iCloudHealth: Digital Empowerment Across In-Hospital and Out-of-Hospital Chronic Disease Management, Pharmacy Business Drives Second Growth Curve

Statistics show that in China, more than half of total healthcare expenditure is attributed to costs associated with chronic diseases. As conditions characterized by long cycles and prolonged courses, chronic diseases often require treatment spanning decades, across multiple care settings both inside and outside hospitals.

As a leading provider of digital chronic disease management solutions in China, Zhiyun Health launched China’s first SaaS system designed to facilitate the digitization and standardization of hospital-based chronic disease management—Zhiyun Yihui—in 2016. The company also independently developed its medical Internet of Things (IoT) infrastructure to enable seamless interoperability of medical data within hospital settings, thereby enhancing chronic disease management in clinical environments.

Subsequently, in 2019, Zhiyun Health launched a SaaS system for pharmacies. The introduction of Zhiyun Consultation provided online consultation and prescription services to pharmacy patients, empowering pharmacies’ medical service capabilities and enabling patients with chronic diseases to purchase prescription drugs more conveniently at pharmacies.

“We connect doctors and patients across various in-hospital and out-of-hospital scenarios. Within hospitals, we leverage Zhiyun Yihui to help entire hospitals achieve efficient clinical workflows; outside hospitals, the pharmacy setting is a key strategic focus for us, where we empower both online and offline pharmacies with one-stop solutions through digital enablement,” pointed out Jia Yan, Vice President of Zhiyun Health.

Leveraging digital technology to penetrate chronic disease management, and connecting medical data across in-hospital and out-of-hospital scenarios through a unique business model, the company has strengthened its integrated layout capabilities. Notably, for Zhiyun Health, while its in-hospital solutions have maintained high growth in recent years, its out-of-hospital scenario business is becoming its fastest-growing segment. In the first half of 2023, revenue from pharmacy solutions reached RMB 206 million, representing a year-on-year increase of 58%.

Zhiyun Health’s in-depth layout in out-of-hospital business has established its second growth curve, potentially unlocking greater room for expansion.

Amid the backdrop of outflow of in-hospital prescriptions driven by the “dual-channel” policy for reimbursable drugs and rising sales of chronic-disease medications in brick-and-mortar pharmacies, the pharmacy business is seizing new growth opportunities.

However, a research report by Caitong Securities indicates that pharmacies currently face two major issues. On one hand, selling prescription drugs without the relevant qualifications is illegal; therefore, even against the backdrop of the outflow of prescription drug sales from hospitals, many pharmacies are unable to seize this opportunity to boost their revenue. On the other hand, many pharmacies in lower-tier markets suffer from a range of problems, including incomplete drug SKU assortments and poor distributor compliance.

Based on this, Jia Yan introduced that in 2019, Zhiyun Health launched a SaaS system tailored for pharmacy scenarios—Zhiyun Consultation. This system empowers pharmacies to provide real-time in-store consultations and prescription services to walk-in customers, effectively strengthening customer stickiness between pharmacies and users.

Specifically, patients can initiate online consultations with physicians within the Zhiyun Health network to obtain prescriptions and have them filled, thereby saving significant time and enabling the purchase of prescription medications directly at pharmacies. On average, in 2021, walk-in patients at pharmacies equipped with Zhiyun’s consultation services were matched with a physician for consultation within three minutes without an appointment.

According to Frost & Sullivan data, in terms of the number of pharmacy installations, Zhiyun Health has become China’s largest provider of pharmacy SaaS products.

As of June 30, 2023, more than 200,000 pharmacies in China have successfully installed Zhiyun Consultation, achieving a nationwide pharmacy coverage rate of 32%. This figure continues to grow rapidly, with approximately 20% of these being among the top 100 pharmacy chains, including major brands such as Yifeng and Laobaixing.

In addition to addressing the needs of chronic disease patients for in-store diagnosis and prescription through Zhiyun’s online consultation services, facilitating the fulfillment of prescriptions diverted from hospitals, and assisting pharmacies with online-to-offline (O2O) member management, Zhiyun Health leverages data insights derived from a peak daily volume of 600,000 online consultations. This enables the company to effectively identify sales opportunities for pharmaceuticals and products, while providing new retail and inventory management capabilities to enhance the operational efficiency of pharmacies both online and offline.

