New Trends in Prescription Referral Platforms in 2019: Pathways to Realizing Separation of Medical and Pharmaceutical Services
Editor’s Note: This article is reprinted from 21st Century Pharmacy, authored by Zhu Shaohui. Republished with permission by VCBeat.
Prescription outflow has been a hot topic in the past two years. From the perspectives of policy evolution, technological advancement, and industry exploration trends, the separation of prescribing from dispensing will continue to advance, making prescription outflow an inevitable trend. For the market, the structural adjustment of pharmaceutical distribution channels brought about by prescription outflow represents both a restructuring of existing resources and a new growth engine.
“Industry players are generally exploring effective pathways for prescription outflow through five models: hospital-adjacent pharmacies, specialized pharmacies, pharmacy-clinic hybrids, internet healthcare plus e-commerce, and prescription-sharing platforms.” This was stated by Xu Xiaoliang, Deputy Dean of the China Pharmacy Management Institute, at its 2018 annual conference. Other industry insiders remarked that the outflow of prescriptions from hospitals can be summarized in eight Chinese characters: “An inevitable trend, yet a tortuous path.”
As the outflow of prescriptions creates a market worth hundreds of billions of yuan, various stakeholders are making predictions and strategically positioning themselves. As key recipients of this prescription outflow, what are the respective strengths and weaknesses of pharmacies, pharmaceutical e-commerce platforms, and distribution companies in terms of prescription acquisition, drug supply assurance, and pharmaceutical care services? What trends will emerge in the future?
Pharmacies are among the key recipients of outpatient prescription outflow, and policy initiatives primarily direct this flow toward retail pharmacies. However, critical challenges remain for every manager in the pharmaceutical retail industry: How to secure prescriptions? Which stores are qualified to fulfill them? And how to better meet the medication needs of patients with chronic diseases requiring long-term prescription drugs?
Last year, Qingdao Tongfang established a dedicated out-of-hospital market department and launched 20 strategically located off-site pharmacies to facilitate the outflow of prescriptions and related business initiatives. However, “While prescription outflow presents significant market opportunities, I believe not every enterprise will be able to capture this share. Brand-name pharmaceutical companies with strengths in prescription drugs will choose to partner with high-quality chain pharmacies,” said Wang Yuanxi, Chairman of Qingdao Tongfang Pharmaceutical Chain Co., Ltd. He indicated that strengthening communication with branded pharmaceutical manufacturers and continuously expanding the company’s scale may be a more pragmatic strategy.
Recognizing the favorable policy trends and leveraging their own scale and resource advantages, leading pharmacy chain and distribution companies—including Guoda Pharmacy, Yifeng Pharmacy, Laobaixing Pharmacy, Jointown Pharmaceutical Group, China Resources Pharmaceutical, and Shanghai Pharmaceuticals—are actively positioning themselves for the outflow of prescription drugs from hospitals by continuously enhancing their professional service capabilities.
For chain pharmacies, establishing stores in strategic locations near hospitals has been one of the earliest and primary means to capture prescription outflows from hospitals. According to relevant data, by the end of 2017, Guoda Drugstore had opened 253 stores in the vicinity of hospitals. However, operating such “hospital-adjacent” stores requires a comprehensive portfolio of hospital-formulary drugs, access to high-quality retail locations, and entails significant operational costs. Consequently, this model is not an optimal choice for widespread adoption and replication by small and medium-sized chain pharmacies, making it more suitable for enterprises with integrated wholesale and retail operations.
