Three Pillars of Internet Healthcare in China: Offline Hospitals, Chain Pharmacies, and Internet Platforms

According to relevant statistical data, the overall size of China's internet healthcare market was projected to reach RMB 11.39 billion in 2014, with mobile healthcare accounting for RMB 3.01 billion, representing a 26.4% share. It can be confidently stated that China's internet healthcare industry is in a phase of rapid growth, with numerous participants—including hospitals, physicians, and pharmaceutical companies—vying to secure a competitive advantage. Among these, offline hospitals, chain pharmacies, and internet platforms have emerged as three key forces, occupying a unique position in the development of internet healthcare and highlighting the sector's competitive advantages and growth prospects.

The Three Mainstream Trends in Internet Healthcare Development Are Becoming the Dominant Force

Why do we consider offline hospitals, chain pharmacies, and internet platforms to be the mainstream and most promising segments in the development of the internet healthcare industry? This is because the growth of China’s internet healthcare sector has its inherent characteristics: patients’ medical consumption is relatively inelastic, while hospitals, physicians, and pharmaceutical service terminals are relatively scarce. These three elements are critical to the success of internet healthcare enterprises. Offline hospitals, chain pharmacies, and internet platforms all hold advantageous positions in these areas, demonstrating strong industry competitiveness.

1. Significant Medical Value

In essence, the internet healthcare industry is a domain characterized by the high-level aggregation of hospital resources, physician expertise, and medical research assets, representing a sector where professional medical value is highly concentrated. Its development cannot rely solely on pharmaceutical sales; moreover, online consultation models limited to common and chronic diseases are overly simplistic. The rapid advancement of internet healthcare requires the robust aggregation and integration of powerful, specialized medical resources. This is precisely where offline hospitals, chain pharmacies, and internet platforms hold their resource advantages. Given their significant medical value, these three entities occupy a dominant position in the development of the internet healthcare industry.

2. High Patient Acceptance

Patients are highly attentive to matters involving medicine and healthcare. Seeking medical treatment is an essential need, and patients place great importance on selecting appropriate hospitals and physicians to alleviate suffering and restore health. High-quality hospital and physician resources inherently possess significant credibility and recognition. Offline pharmacies can provide high-quality pharmaceutical care services through pharmacists and other professionals, while internet e-commerce platforms can offer substantial access to high-quality medical traffic. These three entities each boast distinct advantages and enjoy relatively high patient recognition.

3. High Connection Value

In the era of mobile internet, there is a widespread emphasis on the value of connectivity. Internet healthcare places significant importance on this as well. Hospitals and physicians connect with patients by leveraging their professional brand influence and efficient medical resources. Internet platforms provide high-quality traffic entry points and information matching by capitalizing on their vast traffic advantages, excellent online platform operations, and integration of high-quality offline resources. Meanwhile, chain pharmacies offer partial pharmaceutical care service experiences. Each of these three entities has distinct strengths and prominent advantages in connecting with patients, which constitutes their respective competitive edges.

Fresh Force—Offline Hospitals

Offline hospitals are the primary setting for most patients seeking medical care and serve as the core entities providing offline medical services within new business models of internet healthcare, playing an irreplaceable role. They not only deliver high-quality outpatient services, on-site medical diagnoses, and necessary medical examinations but also facilitate mobile health online services and remote consultation services. By integrating online and offline medical resources, they promote the healthy development of internet healthcare.

1. Robust Professional Medical Resources

Hospitals are the primary venues for patient consultations and the convergence points for various specialized medical resources, which constitutes their core competitive advantage in developing internet-based healthcare services.

Hospitals possess three major medical resource advantages: 1) Professional medical equipment capable of performing various complex medical examinations, enabling more comprehensive and specialized diagnosis for patients, thereby earning deep trust from users; 2) A professional medical team, as hospitals often gather a large number of specialized physicians, and well-established medical departments enhance the professionalism of diagnosis and treatment; 3) A specialized medical research team, enabling the development and application of advanced diagnostic equipment, therapeutic technologies, and new drug research, thereby enhancing the hospital’s professional capabilities and promoting the rapid development of internet healthcare.

2. Enduring Brand Reputation

Leveraging years of accumulated medical resources, some hospitals—particularly those ranked at the tertiary level or above (Grade 3A and higher)—have established strong brand reputations. Their long-standing regional prestige, track record of patient cases, and renowned specialized departments have significantly amplified their brand influence, attracting a large influx of patients and profoundly shaping patients’ offline diagnostic and treatment experiences within the internet healthcare ecosystem.

A hospital’s brand reputation is primarily concentrated at three levels: 1) Regional brand influence. First People’s Hospitals and specialized treatment hospitals in various regions, with their long establishment histories and extensive accumulation of patient cases, enjoy high credibility within their respective regions; nationally renowned hospitals possess even greater brand influence. 2) Prominent reputation of specialty departments. Each hospital features nationally recognized excellent medical specialties, and each department has its own outstanding attending physicians. The influence of these specialty departments significantly enhances the hospital’s brand reputation and attracts a large number of patients with complex and difficult-to-treat conditions.

