China’s online health platforms boom in wake of coronavirus

Chinese technology groups are vying to lead the country’s fledgling online healthcare sector after the coronavirus pandemic boosted demand for platforms that provide virtual consultations and sell medicines.

Following a decade of tepid uptake for online pharmacies and consultations, Covid-19 has prompted a clamour for remote healthcare services by patients afraid to visit hospitals and investors keen to tap into the expanding sector. Digital alternatives could also potentially fill longstanding gaps in China’s healthcare coverage, where the best doctors and equipment are concentrated in top-tier hospitals in big cities.

The growing interest in the industry was underscored last week when shares in JD Health rose as much as 75 per cent on their debut. The healthcare unit of ecommerce group earlier raised $3.5bn in Hong Kong’s biggest initial public offering of 2020.

Shares in AliHealth, the Hong Kong-listed healthcare division of rival internet business Alibaba, are also up over 170 per cent this year.

“What Covid-19 did in many ways was to create a mass trial for a service that people have not tried before,” said Vikram Kapur, head of healthcare at consultancy Bain Asia Pacific. 

Even as China has returned to relative normalcy after controlling coronavirus with some of the world’s strictest lockdowns, use of online healthcare platforms has remained about 60 to 70 per cent of that in the early stages of the outbreak, Mr Kapur added.


Citi’s forecast for online drug sales in China by 2025

Ping An Good Doctor, a unit of China’s largest insurer Ping An, had 67.3m monthly active users as of June and was hosting an average of 831,000 consultations every day. That made it China’s most popular online healthcare provider in terms of users, outpacing JD Health and AliHealth.

Online drug sales, meanwhile, could reach Rmb516bn ($78.9bn), or 15 per cent of China’s total by 2025, according to estimates by Citi. That figure is up from 6 per cent in 2018.

Xin Lijun, chief executive of JD Health, told the Financial Times that long-term growth for China’s online healthcare sector would come from its ability to resolve longstanding problems in the distribution of high-quality healthcare across the country.

JD Health works with local communities to offer access to highly trained doctors who are frequently unavailable at small clinics. The service also helps prevent large public hospitals from being overwhelmed by “ordinary people with minor or chronic illnesses”, Mr Xin said.

But there are significant barriers to growth in the industry, including patients’ ability to make claims for online medical services through employer-provided insurance schemes. China launched an online medical insurance system in August last year, but only a handful of cities and provinces, including Beijing and Shanghai, have formally implemented it.

Mr Xin said the national rollout of the public reimbursement system for online healthcare would likely take two to three years.

There are over 300 local government departments across the country that are responsible for managing health insurance, and JD Health has to speak with each of them to work out how to manage claims for online consultations or prescriptions. “Some local governments’ finances are ample and some are in short supply, so they will be more cautious,” Mr Xin added.

The boom in China’s online healthcare industry has led to a proliferation of providers, but only those with scale and brand recognition are likely to survive, said Kitty Lee, head of Oliver Wyman’s health and life science practice in Asia Pacific.

Analysts said that JD Health and AliHealth also have an advantage in selling over-the-counter drugs and prescriptions thanks to their underlying ecommerce platforms, which will take up a large portion of revenue growth in coming years as rates of chronic diseases such as diabetes and hepatitis rise. 

Companies may also have to contend with a shifting regulatory environment. Oliver Wyman’s Ms Lee said that the policy framework China is building has yet to fully account for all the risks arising from the sector’s growth, including challenges in standardising care and products across the country. “There remain a lot of unconnected dots,” she said.

Additional reporting by Wang Xueqiao in Shanghai

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