Qingdao Consensus on Intelligent Applications in Pharmaceutical Distribution Released: AI Empowers Industry Transformation

Recently, to seize significant national strategic opportunities during the “critical phase” of China’s healthcare reform and to build a new ecosystem of service capabilities in the pharmaceutical distribution industry, the 2017 China Pharmaceutical Distribution Industry Intelligent Application Forum, hosted by the China Pharmaceutical Commercial Association and organized by Baiyang Pharmaceutical Group, was held in Qingdao under the theme “Gathering Momentum, Innovation, Disruption.” The forum focused on new technologies driving innovative development in the pharmaceutical distribution sector—including mobile internet, big data, the Internet of Things (IoT), artificial intelligence (AI), and blockchain—and explored how intelligent applications such as smart healthcare, mobile health, integrated terminal-cloud solutions, and human-machine collaborative medical devices are poised to disrupt future business models and development pathways in the pharmaceutical distribution industry.

The conference invited approximately 300 attendees, including Wen Zaixing, former Inspector of the Department of Market Order under the Ministry of Commerce and expert at the China Pharmaceutical Commercial Association; Qian Juncheng, Director of the Statistical Information Center of the National Health and Family Planning Commission; Bai Jianchao, Deputy Director of the Qingdao Food and Drug Administration; Fu Mingzhong, Executive President of the China Pharmaceutical Commercial Association; Fu Gang, Vice President of the China Pharmaceutical Commercial Association; representatives from pharmaceutical distribution-related entities and manufacturing enterprises; as well as delegates from major information technology companies such as IBM, Oracle, and Philips. At the event, industry experts and scholars interpreted artificial intelligence and smart healthcare from a policy perspective, while representatives from leading enterprises shared insights on topics including the development of traceability systems, blockchain technology, PBM models, and machine learning applications in the medical field.

According to the "Analysis of the Operation and Development Trend Prediction of the Drug Circulation Industry in the First Half of 2017" released by the Department of Market Order under the Ministry of Commerce, a series of policy documents were issued by relevant national industry authorities in the first half of this year. Among them, tiered diagnosis and treatment, the "Two-Invoice System," consistency evaluation, and reforms in medical insurance payment methods have had significant and far-reaching impacts on China's drug circulation industry. Under the combined influence of policies and technological innovations, the industry has focused on transformation and upgrading, demonstrating an overall trend of steady progress and improvement. The operational order has been increasingly standardized, operational quality has continued to improve, business innovation is flourishing, and industry concentration has further increased.

China’s pharmaceutical distribution industry is currently seizing a rare historical opportunity; however, the sector remains in its early stages of development, offering substantial room for both horizontal and vertical integration. During the 13th Five-Year Plan period, healthcare reform has entered a critical phase. While the outlook for the pharmaceutical distribution industry remains promising, transformation and upgrading have become urgent imperatives for pharmaceutical enterprises to adapt to a series of new national policies and the industry-wide changes driven by the “Internet + Healthcare” model.

Fu Mingzhong, President of the China Pharmaceutical Commercial Association, stated at the conference: “The industry will evolve into a health service sector characterized by smart and intelligent pharmaceutical distribution, transitioning from a low technology-intensive industry to a high technology-intensive one. The integration of ‘six modernizations’—informatization, systematization, standardization, automation, engineering, and intelligence—will drive the industry’s intelligent transformation. The application of Internet of Things (IoT) and blockchain technologies in drug traceability systems, along with cloud-and-edge service technologies and models, will achieve breakthroughs in industry applications. Intelligent medical service models and intelligent medical supply chain applications will accelerate the transition of the healthcare service system toward a smart healthcare ecosystem.”

Fu Gang, Vice President of the China Pharmaceutical Commercial Association and President of its Intelligent Application Branch, believes that the pharmaceutical distribution sector is currently undergoing a period of profound transformation. First, China’s overall reforms have entered a post-reform era, in which extensive,粗放-style growth no longer aligns with national conditions; the most prominent manifestation of this shift is the standardization across various industries, with policies such as the “Two-Invoice System” being products of this regulatory drive. Second, a global perspective is essential: new technologies from around the world will continue to enter China, while Chinese products will increasingly go global. Finally, although the health industry is developing rapidly, the pharmaceutical distribution sector remains in its early stages. The emergence of new technologies will drive innovation by replacing the old with the new, presenting both opportunities and challenges for the industry’s development.

For pharmaceutical distribution enterprises, the level of intelligence will become a core competitive advantage in the future, and the value brought by intelligent applications will become even more prominent. The conference officially released the "Qingdao Consensus on Intelligent Applications in the Pharmaceutical Distribution Industry," with the association and its council members reaching consensus on three aspects: industry trends, technological development, and organizational collaboration.

The “Consensus” points out that there is significant room for consolidation in China’s pharmaceutical distribution industry. Healthy consolidation in this sector should not rely solely on capital-driven mergers and acquisitions; rather, it should be driven by technological innovation to continuously improve overall operational efficiency and industry standards, achieved through the optimization of service functions. The entire pharmaceutical distribution industry in China will trend toward the integration of wholesale and retail, online and offline channels, e-commerce and information services, and proprietary and cooperative operations.