DTP (Direct-to-Patient) business is not only a new highlight of retail transformation but also a favorable recipient of prescription outflow from hospitals. Its distinguishing feature lies in attracting prescriptions to pharmacy platforms and converting them into sales through professional services. In recent years, Laobaixing Pharmacy has vigorously developed its DTP specialty pharmacies by establishing dedicated departments to handle DTP-related affairs, strengthening the layout of stores adjacent to hospitals, and proactively engaging in communication and cooperation with upstream manufacturers. Early this year, it convened with numerous specialty drug suppliers to jointly explore future strategic DTP collaborations, as well as pathways for operational service excellence and innovative development. Currently, DTP pharmacies in China are primarily distributed across first- and second-tier cities and are predominantly operated by state-owned enterprises, leading chain pharmacies, and companies with wholesale backgrounds, such as Cardinal Health Baiji under Shanghai Pharmaceuticals, CR Pharma’s Yibao Quanxin, Guoda Drugstore, and Intereyear under Zhejiang International Business Group.
Undeniably, specialty pharmacies represent an inevitable direction for retail development and serve as a robust model for accommodating the outflow of prescriptions from hospitals. However, they also face numerous challenges, such as difficulties in gaining patient trust, with patients’ medication decision-making power still resting primarily with physicians who tend to favor hospital channels; significant financial pressure on overall pharmacy operations; the need to enhance comprehensive service capabilities; uneven quality of hardware facilities; and issues related to prescription review and verification. Whether establishing hospital-adjacent pharmacies or Direct-to-Patient (DTP) pharmacies, reliance solely on the pharmacies themselves is far from sufficient. Multi-party collaboration is essential, particularly cooperation with upstream pharmaceutical manufacturers.“In the future, we will see the emergence of professional online DTP pharmacies and DTP specialty pharmacies backed by commercial insurance. Whole-course disease management will become a key competitive factor. Medical insurance policies will reshape the landscape of regional DTP pharmacies, prompting DTP pharmacy services to become more comprehensive and extend further both upstream and downstream,” said Zhang Jinhua, General Manager of the E-commerce Branch of Inte Pharmaceutical.
Prescription-sharing platforms represent a key model for the outflow of prescriptions and serve as an important application scenario for electronic prescriptions. Companies such as Shenzhen Youdeyi, WeDoctor, and Yi Fuzhen are actively expanding into this sector. In recent years, cities including Xi’an, Chengdu, Qingdao, Tianjin, Lanzhou, and Haikou have successively introduced policy documents conducive to prescription outflow.
In May 2017, Wuzhou, Guangxi, launched China’s first third-party prescription sharing platform, becoming the country’s first implementable pilot project for prescription information sharing. Partnering pharmacies included local chains such as Wuzhou Baixing Pharmacy and Jiajin Chain. The “Wuzhou Model” is characterized by its reliance on the Yifuzhen third-party prescription sharing platform to establish a connected ecosystem among hospitals, medical insurance providers, pharmacies, and patients. After receiving a medication pickup code via SMS or a paper prescription, patients can independently choose to pick up their medications and make payments either at hospital pharmacies or at participating shared-network pharmacies.
On July 1 last year, the “Wuzhou Model” added a function for prescribing refills for chronic disease follow-up visits, expanded the scope of medication access for patients with chronic diseases, and opened the pooled medical insurance account to retail pharmacies, enabling patients to more conveniently access hospital-extended services and out-of-hospital medication purchase services.
In the long run, prescription-sharing platforms hold certain advantages in terms of prescription access and pharmaceutical care capabilities, offering greater safety and reliability. However, widespread replication of this model across China requires support from various local regulatory authorities. During the establishment of the Wuzhou Prescription Information Sharing Platform, relevant officials from the Wuzhou Municipal Health and Family Planning Commission stated, “Whether to allow the extension of prescriptions beyond hospitals must be jointly evaluated by multiple regulatory bodies under the leadership of healthcare reform; each party is indispensable.” For instance, the Health and Family Planning Commission can standardize clinical practices, ensure price transparency, and improve medical quality; social security departments can verify the authenticity of prescription information, coordinate reimbursement, and implement effective oversight; and drug administration authorities can review and certify pharmacy qualifications to enhance pharmaceutical care capabilities.