3. High Degree of Autonomy in Prescribing

The advancement of internet-based healthcare involves the prescription and purchase of prescription drugs. Currently, the state has partially opened up qualification certification for online pharmaceutical transactions. This requires promoting the moderate opening and orderly competition of "electronic prescription drugs." In this regard, offline hospitals possess inherent advantages. The rapid advancement of their medical information systems has made the internal transmission and external distribution of electronic prescriptions a reality. Offline hospitals are the true controllers of electronic prescription drugs; undoubtedly, they hold a dominant position in the promotion of internet-based healthcare, particularly in pharmaceutical sales, medical device sales, and periodic follow-up examinations during mobile medical treatment.

The Main Force — Chain Pharmacies

Chain pharmacies possess unparalleled advantages over other entities. With diverse and widely distributed terminal outlets, they offer a range of services including offline medication guidance, condition reassessment, and face-to-face communication. Their ability to engage directly with patients in person, combined with integration with online diagnosis and telemedicine, highlights their prominent terminal advantages in the development of mobile health.

1. Possessing the first-mover advantage in offline pharmaceutical services

Offline chain pharmacies boast numerous outlets with extensive distribution, greatly facilitating patients’ spontaneous purchases. Naturally, these medications are predominantly over-the-counter (OTC) products. However, drug sales represent merely the point of contact between offline pharmacies and patients under the new mobile healthcare model. There is substantial scope for chain pharmacies to expand their offerings around “pharmaceutical care services,” such as conducting initial condition assessments, follow-up symptom evaluations, and providing medication guidance, thereby enhancing the scientific rigor, professionalism, and patient adherence in medication use.

Two key areas for offline pharmaceutical care services at terminal outlets to focus on include: 1) integrating with offline community-based O2O operations to provide relevant pharmaceutical care services tailored to local residents, which can be linked with community lifestyle services; and 2) focusing on patients with chronic and common diseases by offering related chronic disease health management and lifestyle wellness services. These represent viable pathways for the sustainable operation and innovative development of offline pharmacy terminals, as well as important measures to enhance their central role in new mobile healthcare business models.

2. The connectivity value of internet-based healthcare is prominent

In the current mobile health industry, frequent discussions revolve around “traffic entry points” and “patient engagement.” Offline chain pharmacy terminals possess inherent connectivity advantages. Patients can receive initial consultations and purchase medications for common conditions directly at pharmacies. By positioning “pharmacy medication purchases” as a core touchpoint in mobile health ecosystems, related services such as diagnosis and treatment of common diseases and chronic disease management can be delivered through this connection.

The primary methods for offline pharmacies to establish connections with patients include: 1) Attracting users to physical stores for symptom follow-up consultations, medication reviews, and on-site prescription pickup through online pharmaceutical sales, information sharing, and initial consultation services, thereby enhancing the scientific rigor and specificity of pharmaceutical care while strengthening patient stickiness; 2) Organizing initiatives such as “Health in the Community” to deliver medical public welfare services, including health promotion and pharmaceutical education, based on store locations, thereby reinforcing patient engagement and increasing the value of location-based mobile pharmaceutical services provided by pharmacies.

Vanguard — Internet Platform

When discussing the development of internet healthcare, one cannot overlook the value of “internet platforms.” Whether they are pharmaceutical sales platforms such as Tmall’s Pharmacy Pavilion, or online light-consultation and appointment-registration platforms like Chunyu Yisheng (Spring Rain Doctor), WeDoctor, and Baidu Doctor, most of these platforms are actively attracting high-quality pharmaceutical companies, hospitals, and physicians to join their ecosystems. They aim to match patient traffic with pharmaceutical sales, thereby promoting the growth of mobile healthcare services such as online drug sales and digital appointment scheduling. While meeting patients’ treatment needs, these platforms monetize user traffic and efficiently drive the integration of online and offline medical resources. As such, internet platform resources constitute an indispensable force in the development of internet healthcare.

1. Advantage of Massive User Traffic

Most internet platforms have been in development for many years. Major domestic e-commerce platforms, such as Tmall, often boast significant advantages in user traffic, relatively mature online operational methodologies, and well-established member community management systems. These constitute their strategic advantages in entering the internet healthcare sector. One of the core challenges facing these e-commerce platforms is how to rapidly monetize this substantial traffic advantage while ensuring its effective retention.

