Zhu Hengpeng: Future Breakthroughs in Internet Healthcare (Xingdong Xiangyi Conference Live Session 3)

Event Name: Xingdong Xiangyi Hui Session 1 Open Lecture

Event Dates: November 7–8, 2015

Organizers: Legend Star, VCBeat, BlueRun Ventures

Guest Speaker: Zhu Hengpeng, Deputy Director of the Institute of Economics at the Chinese Academy of Social Sciences and Director of the Center for Public Policy Research.

Zhu Hengpeng said, “I am the best expert on healthcare reform policy, bar none.”

Below are the highlights from Professor Zhu Hengpeng’s insightful speech. For the full presentation, please follow VCBeat on WeChat (vcbeat) to watch.

13. Future Breakthroughs: First, liberalize the online sale of prescription drugs, although the National Health and Family Planning Commission may resist this move. Second, allow physicians to conduct online consultations and issue prescriptions, while mandating the separation of hospital outpatient services. If physicians are willing to prescribe online, hospital administrators cannot prevent it. Third-party platform companies could subsidize physicians for prescriptions diverted outside hospitals, offering a fee of 100 yuan per prescription—a model worth exploring. While pharmaceutical representatives traditionally provide kickbacks to physicians, such practices carry significant risks. Alternatively, purchasing Ping An’s health insurance products could enable commercial insurers to cover prescription fees, which is a viable approach.

14. Online diagnosis, online prescribing, and the outflow of prescriptions enable patients to purchase medications directly at pharmacies. Even if online services remain restricted and are not covered by medical insurance, viable alternatives still exist.
1. Liberalize the online sale of prescription drugs, adopting an O2O model similar to Daojia Meishihui. Policy restrictions on the online sale of prescription drugs will definitely be lifted this year. 2. The second challenge is more difficult: relaxing policies regarding online prescribing and diagnosis by physicians. Current barriers require that telemedicine services be provided through qualified medical institutions, with physicians practicing at multiple qualified sites. 3. Enable online reimbursement through basic medical insurance. For online outpatient consultations covered by medical insurance certification (e.g., a fee of RMB 100), hospital outpatient services must be strictly separated; medications dispensed within hospitals will not be eligible for medical insurance reimbursement.
At its peak, the ratio of doctors to medical representatives in Japan was 1:4.3. Pharmaceutical companies could partner with Alibaba by providing prescription data aggregation services to them, effectively allowing one entity to replace all medical representatives. As long as physicians upload their prescriptions, a single party can handle the entire data aggregation process, thereby converting previously illicit income into legitimate revenue. If Alibaba holds a health insurance license, commercial insurance would cover the prescription fees.

15. So, what should medical representatives do? Medical representatives can serve the internet healthcare sector by leveraging their accumulated understanding of physicians and hospital operations to facilitate a career transition. Multinational pharmaceutical companies have extensive government affairs departments; they are merely shifting to a different service platform while continuing their previous work, with no fundamental change in essence.

16. One advantage of the internet is that it continuously grows stronger and better. Today’s patients, particularly those born in the 1980s and especially the 1990s, were practically born with smartphones in their mouths. Thus, current patients are not like the grandmothers of the past who unquestioningly accepted whatever doctors said; they now consult platforms such as Baidu Doctor and Chunyu Doctor for information. Of course, some physicians dismiss Baidu Doctor as worthless. However, there is no need to worry. I have personally witnessed Baidu’s improvements over time. Although I once considered Baidu to be subpar—and it may still have its shortcomings—its literature search and reference capabilities have been steadily enhancing. Remember, the hallmark of the internet is iterative development, leading to continuous improvement. When QQ first launched, it was also quite poor in quality, but it has progressively become better.

17. The greatest dilemma for physicians practicing independently is the public institution staffing system (shiye bianzhi), with pension benefits being its primary advantage; however, this landscape is now undergoing change. Previously, physicians employed by public hospitals could not leave without forfeiting their pensions. Taking Guangzhou as an example, the monthly pension for a chief physician at a private hospital was over RMB 5,000, whereas at a district-level Grade II Class A hospital it exceeded RMB 7,000, at a municipal Grade III Class A hospital it surpassed RMB 9,000, and at the Provincial People’s Hospital it reached RMB 11,000. To receive these higher pensions, three conditions had to be met: first, holding a public institution staff position; second, remaining within the public hospital system; and third, the higher the administrative level of the hospital, the higher the pension—leaving meant losing these benefits. However, pension reforms initiated this year aim to dismantle this system. Starting from July of this year, pension contributions are required. Those who made contributions prior to July retain their accrued benefits, and future departures from public hospitals will no longer result in reduced pensions. While the policy is complex and beyond the scope of detailed explanation here, the conclusion is clear: this policy will be strictly implemented, ensuring that physicians’ pensions do not decrease upon leaving public hospitals. Previously, public hospitals did not contribute to the pension fund; now they are required to contribute 40%, which, combined with medical insurance contributions, means public hospitals must pay at least 49% more into social security funds, leading to a sharp increase in labor costs. Therefore, we assert that the golden age of Grade III Class A hospitals has come to an end.

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