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Internet giants tap e-health care sector to meet demand

By Ding Yining  (Shanghai Daily)    15:22, April 28, 2015

Photo/ stdaily.com

China’S Internet giants are trying to expand their presence in the booming mobile and electronics health care market as they face new competitors in startup companies and public institutions.

It’s a lucrative pursuit. Medical billings in China are expected to top US$1 trillion by 2020, according to McKinsey Co.

“Many players are actively riding the trend, trying to grab a piece of the cake in this growing market, and these new businesses are successfully tapping into consumer needs in the health care sector,” said Franck Le Deu, a McKinsey partner focused on China’s health care system.

The government is watching the convergence of medical services and digital commerce but has not intervened yet. Electronic and mobile health care was cited as a key area of focus in the State Council’s five-year plan for the development of health care services in China.

As the government holds back, cyberspace is rapidly changing the traditional delivery models of health care services.

Guahao.com, a service provider headquartered in Hangzhou, has been providing patients with online access to medical registration systems in more than 1,100 hospitals in 23 provinces. By the end of 2014, 160 million patients had tapped its services.

Last year, Internet giant Tencent invested US$100 million in the website, addressing what it sees as a core demand from its smartphone users. Earlier this month, Guahao made access to its service easier through Tencent’s popular social platform WeChat. “WeChat offers direct, simple access to people who may not have been familiar with the online registration process in the past,” Peng Binbin, vice president of Guahao, told Shanghai Daily.

Chunyu Doctor is another player in the field. Unlike Guahao.com, the online service works with individual physicians. Paid subscribers can consult specific doctors, with Chunyu taking a commission on each transaction. Chunyu also offers general medical advice for all users.

Zhang Rui, CEO of Chunyu Doctor, said the rapid development of smartphones and mobile devices is creating gradual decentralization of hospital services, giving patients alternative channels for treatment or medical advice.

Currently boasting 30 million active users plus about 40,000 physicians, Chunyu is exploring value-added services through analysis of user health data.

Alibaba taps market

Last August, it raised US$50 million in funding from China International Capital Corp, Temasek investment arm Pavilion Capital and Zhejiang-based Rushan Venture Capital.

E-commerce giant Alibaba is also betting that its vast user base could be leveraged in the medical sector.

Last year, the company and private equity fund Yunfeng Capital bought a controlling stake in Hong-Kong listed CITIC 21CN for US$171 million, changing the listed unit’s name to Alibaba Health Information Technology Ltd.

Earlier this month, Alibaba said it has agreed to integrate its online pharmacy business with the listed unit.

CITIC 21CN operates 95095.com, one of three online platforms allowed to host online pharmacies, giving consumers the opportunity to compare prices before they place orders. The site has been operating under a pilot qualification license from the State Food and Drug Administration since September 2013.

Drawing on its cloud-computing capability, Alibaba said it wants to become a backbone for hospitals, especially in lower-tier cities.

Ma Li, vice president of strategy and products at Alibaba Health Information Technology Ltd, said the company plans to launch an application allowing patients to search for products online and pick up their selections from nearby pharmacies.

Public institutions have also entered the market. Shanghai-based Zhongshan Hospital has launched a service allowing patients to pay medical bills with China UnionPay’s credit or debit cards through smartphone applications.

“Our target consumers are those who repeatedly have to come to the hospital because of chronic diseases,” said Yin Yiqing, head of the computer and network center at Zhongshan Hospital. “UnionPay’s payment system provides an automatic calculation on what a patient owes out of pocket after national health insurance contributions are deducted.”

Yin said bringing scattered health care resources into one unified platform will strengthen the medical system.

The mobile and electronic health care sector was valued at 3 billion yuan (US$483 million) in 2014 and is expected to reach 12.5 billion yuan by 2017, according to McKinsey Co.

Funds going into e-health care

As a result, e-health care is attracting widespread investment. Some 80 deals in the private sector last year involved US$1.7 billion in cash injections.

Investors who want a piece of the action are often bewildered by the array of emerging players and the diversity of services being offered at an accelerating pace.

“The increasing involvement of Internet companies in the pharmaceutical industry makes it hard for investors to make reasonable valuations,” said Yu Wenxin, chief pharmaceuticals analyst at Haitong Securities. “They are not strictly medical companies and they are approaching the industry in a different manner.”

Norman Chen, a venture partner at Fidelity Growth Partners Asia, said there are concerns about overheating and possible bubbles forming in the digital health care market. Venture capital firms need to move fast and to stick to their strategic focus, he said.

Everyone is waiting to see what role, if any, the government plans to take.

Regulations about the rights and liabilities of these tele-medical services are still absent at the moment, said Liu Chunquan, a senior partner and attorney with Panocean Law Firm. He said he favors strict rules related to the business partnerships between medical institutions and commercial companies.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Gao Yinan,Yao Chun)

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