The Chinese healthcare market has become increasingly competitive in the past few years. Three dominant Internet giants – Baidu, Alibaba, and Tencent (BAT) – are competing to increase their share. Despite their efforts, they still have a long way to go.
The Chinese healthcare market is a blue ocean, and the three dominant Chinese Internet giants – Baidu, Alibaba, and Tencent (BAT) – are competing to get a lion’s share. However, a close look into the industrial chain will reveal many sore points with the five main processes: patients, hospitals, doctors, enterprises (medicine and equipment, etc.), and payments.
Baidu: not a positive word in the healthcare field
Whenever “Baidu” and “healthcare” appear together, the Chinese will not associate them with anything positive. Two big scandals have occurred in just last six months, overshadowing Baidu’s past efforts in the healthcare industry.
The first scandal is the selling out of haemophilia forum. On January 9th, Baidu kicked out the owners and operators of the haemophilia Baidu forum, which is a platform for haemophilia patients and their family to share about this horrible disease. The new owner and administrators are selected by Baidu, and are all from some medical organisation in Xi’an. One of the administrators was repeatedly reported by users of the forum for being a cheater. As a result of the selling out of forums, the help-seeking and experience-sharing platform for fellow patients becomes the advertising space for institutions that are willing to spend money.
The former owner’s article shared on Zhihu, a knowledge-sharing web attracted massive attention and revealed many inside stories. It is estimated that about half of the illness forums were sold out without checking if the buyers are professional medical institutions or cheaters trying to make money. 36 health non-government organisations have complained to the government about false medical advertisements on Baidu forums. Although Baidu finally announced that it would no longer allow private firms to run the forums, and would invite professional NGOs to assist in the operation of the relevant forums, its marred corporate image seems irreparable.
The second scandal concerns paid listing. Paid listing misleads medical-seekers, and results in serious repercussions, such as in the case of Wei Zexi, whose treatment was delayed after falling victim to one of the paid listings on Baidu. One reason why such perfidious client can even advertise on Baidu is that Baidu do NOT take the responsibility of checking the clients of paid listings seriously. To worsen the matter, the “commercial” mark at the corner of the link is unclear and few people actually do notice it. Innocent people also fall into the trap of believing that hospitals ranked at the top are reliable. Fortunately, after suffering huge pains, many people come to realise that there are some dirty bargains between the search engine and unscrupulous hospitals. Wei Zexi passed away in April, and many more similar cases were uncovered. However, it is disappointing that many names on the blacklist sorted out by the Chinese following the episode still occupy the top positions in Baidu search.
As a matter of fact, Baidu did take actions to improve its credibility. It is cooperating with professional medical webs such as haodf.com to improve the medical information on search results, and has failed several medicine e-commerce platforms, with the latest one being Baidu Health Medicine Centre because it is unable to prove its eligibility to sell medicine online. The next step of Baidu is believed to be O2O medicine.
Healthcare is a long-term business but Baidu is still lacking in many ways.
Alibaba: a new-born industry chain
Tmall drug store is an important branch of Taobao. It was launched in 2012 and the volume came to ¥4 billion in the first half of 2016. Medicines, medical devices, IPPF supplies, healthcare products, and healthcare services are all within the business scope of Tmall drug store. 74 of 101 companies who have the qualification for pharmaceutical retail have opened online shops there. As part of the requirements of the regulation, consumers can only book the medicines online and pay offline when the products are delivered.
Alibaba acquired Citic 21CN in 2014 and later renamed it Alibaba Health Information Technology, or simply Alihealth. Citic 21CN has resources in drug electronic supervision code and third-party qualification of selling medicine online. Since then, AliHealth not only became a channel of healthcare services in Tmall drug store but also provides the service of testing the authenticity of medicine, ensuring consumer safety. The latest news in February showed that General Administration of Food and Drugs (GAFD) is planning to close the policy of electronic supervision code. AliHealth indicated that they are still discussing about the removal of supervision net, which provides a huge portion of the company’s revenue.
In May, AliHealth allied with 65 physical pharmacies to set up a programme based on big data. This alliance between Internet technology and physical pharmacies allows for the establishment of health records, and offers proper health management plans. With that, patients no longer need to go to crowded hospitals for some small problems. Diagnostic procedure will also be improved with a detailed record. While AliHealth follows the trend of China healthcare reform, it still has a long way to go in the expansion of the market.
Tencent: invested mature platforms
The Chinese medical system is hierarchical, and this is a hurdle that healthcare providers have to overcome for a successful reforming of the system. For years, China has pushed for the development of primary care but people are still predisposed to choose big hospitals over smaller ones when they are ill. Community hospital and family doctor are rarely popular in China.
Since 2013, the number of clinics has increased considerably. According to latest statistics, there are 197,873 clinics in China and this figure is likely to be larger than 200,000 by the end of this year. Yet the percentage of people who go to clinics only increased by 3.1%. On the other hand in tertiary hospitals, percentage of patients increased by 7.9% and visits in primary care decreased by 0.2%.
The responsibilities of primary care include solving small problems, guiding patients to the right division in the hospital, and taking care of patients in rehabilitation, etc. What clinics need are not recruiting attractive specialists but offering personal and customised services and projects.
Of all three Internet giants, Tencent is perhaps the only one that understands the Chinese government the most. In 2014, it invested ¥70million to DXY and ¥100million to guahao.com.
Founded in 2000, DXY has built the largest online forum for physicians, launched a series of mobile applications, and opened its wholly owned clinics. DXY connects Patient, Physician, Pharmacy, and Payer. By the end of 2015, DXY has tens of millions of users in China and more than 5 million registered members, including 2 million physicians and 1.37 million licenced physicians.
Guahao.com started off with online scheduling of patients appointments in 2010. Today, Guahao.com has developed We doctor, a platform that gives patients guidance and checking services, and wu.gov.cn, an online clinic. Guahao.com owns 110 million users and 0.2 million specialists, connecting more than 1900 hospitals in 27 provinces in China. This year, Guahao.com is preparing for Accountable Care Organization (ACO), a programme covering healthcare and insurance.
Both Alihealth and Tencent utilise different approach to increase their market share. AliHealth chose pharmacy as the entrance of Internet healthcare while Tencent deepened its network by buying platforms enriched with resources and experiences. Nonetheless, both share a time-consuming problem: how to change the Chinese perception that only doctors in big hospitals are reliable?