Chongqing Pilots E-Prescription Drug Sales as Alibaba, JD.com, and Tencent Enter the Trillion-Yuan Prescription-Outflow Market

VCBeat (WeChat ID: vcbeat) has learned that the Chongqing Municipal Food and Drug Administration recently issued a notice proposing to pilot the sale of prescription drugs in retail pharmacies across the city based on electronic prescriptions.

The notice points out that retail pharmacies, based on their own drug distribution needs, may sell prescription drugs against paper prescriptions, and may also pilot the sale of prescription drugs against electronic prescriptions by leveraging informatization capabilities.

Retail pharmacies piloting the sale of prescription drugs via electronic prescriptions shall comply with the following provisions:

(1) Adopt a model of integration with medical institutions, implement computer networking, and obtain electronic prescriptions from medical institutions through information systems.

(2) In accordance with the relevant provisions of laws and regulations on drug administration, establish and improve management systems for the sale of prescription drugs based on electronic prescriptions.

(3) Submit a written report in advance to the local district/county food and drug regulatory authorities regarding the establishment and improvement of management systems, coordination with medical institutions, and other relevant matters; chain stores may have their reports consolidated and submitted by their parent chain enterprise.

(4) Collect, review, dispense, verify, and archive electronic prescriptions in accordance with regulations. The signatures of personnel responsible for prescription review, dispensing, and verification on electronic prescriptions may be affixed using electronic signatures or by maintaining an audit trail within the information system.

The notice points out that the pilot program allowing retail pharmacies to dispense prescription drugs based on electronic prescriptions represents a new exploration in the pharmaceutical distribution sector. All relevant parties should standardize their conduct, assume corresponding responsibilities in accordance with the law, and ensure medication safety.

In fact, prior to Chongqing, cities such as Chengdu and Xi’an had already taken the lead in launching pilot programs for electronic prescriptions in retail pharmacies.

In May 2017, the Xi’an Food and Drug Administration issued the “Work Plan for Promoting Electronic Prescription Services in Retail Pharmaceutical Enterprises (Trial),” aiming to implement electronic prescription services across retail pharmacy chains and qualified standalone retail pharmacies in the city.

Under this scheme, pilot enterprises must obtain a business license and two certificates (i.e., the Business License, Drug Operation Permit, and Certificate of Compliance with the New Good Supply Practice for Pharmaceutical Products) in Xi’an, achieve a credit rating of “Basically Trustworthy” or higher in Xi’an’s credit evaluation system for drug distributors, and have no record of major legal or regulatory violations during routine supervision.

Eligible pharmaceutical retail enterprises may, based on their actual circumstances, select third-party medical service institutions with the requisite network technology and hardware infrastructure to collaboratively establish platforms for remote physician diagnosis and treatment and electronic prescription applications. Remote physicians must hold valid practicing physician qualifications and be registered and managed under legitimate medical institutions. Electronic prescriptions shall comply with the relevant regulations of the health and family planning authorities and bear the physician’s electronic signature. Electronic prescriptions issued by remote physicians are equivalent to conventional paper prescriptions; they shall be retained at the enterprise’s retail outlets for inspection purposes, with the same retention period as that applicable to conventional prescriptions.

The Xi’an Food and Drug Administration also requires that pilot pharmacies be equipped with appropriate telemedicine terminals. Furthermore, each pharmacy’s terminal must be capable of retrieving detailed records of every prescription issuance and review within specified timeframes. The enterprise-side electronic prescription system must support clear and seamless video communication with licensed physicians, and store consultation audio and video files in the backend to facilitate post-hoc spot checks.

After a prescription is issued, the sale of prescription drugs requires review and approval by a licensed pharmacist, who must sign or affix their seal (including an electronic seal) on the prescription before dispensing; the medications listed in the prescription shall not be altered or substituted without authorization, and prescriptions containing incompatible drug combinations or excessive dosages shall be refused for dispensing.

On June 13 last year, the Xi’an Food and Drug Administration issued another document providing guidance on the sharing of electronic prescriptions. In the “Opinions on Promoting Internet Hospitals to Carry Out Electronic Prescription Sharing for Chronic Disease Follow-up Visits,” the Xi’an FDA once again focused the pilot program for electronic prescriptions on chronic disease follow-up care conducted through internet hospitals.

The “Opinions” do not differ from the aforementioned “Plan” in terms of retail enterprise qualifications and procedural standards, but they provide a more detailed definition of third-party medical service institutions. The “Opinions” require that third-party medical service institutions hold a Business License and a Medical Institution Practice License, or possess third-party medical service authorization confirmed by health and family planning authorities at various levels through other forms, so as to ensure the quality and safety of remote diagnosis and treatment.

Third-party medical service platforms shall implement practical and effective measures to ensure that medical personnel participating in remote diagnosis and treatment services possess valid professional qualifications and conduct diagnostic and therapeutic activities in accordance with legal procedures. Institutions providing third-party medical services shall bear legal liability for the quality of diagnosis and treatment services rendered on their platforms. Shared electronic prescriptions must be authentic, valid, and complete; they shall be incorporated into patients’ electronic medical records and remain accessible for lifelong inquiry by the patients.

