Community 580 Virtual Pharmacy: Solving the 'Drug Shortage' Challenge in Primary Care Hospitals

“With the influenza epidemic raging, ICU beds are in critically short supply, general wards are undergoing rapid patient turnover, and critically ill patients are accumulating. The majority of these patients are community cases of the common cold, rendering family physicians and the tiered diagnosis and treatment system virtually ineffective.”In the face of the recent influenza outbreak, Dr. Chen Jingyu, a thoracic specialist engaged in lung transplantation, Vice President of Wuxi People’s Hospital, and a deputy to the 12th National People’s Congress, expressed the following sentiments.

A netizen who identified herself as a grassroots healthcare worker stated that she had long been overwhelmed by various forms and reports: “We want to focus on patient care, but reality does not allow it. Many medications are simply not available for procurement at the primary care level, which is truly disheartening...”

Some netizens have also pointed out that the “two-line” revenue and expenditure system, together with the National Essential Medicines System, has resulted in a situation where needed medicines are unavailable while available medicines go unused. Tertiary Grade A hospitals, leveraging their extensive drug formularies, have launched comprehensive and targeted competition against community hospitals constrained by the essential medicines list.

The above remarks reveal that the limited variety of medications available at China’s primary healthcare institutions is a particularly pressing concern. This shortage hinders these facilities from effectively managing sudden epidemics and chronic diseases, forcing patients to seek care at large hospitals. While this is only one aspect of the issue, it represents a critically important link in the healthcare system.

In light of this issue, Shequ 580, a well-known domestic internet company specializing in primary healthcare, recently partnered with China Resources Pharmaceutical and the Xinshi Street Community Health Service Center in Baiyun District, Guangzhou, to launch the “Shequ 580 Cloud Pharmacy” service, aiming to provide better medication services to residents enrolled in chronic disease management programs.

What is the background behind the emergence of the “Air Pharmacy”? To find out, VCBeat conducted a special interview with Huang Jianzhong, Director of the Xinshi Street Community Health Service Center.

It is reported that the Xinshi Street Community Health Center serves the two subdistricts of Xinshi and Yuncheng, covering a total population of approximately 160,000. Director Huang stated that after the implementation of family doctor contract services, how to enhance the center’s service capacity and efficiency across such a large covered population, thereby facilitating smoother fulfillment of contractual obligations, has been a persistent concern of his. In this regard, informatization plays a crucial role.

Although Guangdong Province lifted restrictions on the drug formularies for primary healthcare institutions in mid-2017, community health centers typically stock only 200 to 300 essential medicines due to constraints such as usage volume and storage space. This stands in stark contrast to large hospitals, which often carry thousands of medications, indicating that the “drug shortage” dilemma in community hospitals remains unresolved. With the advancement of tiered diagnosis and treatment, an increasing number of residents are seeking medical care and prescriptions at community hospitals, further straining their limited pharmaceutical capabilities.

Guided by the spirit of the 19th National Congress of the Communist Party of China, Xinshijie Community Health Service Center has diligently implemented the family doctor system to enhance services for enrolled residents. By leveraging “Internet + Community Healthcare” solutions, it has launched the “580 Air Pharmacy” service. Physicians at the center can now access over a thousand medications through the “580 Air Pharmacy” to supplement shortages in the community health inventory, thereby meeting residents’ needs. Additionally, long-term prescriptions for chronic diseases are delivered free of charge to patients’ homes.

A diabetic patient enrolled in the family doctor program stated, “In the past, certain medications were only available at large hospitals, and each prescription visit would take half a day or more. Now, I can get my prescriptions filled right in my neighborhood. By signing up with a family doctor, I can complete the entire process in under an hour and also benefit from outpatient reimbursement for chronic diseases, which has made things much more convenient.”

It is reported that the drug formulary of the “580 Air Pharmacy” is consistent with Guangzhou’s Essential Drug Procurement Network. China Resources serves as both one of the platform’s drug distributors and the distributor for the Air Pharmacy.

Functionally, the “580 Air Pharmacy” is independently managed by the Xinshi Street Community Health Center, with drug distribution handled by China Resources; the community-based 580 platform provides system solutions for both parties, enabling online transmission of prescription order information.

From a system architecture perspective, the “580 Air Pharmacy” integrates three major systems: first, the Hospital Information System (HIS) of community health service centers; second, China Resources’ drug supply, inventory, and pricing system; and third, the family doctor contract management system. Community 580 has incorporated China Resources’ inventory and pricing data for over a thousand commonly used drugs into the HIS of primary care hospitals.

