Digital Health Industry And Medical Service Market Meet Explosive Growth

By Zhu Ping

The outbreak of new crown pneumonia in 2020 has brought unprecedented challenges to human beings, and accelerated the digital upgrading of medical and health industry. In this year, the digital health industry took advantage of the wind and ushered in rapid growth. According to the data, from January to may 2020, the number of Internet hospitals in China is close to the total amount in 2019. By November, the total number of Internet hospitals has exceeded 900.

This year, the whole industry also witnessed the "Internet + medical health" supported by digital means such as the Internet, artificial intelligence, etc., from "better with you" to "not without you".

In 2020, the new mode and business form under the concept of digital health will achieve explosive growth, and the division between the two major tracks in the industry will gradually become clear. The "pharmaceutical e-commerce" evolved from consumer e-commerce and the "medical service" based on digital technology provide innovative digital health services for people in different dimensions, which not only meets the needs of users, but also brings industrial breakthroughs.

Compared with the pharmaceutical e-commerce which has become a red sea, the digital medical service track remains blue because of its high industry threshold. However, under the influence of the epidemic, the medical service track is accelerating into the center of people's vision, and ushered in an explosive growth period driven by multiple factors.

Epidemic situation accelerates digital migration of health care

In the past ten years, China's medical and health industry has gone from the informatization of hospitals to the real "touch the Internet" to connecting patients through registration, and then to providing in-depth services through Internet hospitals. Traditional medical habits, doctors' habits and strict policy supervision, especially the absence of online medical services by the largest payer of medical insurance, make the digital migration of medical industry difficult.

In this context, the head e-commerce platform "opens a new path", bypassing the pain points and blocking points of medical services, cuts into the digital health industry through its own mature e-commerce path and flow, provides health consumer goods, health products and OTC retail services for people, meets the basic health needs of users, and realizes the rapid growth of the platform. For example, the relevant revenue of JD health in the first half of 2020 exceeded 8.2 billion yuan and was listed in Hong Kong by the end of this year; the related revenue of Ali health in the first half of fiscal year 2021 exceeded 6.9 billion yuan.

At the same time, the industry is also exploring the digital upgrading of medical services. In 2015, Wuzhen Internet hospital, China's first Internet hospital, was founded. By connecting doctors and patients, it opened up the closed-loop service of online follow-up, sharing of electronic medical records, electronic prescription, drug distribution and other services. According to public information, as the founder of Wuzhen Internet hospital, micro medicine currently has 30 Internet hospitals, 18 of which have become designated medical insurance institutions, connecting more than 7600 large and medium-sized hospitals and more than 250000 doctors practicing online.

Under the catalysis of the epidemic situation, the competent departments of the industry have issued a number of encouraging policies to promote Internet + medical services this year. In July this year, the national development and Reform Commission and other 13 departments jointly issued the "opinions on supporting the healthy development of new formats and new models, activating the consumer market and driving employment expansion". It was pointed out that the government should actively develop internet medical care, optimize medical treatment experience with the Internet, and create a new ecology of healthy consumption. Digital medical and health services have ushered in unprecedented development in user habits, doctor behavior, drug circulation, hospital management and government attitude.

Digital health industry presents two tracks

With the rapid development of the industry, the division of tracks under the concept of "digital health" has gradually become clear. One is a pharmaceutical e-commerce track focusing on health consumption and OTC retail; the other is a digital medical service track that provides medical and health services, prescription drugs and health insurance.

Jingdong health, which was listed not long ago, had a market value of more than HK $340 billion on the day of listing, and ushered in a rapid growth of market value after its listing. As a leading pharmaceutical e-commerce racetrack giant, JD health's revenue of 94.5% of its 8.7 billion revenue in the first half of 2020 will be obtained by e-commerce business (self support + business settlement), while in Ali health's 7.1 billion revenue in the first half of fiscal year 2021, e-commerce (self operated + business settled) contributed 97.2%.

There are different growth logic behind the seemingly similar development of medical e-commerce and medical services. According to the view of securities market analysts, as consumers choose their own services, the price and flow are the core elements driving its growth, and they are the extension of standardized consumer goods in the health field, which can meet people's demand for health care products and surrounding services. The medical service is decided by doctors, with the core of medical insurance, commercial insurance payment and medical service ability as the core, providing serious and professional medical services.

Internationally, the medical service track has become increasingly mature. In August this year, teladoc, the leading online medical service enterprise, purchased livongo, an online chronic disease management platform, with us $18.5 billion. After the merger, teladoc will provide holographic digital health services from treatment to disease management for payers, service providers and users. At the same time, its management predicts that by the end of 2020, its revenue will exceed US $1 billion and more than 10 million digital medical services will be completed.