As one of the pilot enterprises, Kong Jianguang, Chairman of Wuzhou Baixing Pharmacy, stated that for pharmacies, having patients pick up medications at physical stores has enhanced patient trust in the prescription-sharing platform pharmacies. It has also driven foot traffic and increased sales of other pharmaceutical products in stores, thereby strengthening brand empowerment for the chain enterprise. Furthermore, pharmacists at these prescription information platform pharmacies undergo training and internships at hospital pharmacies before assuming their roles, which elevates the professional competency of the pharmacies in pharmaceutical care services. However, chain pharmacies must also optimize their strategic layout. This includes securing greater access to manufacturer resources and product varieties, accelerating deployment near hospitals and allocating capital for store openings in these areas, rapidly establishing teams for home care and chronic disease management, and ensuring the swift integration of information technology.
Internet healthcare companies and pharmaceutical e-commerce platforms are two other significant forces participating in the outflow of prescriptions that cannot be overlooked. With upgrades in internet technology and policy incentives encouraging the pharmaceutical industry to explore the “Internet+” model, an increasing number of enterprises have the opportunity to implement this approach. They primarily provide technical support, remote consultations, electronic prescriptions, resource matching, and online services to facilitate prescription outflow. Representative companies include Ali Health, 111.com, Jianke, and Qilekang.
In January this year, the Health and Family Planning Commission of Kunshan City, Jiangsu Province, and 111 Group jointly signed a strategic cooperation framework agreement on an internet healthcare project to collaboratively explore innovative models in internet-based healthcare. Relevant information indicates that, as the technology provider for this initiative, 111 Group will establish offline medical institutions in Kunshan to conduct related business operations, while also providing internet-based operational services to medical institutions, pharmaceutical wholesalers, and retailers within the Kunshan area. For traditional pharmaceutical retail enterprises, e-commerce companies possess advantages in technology and data; however, due to restrictions imposed by policies on the online sale of prescription drugs, the business expansion of pharmaceutical e-commerce has yet to achieve significant breakthroughs.
Therefore, collaborating with internet hospitals, acquiring hospitals, or adopting a hybrid business model combining B2B, B2C, and O2O operations—by adding remote consultation modules to existing e-commerce platforms and building a new retail ecosystem closed loop of “consultation, prescription, online sales, and offline delivery” based on physicians’ diagnoses and prescriptions—is a crucial approach for pharmaceutical e-commerce companies to sell prescription drugs in compliance with regulations and capture incremental market growth. A number of innovative internet healthcare enterprises, including Ping An Good Doctor, Jianke, Qilekang, and 1 Drug Net, have already established their own ecosystems by acquiring medical institutions, assembling physician teams, and creating online diagnosis and trading platforms.
As internet hospitals and remote diagnosis and treatment models gain increasing recognition, the “medical care + pharmaceuticals” model of pharmaceutical e-commerce is poised to become the mainstream channel for accommodating the outflow of prescriptions from hospitals. However, this model faces significant transformation challenges due to restrictions on online sales of prescription drugs, complexities in integrating with medical insurance systems, consumer awareness and purchasing habits, as well as high costs and the difficulties associated with cross-industry innovation.“With the accumulation of industry experience and the gradual clarification of regulatory policies, the model for outpatient prescription outflow has entered a phase of genuine implementation and competition. The ability to swiftly introduce more regulatory frameworks and resources, and to establish more feasible structures and systems, will determine which platforms and models ultimately succeed and emerge as the major beneficiaries under policy adjustments,” said Liu Tong, Vice President and Chief Public Affairs Officer of 111 Group. He believes that the exploration of new models is merely the beginning, as the outflow of prescriptions from hospitals is a long-term process. In addition to the gradual involvement of multiple departments, continuous operational enhancements are required, including comprehensive improvements in pharmacists’ accurate prescription review, supervision of medical insurance funds, and logistics and distribution systems.