Since the Hospital Information System (HIS) at community health service centers also includes pharmacy management functionality, if family doctors cannot find the required medication for a patient in the HIS pharmacy module, they can select the appropriate drug from the “Cloud Pharmacy” and issue a prescription. The patient can then wait at home for the medication to be delivered to their doorstep.

According to VCBeat, Community 580 collaborates with over 3,000 community health service centers across China. Its mission and strategic direction are to help these centers enhance their capabilities in clinical diagnosis and treatment, pharmaceutical services, and public health.

Following the national implementation of the “Two-Invoice System,” pharmaceutical distribution has become increasingly concentrated in the hands of four or five major distributors. As China’s second-largest hospital pharmaceutical distributor, China Resources Pharmaceutical has gradually begun to extend its drug delivery services directly to patients’ homes.

Under shared objectives, the collaboration between China Resources and Community 580 has become possible.

Due to the wide distribution and low sales volume of community health service centers, it is difficult for China Resources to establish separate inventories for individual centers. Therefore, Community 580 and China Resources have jointly established a virtual warehouse. The medicines in this virtual warehouse are exclusively supplied to community health service centers, reducing the operational costs of drug distribution by consolidating scattered demands into bulk orders.

“580 Air Pharmacy” has currently achieved the capability to deliver medications to patients’ homes, typically within 24 hours of order receipt. It fully meets the medication needs of primary care hospitals, with its list of commonly used drugs aligned with that of tertiary Grade A hospitals.

It is reported that the “580 Air Pharmacy” currently does not support online medical insurance payment and other features. Once medical insurance payment is integrated, combined with remote diagnosis and treatment, this service will enable residents to receive medical care without leaving their homes, have medications delivered directly to their doorsteps, and enjoy medical insurance reimbursement services.

Currently, Community 580 has completed the pilot program for the “580 Sky Pharmacy” in Guangzhou’s Baiyun and Haizhu districts, with plans to expand the service nationwide this year.

From the results, it is evident that the collaborative model between Xinshi Street Community Health Center and Community 580 and China Resources has not reduced the hospital’s drug cost proportion nor achieved control over medical insurance expenditures. Director Huang did not deny this point.

He stated that, due to the large number of patients designated under the medical insurance scheme, the costs at the Xinshi Street Community Health Center are currently relatively controllable; however, this does not reflect the situation at other community health service centers. More importantly, the “Air Pharmacy” at the Xinshi Street Community Health Center currently serves only patients with chronic diseases. In accordance with Guangzhou’s policies, patients with chronic conditions are covered by the outpatient chronic disease pooling fund, which provides a monthly quota of RMB 200. This helps alleviate, to some extent, the pressure on the community health center’s medical insurance budget allocation.

Director Huang candidly stated, “The ‘Cloud Pharmacy’ is a service innovation that changes the service delivery process, but it does not alter the management processes of community health service centers. This is an innovation in mechanism, not in system. The ultimate goal of launching the Cloud Pharmacy is to enhance public satisfaction. Service is a critical component; if we fail to excel in the fundamental aspect of medication provision, it will be difficult to attract more residents to our community health service centers. Therefore, I believe the Cloud Pharmacy is both necessary and in demand.”

In the future, as medical insurance reimbursement schemes gradually expand to retail pharmacies, the outflow of prescriptions from primary care hospitals will become inevitable, and the issue of the drug-to-revenue ratio will ultimately be alleviated.

According to Liu Bo, CEO of Shequ 580, the full name of this collaboration model between Shequ 580 and China Resources is the “Air Pharmacy Distributor Model.” In addition, Shequ 580 is simultaneously partnering with chain retail pharmacies to jointly handle the outflow of hospital prescriptions, a model referred to as the “Air Pharmacy Retail Pharmacy Model.”

Liu Bo stated, “The primary distinction between the former and the latter lies in the entity responsible for dispensing medications. In the former model, medications are still dispensed by medical institutions, whereas in the latter, they are dispensed by retail pharmacies. I believe these represent two distinct phases; as prescription outflow continues, the market will ultimately shift toward a retail pharmacy-dominated model. Community 580 will collaborate with Laobaixing Pharmaceutical, Tasly, and other chain pharmacy organizations to launch the ‘Retail Pharmacy 580 Cloud Pharmacy’ in the near future.”