The “Consensus” further points out that the internet has evolved into the “post-truth era,” where issues such as noise, data leaks, and resonance have emerged, leaving both individuals and enterprises prone to digital confusion. The rise of artificial intelligence will optimize cognition through human-centric personalized solutions. The medical paradigm will evolve from the dominance of evidence-based medicine to a competitive landscape where integrative medicine, precision medicine, and personalized medicine coexist. Meanwhile, the economic model will transition from the “boredom economy” to the “smart economy.” Pharmaceutical distribution enterprises should take the lead in researching, promoting, and innovating AI technologies, enhancing the pharmaceutical industry’s data utilization capabilities. By driving intelligent, disruptive upgrades, they can foster the deep integration of cloud computing, big data, and the Internet of Things with the pharmaceutical industry, thereby elevating the status and efficiency of the pharmaceutical distribution sector.

Furthermore, industry associations continue to strengthen communication with government departments to secure necessary attention and support for the intelligent applications and innovations in the pharmaceutical distribution sector. It is essential to guide and promote various forms of technical exchange and cooperation among domestic and international enterprises, thereby maintaining an advanced perspective on intelligence within the pharmaceutical distribution industry. Additionally, specialized training for technical talent must be strengthened to build a vibrant and dynamic ecosystem that sustains advanced levels of intelligent technology. To this end, the China Pharmaceutical Commerce Association has established the “Training Base for IT Technical Talent in the Pharmaceutical Distribution Industry” at Baiyang Pharmaceutical Group, aiming to cultivate professional talent for the industry’s transformation and upgrading, and to seek greater development of intelligent applications in the field of pharmaceutical distribution.

Wen Zaixing, former inspector of the Department of Market Order under the Ministry of Commerce and an expert at the China Pharmaceutical Commercial Association, believes that the market size of the big health industry will reach 8 trillion yuan by 2020 and double to 16 trillion yuan by 2030. Within this big health ecosystem, artificial intelligence presents boundless business opportunities in areas such as traditional medical care, pharmaceuticals, chronic disease management, and elderly care.

Fu Gang stated, “The future of IT technology will see rapid breakthroughs across three application layers. The first is the ‘edge,’ which refers to data acquisition. The future of the edge lies in flexible sensing combined with neuromorphic chips. The second is the ‘cloud,’ where true artificial intelligence (AI) is realized. AI can manage highly complex information, while quantum computing represents a more advanced algorithmic paradigm; once commercially available, it will be a disruptive technology. The third is the ‘network.’ With 5G already deployed and blockchain emerging, the internet has solved the problem of connectivity, whereas blockchain addresses the issue of trust. However, any network involvement incurs security costs, making robust cybersecurity systems critically important. The seamless integration of edge, cloud, and network enables ubiquitous data collection, which, after being processed by powerful data-handling capabilities, yields valuable and trustworthy information to ultimately serve the real economy.Baiyang has leveraged AI as its strategic entry point, deploying a ‘Three-Edge, Two-Cloud, One-Platform’ architecture to enhance its industry service capabilities. This includes the Watson Decision Support Edge developed in collaboration with IBM, the self-built Yi Fuzhen Prescription Information Sharing Edge, and physician skill-enhancement platforms such as Palm Medical News. For hospitals, it provides Bodhi Medical Cloud for informatization services, and Mingjing Marketing Cloud, an intelligent marketing management platform created in partnership with Oracle.”

Beyond addressing operational efficiency issues, the pharmaceutical retail market is poised to become a key growth area in the future as prescription outflow accelerates. As China’s first platform to successfully implement prescription information sharing, Yi Fuzhen (Easy Follow-up Consultation) is comprehensively rolling out urban prescription information sharing in Wuzhou City, Guangxi Zhuang Autonomous Region. Since the pilot project was officially launched on May 23, a total of 12,393 patients had shared their prescriptions by September 26, accounting for 8% of outpatient prescriptions at the participating pilot hospitals.

The pharmaceutical distribution industry will undergo significant consolidation in the future, leading to further increased market concentration. How enterprises can leverage intelligent technologies to enhance competitiveness and drive innovative development has become a critical issue at this stage. The integration of cloud computing- and big data-based intelligent technologies and applications into the pharmaceutical distribution sector will effectively consolidate data information across product research and development, manufacturing, distribution and usage, changes in disease spectra, as well as patient health needs and consumption patterns. Meanwhile, by relying on the management, analysis, and application of big data, valuable data support will be provided to pharmaceutical R&D institutions and manufacturers for judging market trends and adjusting product portfolios, and to healthcare institutions for improving medication selection and promoting rational drug use, thereby enhancing the operational efficiency of the entire pharmaceutical supply chain.

Faced with the profound transformation brought by artificial intelligence (AI) to the industry, Baiyang proposes three mindsets for embracing AI. First is the mindset of learning from others. As an enterprise, it is impossible to independently develop all emerging AI technologies; therefore, we should humbly introduce advanced technologies from multinational corporations, focusing on effectively integrating these superior technologies to enhance our own capabilities. Second is the mindset of practical implementation. The technologies we adopt must address real-world challenges, leveraging advanced tools to solve specific, practical problems within the pharmaceutical distribution sector. Third is the mindset of sharing. For a new technology, success cannot be achieved by a single enterprise alone; instead, industry-wide progress is essential. Only when this perspective is widely accepted across the sector can the entire industry achieve substantial development.