If you ask, what is the segment with the largest shrinkage in the market value of the big health sector? The answer is imminent.
It is not the field of innovative drugs that is currently facing challenges, nor is it the high-value consumables market that is profoundly affected by the centralized procurement policy, but the Internet medical field, where the market value of a single enterprise has shrunk sharply by more than 400 billion in the past three years. The valuation of industry enterprises has shrunk by about 90% from the highest 500 billion to the current 60 billion.
As an emerging industry, Internet medical care has only taken 20 years from its rise and prosperity to its current adjustment. However, so far, the industry has not found a clear and stable path to profitability, and only a few companies such as Alibaba Health and JD Health have achieved profitability.
This year's market changes are particularly eye-catching, from the news in April that China's pioneer of online diagnosis and treatment on the Internet "Good Doctor" may be acquired by Ali Health, to JD Health's comprehensive adjustment of its "family doctor business" in June, these events have triggered the market to think deeply about the future development of Internet medicine. Does this indicate the future development trend of the Internet medical industry? We still need to observe and analyze further.
01. "Family doctor service" is a double day
At the beginning of June, the news of "Jingdong Family Medicine Division was laid off as a whole" has not subsided, and recently "Ping An Family Medicine" has come with big news, but this time it is a "strong upgrade".
Almost at the same time, the "family doctor service" was launched, why did Jingdong and Ping An go to the two heavens of ice and fire?
In 2019, Ping An Health's "Family Doctor Service" was launched; The goal is to serve 10 million families in 3-5 years; As of 2023, Ping An Family Doctor has nearly 13 million registered members.
In June 2024, Ping An announced that it would officially upgrade its family doctor service brand "Ping An Family Doctor". And build a "11312" active health management service system.
That is, 1 professional family doctor team with the dual certification guidance of Peking University Medical International Hospital and the World Organization of Family Doctors WONCA, 1 5A standard service path guided by the Chinese Medical Association General Practice Branch and certified by the Australian Medical Association RACGP, 3 sets of active health management services for sub-healthy people, chronic disease groups and disease groups, and 12 scarce medical resources.
In 2020, JD Health released the service product "JD Family Medicine"; The goal is to serve 50 million families within 5 years.
In June 2024, JD Health adjusted the organizational structure of its family doctor division, merging the C-end business and functions of the original family doctor division into the Internet medical division of JD Health; The B-end business and functions were merged into the Enterprise Business Division of JD Health. It also said that this adjustment does not involve business and personnel layoffs except for structural separation. In addition, JD's family medicine products will focus more on the B-end direction in the future.
In the competitive landscape of China's Internet healthcare industry, Ping An Good Doctor and JD Health, as industry leaders, are often compared by the public. The different strategies adopted by these two companies for the family medicine business just verify a major trend of Internet family medicine services, that is, to give priority to the B-end as the core driving force, and then drive the steady development of the C-end (consumer) market.
Judging from the previous public information in 2020, there is no big gap between JD and Ping An's "family doctor service" in terms of products, service content, and medical resources.
Of course, since then, they have also continued to increase their service items and resources, such as:
- JD Health has set up 22 specialty centers, including pediatrics, cardiology, etc., and invited nearly 100 authoritative doctors to settle in. Launched a variety of versions, such as sleep improvement version, personal care version, and officially launched the "annual care for the elderly" service.
- Ping An Health expanded to 50,000 doctors, covering 29 departments, establishing 23 specialized disease centers, and covering overseas resources. Real-time cooperation with 4000+ hospitals, with 230,000 cooperative pharmacies. The service population is subdivided into: healthy/sub-health, chronic disease population, and disease population (mild and severe disease).
However, the charging model directly facing the C-end still faces problems such as insufficient public awareness, low acceptance, and lack of trust, so consumers are not willing to pay. However, the B-side (such as the government, insurance companies, etc.) can better promote the implementation of family doctor services.
Therefore, from the very beginning, the market positioning of Ping An Family Medicine has been to mainly provide services for the F-end (financial customers) and B-end (enterprise customers) of Ping An Group. In particular, it relies on Ping An Life's huge customer base. It is reported that in 2023, the number of Ping An Life customers using medical and health services will exceed 20 million, and the service satisfaction rate will reach 99%.