In addition to the difference in service providers, there are three other major differences between the two:

First is the medical insurance reimbursement process. Since the distributor model does not disrupt any segment of the medical supply chain, it complies with the Two-Invoice System and the zero-markup policy for pharmaceuticals, as well as all medical insurance regulatory frameworks. By leaving every link and procedure intact, this business model does not require special policy support; it primarily needs administrative approvals from relevant departments of the Health Bureau, and it fully qualifies for outpatient reimbursement under medical insurance policies.

However, in most parts of China, such as second-tier major cities like Changsha and Wuhan, due to the absence of reimbursement policies under outpatient pooling or limited quotas for outpatient pooling, there is virtually no difference in cost for residents between purchasing medications at hospitals and at pharmacies.

Therefore, Community 580 adopts the following approach: implementing a distributor model in regions with outpatient pooling reimbursement under medical insurance, and promoting a retail pharmacy model in areas where such reimbursement is insufficient or unavailable.

Second is the price of medications. Compared with most retail pharmacies, community health service centers offer a wider variety of prescription drugs. In general, the prices of prescription drugs at community health service centers are typically lower than those at retail pharmacies. Due to the zero-markup policy on pharmaceuticals and the centralized drug procurement negotiations in Guangdong Province, drug prices at community health service centers are relatively lower.

Third, there are differences in user categories. Customers who purchase medications at retail pharmacies typically self-select their drugs (mostly for common conditions), whereas patients at community health service centers receive medication recommendations from physicians within a prescribed formulary. Thus, the two channels serve distinct target populations.

In Liu Bo’s view, the distributor model does not pose a threat to retail pharmacies. This is because there are significant differences in their drug formularies; apart from DTP (Direct-to-Patient) pharmacies, most retail pharmacies in China still primarily carry over-the-counter (OTC) medications.

“There are two key factors driving patient attrition from primary care. First, patients leave due to the limited clinical capabilities of primary care providers, which falls under the scope of treatment capacity. Second, pharmaceutical service capability plays a critical role; if patients—particularly those with chronic conditions requiring long-term medication—cannot obtain their prescribed drugs at primary care institutions, they will inevitably seek care elsewhere. Addressing these two issues would effectively channel patients toward seeking medical attention at the primary care level,” Liu Bo told VCBeat.

Pharmaceutical service capabilities can be addressed through online pharmacies, whereas enhancing physicians’ diagnostic and treatment capabilities involves two dimensions of shortage: the number of physicians and their professional competence. Clearly, this is a process requiring sustained long-term improvement. In the short term, teleconsultation and two-way referral systems can help enhance the diagnostic and treatment capabilities of community health service centers to a certain extent.

Currently, Shequ 580 is establishing a remote assistance service between upper- and lower-tier hospitals based on the medical consortium in Baiyun District, Guangzhou. Through this pilot project, doctors from large hospitals can remotely assist family physicians in managing complex and rare conditions.

According to Liu Bo, remote assistance services serve more as a complement to family doctor contracting and air pharmacy services.

According to observations by VCBeat 580, the contracted users of community health service centers are currently predominantly patients with chronic diseases. Medication for these patients is planned and involves the long-term use of a single drug, rather than episodic or acute-use medication.

In May 2017, the National Health and Family Planning Commission’s “Measures for the Administration of Internet-based Diagnosis and Treatment (Trial)” (Draft for Comments) stipulated that permissible internet-based diagnosis and treatment activities were limited to telemedicine services between medical institutions and contracted chronic disease management services provided by primary healthcare institutions.

It is further stipulated that medical institutions shall not conduct internet-based diagnosis and treatment activities for patients during their initial visit. When a patient’s condition changes and requires in-person examination by medical personnel, the medical institution and its staff shall immediately terminate the internet-based diagnosis and treatment activities and guide the patient to seek care at the medical facility.

Therefore, the remote consultation services provided by Community 580 and community health service centers are primarily aimed at follow-up care for contracted patients with chronic diseases, rather than initial diagnoses. This enables patients to establish continuous care relationships with their family doctors via remote video consultations from home, significantly reducing the time and labor costs associated with hospital visits.

Liu Bo stated, “Without prescription and medication services, remote consultations cannot meet patients’ diagnostic and treatment needs—a challenge that previously plagued light-touch mobile health clinics. Only by addressing the medication issue first can the challenges of remote consultations be readily resolved.”