To fully leverage the advantage of massive user traffic, the following points should be prioritized: 1) Effective patient screening. Currently, pharmaceutical products on e-commerce platforms are predominantly over-the-counter (OTC) drugs and medications for certain chronic conditions, which primarily cater to patients with common ailments. Platforms need to achieve precise matching between user traffic and patient needs; 2) Enhance the dissemination of health-related information. By effectively facilitating symptom analysis and self-diagnosis for users, platforms can reinforce their professional credibility and demonstrate high value.

2. Enhancable Brand Community Value

The author has highlighted the importance of “doctor-patient communities” in numerous articles, providing detailed expositions on their formation characteristics, operational mechanisms, and management methodologies. Internet e-commerce platforms possess inherent advantages in community management; they have not only cultivated extensive member communities but also leverage big data to deliver precise consumption recommendations to members. These capabilities constitute the core strengths of internet-based medical e-commerce platforms.

3. Outstanding Commercial Value of Traffic Monetization

From the current development status of internet healthcare platforms, mobile healthcare platforms represented by Chunyu Doctor are more focused on drug sales and online preliminary diagnosis services. With a large user traffic at the front end and strong resources such as pharmaceutical supply and logistics at the back end, these platforms have more ways to monetize their traffic.

Future monetization pathways for internet-based healthcare e-commerce platforms may include: 1) Integrating products and services by consolidating offline medical service resources to provide more comprehensive patient diagnosis and treatment services; 2) Guided by the provision of “patient health solutions,” offering bundled health products such as pharmaceuticals, health supplements, and nutritional products, along with multi-dimensional health services including online initial consultations and offline in-person follow-up evaluations, thereby enabling more diverse monetization models.

Collateral Vessels—Peripheral Resources

In the development of the internet healthcare industry, in addition to the aforementioned participants such as offline hospitals, chain pharmacies, and internet platforms, the ecosystem also includes pharmaceutical companies, health information service providers, medical device enterprises, and health equipment manufacturers. While these entities possess their own competitive advantages, they are often positioned as targets for integration or connectors within the industry. Consequently, they struggle to lead the trajectory of internet healthcare and find it difficult to achieve independent growth or widespread dominance amidst the sector’s rapid expansion.

1. Entities to be integrated: pharmaceutical companies, health service providers, etc.

Pharmaceutical companies, health service providers, and similar enterprises operate outside the core mobile healthcare service workflow of “patient consultation – physician/online diagnosis – on-site treatment – patient rehabilitation.” In this context, pharmaceuticals serve as therapeutic products, medical devices function as auxiliary diagnostic and treatment tools, and services such as health information and guidance constitute components of patient rehabilitation support. These products and services are either fragmented across various stages of the diagnostic and treatment process or adopted by hospital physicians as part of their clinical practices, making it difficult for them to independently form a cohesive “patient rehabilitation chain.” Consequently, their role as “chain participants” rather than “chain leaders” is unlikely to change in the short term.

2. Connectors: medical device manufacturers, health equipment providers, etc.

The distinguishing feature of internet healthcare, as compared to traditional healthcare, is that it treats patient treatment as the starting point for bilateral engagement and the entry point for doctor-patient connectivity. It typically initiates services with patient self-diagnosis and clinical consultation, while offering multi-tiered services such as rehabilitation and health nursing. This approach elevates traditional diagnosis and treatment into “close and continuous doctor-patient communication,” thereby amplifying the professional value of hospital physicians and enhancing the commercial value of medical and pharmaceutical services. Medical devices and health equipment, serving as connectors, are primarily applied as auxiliary tools for diagnosis and health management; while their connective value is significant, their development remains constrained.

Key Focus Areas for Internet-Connected Healthcare Entities: 1) Actively promote the intelligent, personalized, and interconnected design of medical devices to enhance their professional capability in pathological diagnosis. Simultaneously, prioritize high-frequency connectivity with mobile applications and cloud data platforms to truly enable efficient remote diagnostics and provide specialized support for patients undergoing rehabilitation; 2) Vigorously develop “cloud-based healthcare” by integrating and coordinating it with smart medical devices and medical terminal applications, thereby achieving automatic synchronization and timely push notifications of patient data to foster a highly interconnected internet healthcare ecosystem.

This article is a contribution to VCBeat by the author, Wang Pengfei. The views expressed herein are solely those of the author and do not represent the position of VCBeat.Author: Wang Pengfei, Partner, Project Director, and Chief E-commerce Planning Consultant at Shanghai Taohui Management Consulting Co., Ltd.; China-certified Management Consultant, China-certified Economist, and China-certified Senior Marketing Professional; Contributing Expert and Columnist for renowned domestic and international magazines and websites such as Business Review and Manager; Contributing Expert and Author for well-known Chinese internet e-commerce industry publications including Tianxia Wangshang (eBrama), Sellers, and Sales & Marketing; Columnist for multiple internet platforms such as iResearch, Paidai.com, Meihua Network, and Global Brand Network. WeChat ID: wind53880; Email: wind53880@163.com.