Prior to the Xi’an Food and Drug Administration, the Chengdu Food and Drug Administration had already launched a pilot program for electronic prescriptions in retail pharmacies across the city in September 2016. According to data from the Chengdu Food and Drug Administration, more than 500,000 electronic prescriptions had been issued by the end of 2016.

Pilot policies are being implemented at the local level first, while enterprises have also undertaken diverse initiatives. According to VCBeat, Alibaba Health (under Alibaba), WeChat, and JD.com have already launched pilot programs for electronic prescriptions in retail pharmacies across multiple regions.

In January 2016, Wuhan Central Hospital partnered with Alibaba Health’s Online Hospital. After patients scheduled consultations through Alibaba Health’s Online Hospital, electronic prescriptions were issued and fulfilled via delivery services provided by Jointown Pharmaceutical Group.

In March 2016, the People’s Government of Zibo City in Shandong Province, JD.com Group, and Xinhua Pharmaceutical signed a tripartite cooperation agreement. Under this agreement, JD.com would build the “Zibo Medical Prescription Circulation Information Platform” for the Zibo Municipal Health and Family Planning Commission. Public pilot hospitals in Zibo would submit prescriptions to the platform, enabling patients to conveniently purchase medications from Xinhua Grand Pharmacy using electronic prescriptions.

In May 2017, Tencent, Liuzhou Workers’ Hospital, and Guangxi Liuzhou Pharmaceutical Co., Ltd. established a partnership, launching an “Outpatient Prescription Circulation” service at Liuzhou Workers’ Hospital. By accepting electronic prescriptions issued by physicians via its WeChat official account, the platform enables patients to purchase medications outside the hospital. The system initially covered eight pharmacies under the Liuzhou Pharmaceutical Group. Going forward, patients can freely choose to pick up their medications either within the hospital or at designated external pharmacies after their consultations.

Behind the pilot implementation of electronic prescriptions in retail pharmacies lies the trend of prescription outflow. Against the broader backdrop of healthcare reform, policies such as the separation of prescribing and dispensing, zero markup on drugs, and controls on the drug revenue ratio are being deepened, making the trend of prescription outflow increasingly evident. Various stakeholders are gearing up to capitalize on the anticipated market expansion.

The Notice on Key Tasks for Deepening the Reform of the Medical and Healthcare System in 2017, issued by the State Council, required that comprehensive reform of public hospitals be fully rolled out by the end of September 2017, with all public hospitals abolishing drug markups (excluding traditional Chinese medicine decoction pieces). In 2017, the proportion of drug revenue (excluding traditional Chinese medicine decoction pieces) in public hospitals across the first four batches comprising 200 pilot cities was to be reduced to approximately 30%. This imposes considerable policy-driven cost pressures on the public healthcare system, which has long relied on “funding healthcare through drug sales,” making the separation of prescribing from dispensing an inevitable trend.

To pave the way for community pharmacies to absorb prescriptions flowing out of hospitals, the Office of the State Council Leading Group on Medical Reform took the lead, mandating coordinated efforts among medical regulatory authorities including the Ministry of Commerce, the Ministry of Human Resources and Social Security, the National Health and Family Planning Commission, and the China Food and Drug Administration. These efforts include piloting a classified and tiered management system for retail pharmacies, encouraging the development of chain pharmacies, and exploring the interconnectivity and real-time sharing of prescription information from medical institutions, medical insurance settlement data, and pharmaceutical retail consumption records.

Why Retail Pharmacies? First, retail pharmacies enjoy favorable geographic conditions with high coverage rates, providing the primary convenience factor for reaching consumers. Second, retail pharmacies possess inherent professional pharmaceutical services; empowered by internet healthcare, they are poised to become a supplement to primary care, encroaching on the market share traditionally held by third-terminal providers such as clinics. Third, the scale of pharmaceutical e-commerce and O2O (Online-to-Offline) services remains relatively small and will not threaten the dominant position of retail pharmacies in the short term.

Currently, e-prescription pilot programs are being vigorously implemented across various regions in China. However, only a small fraction of pharmacies have ventured into this area. Out of the 440,000 pharmacies nationwide, those participating in e-prescription circulation likely account for less than a negligible portion. Driven by this trend, the implementation of e-prescriptions based on internet healthcare is imperative; however, the challenge lies in determining how to effectively execute it.

Dedicated areas must be established to house the equipment required for remote consultations, and staff must be recruited or trained to assist patients with diagnosis and treatment. Collaboration with internet healthcare platforms is necessary to ensure system integration, while retail pharmacies face significant challenges in processing electronic prescriptions.

The emergence of any new sales channel inevitably disrupts existing interest chains. Behind the electronic prescriptions enabled by internet-based healthcare, the outflow of prescriptions has unlocked a hundred-billion-yuan market, giving rise to a new interest chain. Enterprises and individuals within this chain must all contend with the pressures brought about by this new model.