Hospitals should not be key drivers of drug sales

Government efforts to reduce the reliance of public hospitals on drug sales for revenue are driving the growth of alternative sales channels, but obstacles hindering development persist, industry experts said.

In China's drug market, hospitals have long been the main channel for dispensing drugs, and the move away from this model reflects healthcare reforms to promote better and more affordable medical services and to curb excessive prescription, experts said.

According to Wang Bin, managing director of CEC Capital - an investment banking platform in areas including the medical and health industry - medicines used to treat outpatients suffering from chronic diseases, tumors and autoimmune diseases are the easiest breakthroughs for alternative sales channels.

"Outpatient treatment is not that profitable for hospitals, but it is quite time-consuming for doctors," he said.

Authorities hope the success of a three-level medical care system, with which patients choose medical institutions of different levels according to the severity of their illness, will provide inexpensive and quality medical care for patients with conditions that do not require urgent treatment at smaller medical facilities, which will reduce the number of hospital visits for outpatients suffering from chronic diseases, he said.

The sales of drugs that are expensive and which often cannot be reimbursed, such as those used to treat tumors and autoimmune diseases, are also becoming less attractive for hospitals due to new performance criteria used to evaluate public hospitals, including drug sales caps, he said.

However, promoting drug sales through channels other than hospitals is proving difficult.

The online drugs market is constantly growing, especially for prescription drugs. However, a lack of willingness or capability to monitor and block abuse of prescriptions and fake prescriptions is damaging the credibility of online drug sales channels, despite that some big players are paying great attention to medication safety and drug distribution traceability, Wang said.

It is also difficult to build third-party prescription transferring and sharing platforms on a large scale because medical information, especially prescriptions, must remain confidential, he said.

Moreover, when patients get medicines from hospitals, they receive instructions from both doctors and hospital-based pharmacists, while other drug sales channels often are weak in providing professional direction, he said.

Another hurdle is the fact that Chinese patients are accustomed to seeing a doctor in a hospital, especially a doctor with a good reputation in a big hospital, and it is difficult to change people's mindset, according to Zhao Heng, the founder of consulting company Latitude Health.

Zhao added that on the other hand, authentic prescriptions are essential for the healthy development of a wider drug sales market, but doctors are not motivated to support the transfer and sharing of prescriptions.

If patients can buy medicines where they want, it will weaken the influence of doctors over drug sales, he explained.

Internet hospitals, third-party prescription transferring and sharing platforms, and online drug sales are ways to promote drug sales through channels other than hospitals, but their share in the total drug sales market is small, and it is difficult for them to establish a successful business model, Zhao said.

One reason is that drugs bought through such channels often cannot be reimbursed, and another reason is they cannot compete with the large number of offline pharmacies near hospitals, which often have special connections with doctors and can easily attract customers, he said.