“Leveraging Zhiyun Health’s in-depth understanding of the chronic disease market demand, we provide pharmacies with medical devices, consumables, pharmaceuticals, and other product categories related to chronic disease management. This effectively addresses the issues of incomplete SKUs and poor distributor compliance among pharmacies in lower-tier markets,” said Jia Yan.

Beyond brick-and-mortar pharmacies, the pharmacy sector is witnessing significant opportunities for pharmaceutical e-commerce, driven by the growth of the digital economy. Industry experts believe that once the integrated model of “e-prescriptions from internet hospitals + online medical insurance payment + prescription drugs” is fully implemented, it will trigger a major transformation in the multi-billion yuan pharmaceutical market. Digital transformation has thus become an inevitable trend for pharmacies.

However, traditional small and medium-sized offline pharmacies face numerous challenges in developing on O2O platforms, such as lack of traffic support, pressure from leading large chain pharmacy brands, cumbersome onboarding processes, inability to sell prescription drugs, and lack of operational teams.

Addressing these pain points, Zhiyun Health has launched “Zhiyun Kuaiyao,” a pharmacy O2O operational service under its integrated pharmacy solutions portfolio. This service assists small and medium-sized pharmacies in establishing stores on platforms such as Meituan, thereby expanding their business scope, accelerating digital transformation, and improving patients’ access to medications.

“Currently, Zhiyun Kuaiyao has successfully helped tens of thousands of pharmacies break through operational bottlenecks and increase revenue per store, gaining recognition from a growing number of pharmacies,” said Jia Yan.

Specifically, in the O2O operations of retail pharmacies, most pharmacies primarily rely on third-party platforms, supplemented by their own private-domain channels. Zhiyun Kuaiyao has established deep collaborations with mainstream platforms such as Meituan and Ele.me, enabling pharmacies to achieve rapid onboarding and capture traffic. From standardized guidance throughout the entire store-opening process, big data-driven product selection, promotional marketing recommendations, and store operation planning, to B2B supply chain support, Zhiyun Kuaiyao empowers independent pharmacies with the capability to sell prescription drugs online, thereby helping them comprehensively enhance their online operational efficiency.

Zhiyun Kuaiyao boasts a professional O2O operations team with extensive experience in online pharmacy management. Catering to diverse pharmacy clients, it provides comprehensive solutions integrating systems and services, having successfully helped over 10,000 pharmacies overcome operational bottlenecks and achieve substantial business benefits.

Taking a standalone pharmacy in Hebei Province as an example, its online sales exceeded RMB 100,000 in the first month after joining the Meituan platform. During the same period, a community-based standalone pharmacy in Ningbo, Zhejiang Province, saw its monthly revenue on Meituan increase from RMB 10,000 to over RMB 90,000, with nearly 60% coverage of the top 500 best-selling products in the local market.

Behind the rapid growth in online revenue achieved by the aforementioned two pharmacies lies their adoption of the pharmacy O2O operational service provided by Zhiyun Health—Zhiyun Kuaiyao.

In addition to Zhiyun Kuaiyao, by integrating Zhiyun Online Consultation, Zhiyun Merchant Alliance, Zhiyun Pharmacy City, and pharmaceutical retail services, Zhiyun Health can provide small and medium-sized pharmacies with a one-stop digital solution. This enables pharmacies to easily achieve digital transformation, expanding the market coverage radius of offline independent pharmacies from 500 meters to over 5 kilometers.

Jia Yan stated, “We regard the pharmacy scenario as a crucial component of our out-of-hospital strategy. From the Zhiyun Consultation SaaS system to Zhiyun Kuaiyao, and further to Zhiyun Yaocheng, which provides supply chain services, we are essentially capable of meeting a comprehensive range of pharmacy needs—from regulatory compliance and incremental business growth to the optimization of procurement costs. This end-to-end solution is underpinned by the Zhiyun Health Internet Hospital, its team of in-hospital physicians, and Zhiyun Health’s supply chain system.”

“The pharmaceutical industry encompasses numerous specialized segments across the entire value chain, from production to end-use. Within this landscape, there are diverse types and opportunities for digital marketing. Well-known examples include digital marketing services such as prescription outflow, market education, and physician education. In the distribution sector, there are also initiatives focused on data-driven infrastructure for supply chains or regulatory platforms,” pointed out Jia Yan.