In China, digital medical service racetrack enterprises are still in the initial stage of growth, and take advantage of the favorable market and policy in 2020 to seek overtaking on the curve. Micro medicine, dingxiangyuan, Tuxiang technology and other domestic medical service track enterprises accelerate the development layout. Taking micro medicine as an example, through the digital platform, the closed-loop of medical, medical and medical insurance services is opened. Micro medicine provides users with the whole process medical and health services of "Online + offline, in hospital + out of hospital". At the same time, relying on health big data, it provides data empowerment for commercial health insurance and explores the integration of medical insurance and commercial insurance.

Digital medical service track ushers in explosive growth period

At present, the national health care reform has changed from "taking treatment as the center" to "taking health as the center". Under the background of further opening of medical insurance payment policy, the growth of medical service track has been pressed the acceleration key.

In 2019, China's outpatient (emergency) medical expenses exceed 2 trillion yuan, and hospitalization medical expenses exceed 2 trillion yuan. As the main means of payment, the coverage rate of medical insurance is much higher than other methods. This provides a broad space for the development of digital medical platform with medical insurance access qualification, which not only produces economic benefits, but also brings huge social effects.

At the peak of the epidemic, Wuhan provided online follow-up and prescription, medical insurance reimbursement and other services for patients with severe chronic diseases through Wuhan micro medical Internet hospital, which covered 97% of the city's demand for online follow-up visits. Through the cooperation with digital medical service enterprises, Tai'an City explores the digital chronic disease management mode, which reduces the time for patients to visit and purchase medicine from the original 2-3 hours to 10-20 minutes, sharing about 20% of the outpatient pressure of large hospitals. In addition to the Internet hospitals dominated by the third-party platform, entity medical institutions such as West China Hospital, Zhongshan Hospital Affiliated to Fudan University, and run run run hospital affiliated to Zhejiang University Medical College also provide digital medical services for patients through Internet hospitals.

Corresponding to the great development potential of digital medical service track, higher access and operation threshold are required. On November 2, according to the guiding opinions on actively promoting the "Internet plus" medical insurance payment work issued by the State Medical Security Bureau, if the diagnosis and treatment services provided by Internet hospitals are to be included in the scope of medical insurance payment, relevant enterprises are required to meet the requirements of medical insurance qualification in terms of hospitals and doctors, and have technical support for interrogation, inspection and testing, prescription drug supply and medical insurance It can provide high-quality medical services and improve the efficiency of medical insurance funds.

The high threshold makes the digital medical service track start slower than the pharmaceutical e-commerce track, but with the improvement of related infrastructure, the head effect on the track is prominent. According to Sullivan, an industry research institution, the online consultation market only accounts for 6% of China's total consultation volume in 2019. However, under the catalysis of the epidemic situation, the pace of digitalization of medical services will increase significantly, with an annual growth rate of 77.4% between 2019 and 2024.

The market of digital medical service track is heating up rapidly

From the perspective of industry development perspective, digital medical service track is more growth, and driven by multiple factors, it is ushering in a period of explosive growth, and the attention of the capital market to the track is also rising.

In the primary market, the global financing amount of digital health is expected to reach a record high in 2020. According to CB insights, an industry research organization, global digital health financing reached 8.44 billion US dollars at the end of the third quarter, with China and the United States accounting for the largest amount of financing. Among them, the digital medical service track is more favored by the capital, especially the enterprises recognized by diversified payers and forming an online and offline service closed-loop, which have obtained large capital injection in the world. For example, kry from Sweden and carbon health from the United States have completed more than 100 million US dollars of financing this year.

In the secondary market, in addition to the merger of teladoc / livongo, another leading enterprise in the industry, AMWELL, successfully listed on the NYSE in September this year. In addition, Oak Street health, a technology enabled medical service enterprise focusing on capitation, has also been listed, with a market value of over US $15 billion. At the same time, digital medical service companies such as doctor on demand and OMADA health are also rumored to start the listing process in the near future.

In contrast, domestic digital health concept enterprises are all listed pharmaceutical e-commerce track giants, and few digital medical service racetrack enterprises are listed. However, the attention of capital market is rising continuously. It is understood that micro medicine has recently obtained US $350 million in financing, and will promote its medical service sector to go public in Hong Kong after being split up. If the news is true, it may inject a shot in the arm into China's digital medical service market.

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