Roundtable Dialogue: Opportunities and Challenges of Digital Marketing and Retail in the Pharmaceutical Industry Amid the Pandemic

From its initial detection to full-blown outbreak, the COVID-19 pandemic spread from Wuhan to all 31 provincial-level administrative regions across China, and subsequently escalated on a global scale. Its unprecedented duration and vast scope of impact exceeded the expectations of every Chinese citizen. Many industries, such as catering, hospitality, and tourism, were plunged directly into a “deep freeze,” with business operations coming to a standstill.

Amid the ongoing global pandemic, some industries have turned the crisis into an opportunity; for instance, the pharmaceutical sector has seen its comparative advantages come to the fore during this outbreak.

What Opportunities and Challenges Do Digital Marketing and Retail Face in the Pharmaceutical Industry? Recently, VCBeat launched the VB Group Interview – Roundtable Forum. Li Sirui, General Manager of the Strategic Development Center at Tasly Holding Group (Moderator), Xia Yu, CEO of Beijing Dekai Pharmaceutical Technology Co., Ltd., Gao Jianfei, Founder and CEO of Yibai Technology, and Yu Jurong, Partner at Qingke Capital/Qingke Medical Investment, four industry leaders, engaged in an in-depth discussion on this topic. VCBeat has summarized their insightful viewpoints.

Xia Yu, CEO of Beijing Dekai Pharmaceutical Technology Co., Ltd. (hereinafter referred to as “Dekai Pharmaceutical”), stated that the company’s business volume increased two- to threefold following the outbreak of the pandemic. “The epidemic struck suddenly. On the fourth day of the Lunar New Year, we urgently mobilized resources, our warehouses began operating overtime, and all other staff members switched to remote work.” He noted that during the pandemic, Dekai Pharmaceutical supplied over one million face masks to society and maintained substantial stockpiles of medications for chronic diseases.

He analyzed that the current epidemic has brought significant growth to mobile healthcare. Since many mobile healthcare supply chains are pharmaceutical e-commerce platforms, the explosion of mobile healthcare has in turn driven up the performance of pharmaceutical e-commerce. In the case of Dekai Pharmaceutical, its supply chain business in mobile healthcare has increased by about 10 times.

Furthermore, online pharmaceutical sales to consumers (B2C) have grown by approximately 2.5 times, while online-to-offline (O2O) services have seen a 20- to 30-fold increase. Significant changes are evident in the product category structure. “Before the Lantern Festival, products with strong pandemic-related demand, such as face masks, antiviral oral liquids, and alcohol-based disinfectants, experienced substantial fluctuations in sales volume. After the Lantern Festival, data monitoring indicated an accelerated growth rate in the sales of medications for chronic diseases,” said Xia Yu. He added that during the tail end of the epidemic, concerns about offline purchases would drive another wave of growth in chronic disease medications. Moreover, this epidemic will have a lasting impact on and alter consumer habits.

The three-month-long epidemic has made staying indoors the norm for people across China, with obvious impacts on pharmaceutical consumption. So, what is the situation like on the B2B side? Gao Jianfei, founder of Medibai Technology, shares his insights.

Gao Jianfei pointed out that the pandemic has accelerated the digital marketing transformation of pharmaceutical companies.

Yibai Technology is a provider of digital transformation services for pharmaceutical marketing. Its self-developed, one-stop SaaS cloud service for pharmaceutical marketing enables pharmaceutical companies to build exclusive digital transformation platforms for their marketing operations. To date, the company has served more than 200 leading pharmaceutical enterprises.

Gao Jianfei stated that pharmaceutical companies primarily rely on offline marketing, and due to the impact of the pandemic, most of their operations have come to a standstill.

“Yibai’s employees returned to work on the third day of the Lunar New Year, operating under intensive and overloaded conditions every day. Our business volume has increased fivefold compared to before,” said Gao Jianfei. He noted that the pandemic “urged” pharmaceutical companies to make changes to meet market demands. “This actually reflects an explosive growth in demand for digital tools among pharmaceutical companies, affirming the necessity and future trend of digital transformation,” Gao commented.

