services on a certain platform would even ask the doctor about their family members' medical records after finishing their own consultations. Due to platform rules, doctors had no choice but to decline such requests; otherwise, they might face complaints, point deductions, or downgrading. After experiencing this incident, the doctor chose to uninstall the app. "Some internet healthcare platforms are actually increasing the burden on doctors," said Tong Jianjiang.

Patients’ experiences in seeking medical consultation also warrant deep reflection. Yang Yunfeng, head of the Academic Department at Shiqiang, pointed out that a male patient with andrological disorders had traveled to multiple locations within one month in search of treatment, ultimately choosing to visit the most renowned hospital in China. After the physician issued a prescription, the patient was greatly puzzled—the prescribed medication was identical to that prescribed by the doctor he had consulted during his initial hospital visit. This is not an isolated case.

Patients with chronic andrological conditions often exhibit subjectivity in assessing treatment efficacy. Moreover, the need for prolonged pharmacotherapy and adherence to healthy lifestyle habits poses a significant challenge to their compliance and psychological resilience.For an excellent andrologist, possessing extensive knowledge of medical psychology will further facilitate patients' disease recovery.However, in real-world practice, physicians are often overwhelmed by high patient volumes and have no time to consider other factors.

Shiqiang Pharmaceutical’s internet hospital aims to deliver an enhanced service experience for both physicians and patients. Patients can save time and financial costs during online follow-up consultations. Meanwhile, by integrating a health steward service, Shiqiang Pharmaceutical helps address patients’ daily health inquiries and assists physicians in summarizing and prioritizing complex cases that require attention, thereby alleviating the workload burden on doctors.Enhance patient compliance and improve cure rates through higher-quality online medical services.

Through its internet hospital, Shiqiang Pharmaceutical helps physicians better manage patient care while providing patients with a more convenient service experience. However, the currently launched internet hospital platform still requires further improvements, including in areas such as AI assistants and big data integration capabilities.

For Shiqiang Pharmaceutical, establishing an internet hospital is merely the starting point. Leveraging the resources accumulated through this platform, the company is poised to further drive the industrial development of its pharmaceutical operations, including the investment in and R&D of generic drugs and traditional Chinese medicine (TCM) formula granules.

With Shiqiang Andrology Specialty Internet Hospital achieving initial profitability, future expansion promises even broader growth potential.

From VCBeat’s perspective, in an era of stricter oversight of pharmaceutical sales representatives, how traditional pharmaceutical companies can continue to leverage their offline channel advantages is undoubtedly a critical question for every business leader to consider. In the course of fully embracing the transformation toward internet hospitals, addressing this challenge and identifying new growth drivers may well represent the value and significance exemplified by the case of Shiqiang Pharmaceutical.

How has Shiqiang Pharmaceutical aligned its innovative business initiatives following its comprehensive adoption of the internet hospital model? What distinguishes Shiqiang’s internet hospital in the development of specialized andrology care? What pain points in online diagnosis and treatment have been addressed by “Huihui Health,” the mobile clinical platform independently developed by Shiqiang Pharmaceutical? We will continue to publish articles providing in-depth analysis.