“Regardless of the digital marketing model, there are three essential prerequisites: first, regulatory compliance capability; second, technological capability; and third, scenario-based application capability.” Jia Yan emphasized, “These are precisely the capabilities that Zhiyun Health has prioritized throughout its growth and development, and which have now become its competitive advantages.”

In terms of compliance capabilities, Jia Yan pointed out that in addition to adhering to the regulations of regulatory authorities such as the National Health Commission, the National Medical Products Administration, and the National Healthcare Security Administration, Zhiyun Health also places great emphasis on the security of doctor and patient data, the rationality of the entire process, and the traceability of data when providing internet-based diagnosis and treatment services.

In terms of technical capabilities, Jia Yan introduced that these include system tools, big data algorithms, and product R&D capabilities. As one of the early pioneers of internet healthcare in China, Zhiyun Health has a relatively diversified business layout and distinct product advantages. It can provide one-stop digital marketing services for pharmaceutical manufacturers, as well as for terminals within and outside hospitals and in the pharmacy retail market.

Zhiyun Health is also at the forefront of the industry in exploring the application of AI technology. Taking its AI platform, the Zhiyun Health Medical Brain, as an example, the architecture of the Zhiyun Medical Brain is mainly divided into three layers.

First, in terms of prescription volume, Zhiyun Health has become China’s largest online healthcare service provider, delivering 170 million online consultations to end users in 2022. These interactions constitute a critical component of the underlying large-scale medical database powering Zhiyun Health’s Medical Brain. After undergoing compliance review and rigorous de-identification, such data can support expanded clinical analysis and clinical research.

The middle tier of the upward architecture is data processing, including data aggregation and cleaning, standardization, structuring, and machine learning.

At the next level up are two healthcare-specific large language models—ClouD GPT and ClouD DTx—which are applied to AI-assisted diagnosis and treatment, and to AI-assisted research on drugs and medical devices as well as real-world studies, respectively.

In specific implementation scenarios, the Zhiyun Medical Brain also empowers Zhiyun Yihui SaaS and Zhiyun Consultation SaaS with robust AI capabilities.

Taking the Zhiyun Consultation SaaS system as an example, the Zhiyun Medical Brain provides physicians with evidence-based medication recommendations to ensure medication safety. For follow-up visits of patients with chronic diseases, the system evaluates the appropriateness of the consultation in advance based on patient chief complaints and disease conditions, thereby excluding patients whose symptoms do not match the intended scope. During the consultation, a traffic light mechanism is employed to offer physicians more scientific and accurate treatment plan recommendations. After the consultation, the system re-evaluates the treatment plans prescribed by physicians, promptly intercepting any unreasonable regimens. This system safeguards the massive volume of diagnostic and therapeutic services provided by the Zhiyun Health Internet Hospital Platform, significantly enhancing the platform’s diagnostic efficiency, quality, and safety.

Regarding scenario-based capabilities, Jia Yan pointed out that all products ultimately need to be implemented in various scenarios. Zhiyun Health’s comprehensive solutions cover hospitals, pharmaceutical companies, pharmacies, and patients. By connecting different partners through a variety of products and services, it can provide the industrial sector with a compliant, precise, complete, and effective full-suite solution.

Compared to other B2B, B2C, or O2O models in the out-of-hospital pharmaceutical sector, what differentiates Zhiyun Health from other internet healthcare companies?

Jia Yan stated that, whether in the B2B or B2C sector, the core objective is to provide medications to consumers at more affordable prices. Within this business logic, greater emphasis is placed on factors such as the breadth of market coverage and the diversity of product portfolios.

For Zhiyun Health, the goal is to leverage information interconnectivity to help clients obtain multi-dimensional and more precise operational insights, thereby enhancing the effectiveness of their decision-making. Under this business model, Zhiyun Health focuses on the entire customer lifecycle value, specifically customer satisfaction and stickiness, as reflected in whether the types of collaboration become more diverse and the duration of partnerships becomes longer.

Distinct business models and underlying operational logics may well constitute Zhiyun Health’s competitive advantage through differentiation within the broader internet healthcare ecosystem.