“He explained that for pharmaceutical companies, Yibai serves as a technology provider, helping them deliver better services. ‘Essentially, we treat enterprises as users requiring in-depth research support. Through a suite of digital tools, we help pharmaceutical companies build platforms in a cost-effective and efficient manner, enabling lower-cost, higher-efficiency outreach and service delivery,’ said Gao Jianfei.”

He explained that by covering more than 30 application scenarios in pharmaceutical marketing, including departmental meetings, satellite symposia, case collection, and surgical demonstrations, Yibai can help enterprises accumulate content, data, and users such as physicians, pharmacy staff, and patients, all of which can be leveraged on a long-term basis.

“Our platform provides surgical guidance, enabling two doctors in Wuhan to remotely guide a physician at a county-level hospital in image interpretation and successfully perform a surgery, thereby driving sales of medical consumables,” said Gao Jianfei. He added that, from another perspective, Yibai has efficiently helped pharmaceutical companies migrate their offline operations online.

Li Sirui, General Manager of the Strategic Development Center at Tasly Holding Group, expressed agreement with the view that pharmaceutical companies are accelerating their digital marketing transformation. He pointed out that Tasly has been preparing for its digital strategic layout and had already partnered with Yibai Technology as early as last year. “The impact of the pandemic has significantly strengthened Tasly’s resolve in pursuing digital innovation and transformation,” said Li Sirui.

From the perspective of retail channels, Xia Yu, CEO of Dekai Pharmaceutical, summarized the following trends. He believes that: 1. The proportion of online sales in pharmaceutical retail will gradually increase. This trend will help narrow the price differences of drugs across regions; in addition, the market space for OTC drugs and health supplements will expand, leading to intensified competition. Manufacturers with strong capabilities in source control, supply chain circulation efficiency, and refined user operations will stand out in the competition.

II. Brick-and-mortar pharmacies will actively embrace digitalization. “Since the outbreak of the epidemic, many brick-and-mortar pharmacies have come to recognize the importance of digitalization. The ‘Smart+’ upgrade initiative will be officially launched, enabling physical pharmacies to create and implement more innovative retail models and services. Key focuses of their digital transformation will include improving membership operation efficiency and expanding service offerings,” said Xia Yu.

3. Promoting the intelligent upgrading of the distribution sector, with fast and convenient applications serving as the key lever. Many chain pharmacies are already undergoing digital transformation; 4. The pharmaceutical segment of O2O platforms is accelerating its development, driving advancements in various aspects of logistics technology. “On February 19, Meituan released its Big Data Report on the 2020 Spring Festival Economy. The report showed that during the Spring Festival holiday, consumers purchased more than 5 million face masks via Meituan Waimai (Meituan Food Delivery), with nearly 200,000 units of vitamin C sold, over 200,000 units of Chinese proprietary medicines for cold and fever relief, and a 237% increase in sales of commonly stocked prescription drugs,” pointed out Xia Yu.

4. The prescription drug market will emerge as a new blue ocean, with the formation of a closed-loop payment system expected to achieve breakthrough progress. “In particular, policy support will accelerate the development of the prescription drug market. Document No. 10 issued by the National Healthcare Security Administration in 2020 stated that the electronic healthcare security certificate should be fully promoted and applied, and that all regions should realize its application in scenarios such as online medical consultations, medication purchases, public service inquiries, and personal insurance enrollment information queries by the end of August,” said Xia Yu. He noted that the intensified policy measures would directly address individual healthcare security issues.

Furthermore, in 2019, online pharmacies and hospital-adjacent pharmacies maintained high growth rates of 30% and 36.8%, respectively, representing relatively robust expansion. In contrast, the growth rates of other terminal channels were all below 10%, marking a notable shift in the pharmaceutical retail market. It is anticipated that the market size of pharmaceutical e-commerce and internet-based pharmaceutical services will experience substantial growth in 2020.

Yu Jurong, Investment Partner at Zero2IPO Capital and Zero2IPO Healthcare, stated, “Digitalization” acts as a catalyst in the operations of the pharmaceutical industry; traditional enterprises need to embrace it, or rather, accelerate their adoption.

She pointed out that over the past two decades, digital technologies have been adopted across various touchpoints, from regional levels to individual hospitals. From the perspective of marketing expenditures, costs have generally remained high. The growing acceptance of digitalization on the consumer side has significantly improved the efficiency of the entire pharmaceutical distribution chain. Digitization can reduce corporate marketing expenses by approximately 30% to 50%.

In the past, traditional enterprises often failed to meet expectations during digital transformation, from conception to implementation, due to an inadequate understanding of business needs. With policy changes, traffic trends in the pharmaceutical market are shifting from first-tier cities like Beijing, Shanghai, and Guangzhou to extensive grassroots markets, and gradually moving from within hospitals to outside them. Digitalization plays a facilitating role in significant structural changes for the future.

“Regarding digital empowerment on the commercial side, how to leverage internet tools to address the traditional scenario of offline physician visits, reduce labor dependency, utilize more efficient digital tools, and precisely calculate marketing ROI is a long-term trend,” stated Yu Jurong. In addition, some pharmaceutical companies have begun building B2C platforms on the supply side to deliver efficient services. Overall, although the pandemic had adverse effects, it has, in retrospect, accelerated the digital transformation of the entire pharmaceutical industry.

According to statistical analysis by Zero2IPO Capital, the market size of pharmaceuticals at the terminal level reached RMB 1.7 trillion in 2018, with a growth rate of 6.3%, marking a significant slowdown compared to the 15% growth rate recorded in 2013. Yu Jurong pointed out that three clear trends can be observed from changes in terminal sales volume.

I. The pharmaceutical market is gradually shifting its focus from tertiary and secondary hospitals to primary care institutions. “Pressure on pharmaceutical marketing channels has increased. In the past, medical representatives primarily needed to influence physicians at tertiary hospitals. Now, they must engage with a broad base of clinicians in primary care hospitals, which significantly increases the workload. This transition requires better tools, such as digital solutions, to help address these challenges,” said Yu Jurong.

II. Pharmaceutical companies are gradually shifting from offline to online channels. Yu Jurong introduced that the pandemic has accelerated this trend. “How can dozens of offline academic conferences originally scheduled for this year be conducted smoothly? Or, more specifically, how can they be moved online while still ensuring the original effectiveness? This is a question pharmaceutical companies are grappling with. It is believed that after the pandemic, this will become a core capability that major pharmaceutical companies need to develop,” Yu Jurong pointed out.

3. Changes in Medication Structure Require Strategic Planning for New Retail Pharmaceutical EnterprisesFollowing the implementation of the “4+7” volume-based procurement policy within hospitals, terminal drug prices have dropped by more than 50%. Consequently, medications for condition improvement are gradually shifting from hospital settings to out-of-hospital channels, primary care institutions, and online platforms. For new retail pharmaceutical enterprises, it is crucial to accurately identify users amidst high traffic volumes, establish meaningful engagement with them, ensure efficient drug delivery, and help chronic disease patients improve their medication adherence.

Digitalization in Pharmaceuticals and Healthcare: Which Sectors Offer Significant Opportunities? Which Types of Companies Will Win the Favor of Capital?

Yu Jurong pointed out that there is still substantial demand in the B2C and B2D markets. In the future, within the therapeutic areas of improvement-oriented medications where end consumers possess decision-making power, representative companies will be able to complete initial public offerings (IPOs) in the capital markets, and even maintain strong and sustained capital performance post-IPO.

She noted that currently, one-third of patients prescribed medication have the authority to make purchasing decisions (i.e., they can independently choose manufacturers and brands). As public expectations for personal health continue to rise, there will inevitably be a greater demand for autonomy in selecting lifestyle-enhancing medications. In this context, both the acute-care medication market within hospitals and the out-of-hospital market for self-paid, lifestyle-enhancing drugs present significant opportunities for digitalization.

“We favor companies that can effectively control labor and time investments in B-to-D and B-to-C sectors, while continuously optimizing costs and expenses. Companies with high return on investment that surpass the industry’s traditional operational efficiency will continue to attract attention,” said Yu Jurong.