Ping An Health Strategy
Generally speaking, people who buy health insurance products are more concerned about health management and have a higher degree of acceptance of related services than other groups. At the same time, the "family doctor service" also adds additional value to Ping An Life's insurance products.
From the perspective of China's medical innovation payment model in the future, it may become a trend for medical insurance to collaborate and hand over part of the cost of differentiated medical products to commercial insurance.
On June 6, the General Office of the State Council issued a notice on the issuance of the "Key Work Tasks for Deepening the Reform of the Medical and Health System in 2024", proposing to promote commercial health insurance products to expand the scope of payment for innovative drugs; Select some areas to carry out pilot projects, and explore and promote the online rapid settlement of medical expenses for commercial health insurance.
Perhaps because of this, although China's Internet medical companies have been exploring "family medical services" for nearly a decade, it seems that only Ping An Good Doctor has taken the lead.
In 2015, Dr. Chunyu explored "private doctor" services; In 2017, Good Doctor piloted Internet + family doctor service in Pengyang County, Ningxia; In 2017, WeDoctor released the "WeDoctor Family Medical Service System".
However, the Internet medical industry is still in the exploration stage, and the most important thing that Ping An Good Medical needs to prove to the market is "when it will be profitable".
02. What does Internet medical care rely on to make money?
Profit-making Internet healthcare has been "a world-class problem" from the very beginning.
In fiscal year 2021 (April 2020-March 2021), Alibaba Health achieved a positive profit of 349 million yuan for the first time, and JD Health achieved a positive profit of 380 million yuan for the first time in 2022.
Judging from the performance in 2023, only JD Health and Ali Health are still profitable among the listed Internet medical companies. The revenue growth was mainly driven by the sales of pharmaceutical and health products.
Pharmaceutical e-commerce is still the most monetizable Internet medical profit model.
According to the latest data from Minenet, the total retail sales of physical pharmacies will reach 622.9 billion yuan in 2023, while the total retail sales of online pharmacies will climb to 306.4 billion yuan, accounting for 33% of the overall market. Compared to 2022, the market share of brick-and-mortar pharmacies decreased by 3.1%, which is a further increase from 1.8% in 2021. At the same time, the market size of online pharmacies continued to expand, with a year-on-year increase of 17.5%, indicating an increasingly strong growth trend in the online retail market.
As one of the top giants in China's e-commerce field, Alibaba and JD.com have "entered" Internet medical care with a large and sticky user group, and their original advantages are difficult to replicate in the field of pharmaceutical e-commerce.
- As of March 31, 2024, the annual active users of the Tmall Health platform reached 300 million;
- By the end of 2023, JD Health has more than 172 million annual active users.
In addition, the main challenge in the field of service C-end (drug delivery) is the high degree of "homogenization", and its business model has many similarities with fresh e-commerce. At the same time, with the relaxation of drug sales policies, emerging platforms such as Douyin, Kuaishou, and Xiaohongshu have also joined one after another, making the competition in the pharmaceutical online retail market more and more fierce, and the competition situation is obvious.
The core of disease management is to connect the three main bodies of patients, doctors and pharmacies to provide continuous chronic disease consultation and medical services.
With the aging trend in China, the health needs behind the shortage of more than 200,000 general practitioners are obvious.
In November 2023, the National Health Commission and other departments issued the "Guidelines for the Integration of Home and Community Medical Care and Elderly Care Services (Trial)", proposing to provide health management and medical services for the elderly in need of home and community care, and clarifying the service process. In January 2024, the General Office of the State Council issued the "Opinions on Developing the Silver Economy to Enhance the Well-being of the Elderly", strengthening the connection between the research and development of ageing financial products and health, elderly care and other services, encouraging the expansion of integrated medical and elderly care services, and extending rehabilitation services to communities and families.
Internet medicine is an important way to promote the widespread implementation of family doctor business. In order to achieve the seamless integration of online family medicine services and physical medical services, it is necessary to face multiple complex links and challenges of many participants, including doctors, patients, drug supply chains, and examination processes. The coordination and information flow between these links and participants is the core problem of disease management and the development of the family doctor model.
Although it is difficult, Internet medical treatment that only relies on "selling drugs" to make a profit is not a long-term solution.
03. The market value that can't be returned
Almost all Internet medical companies choose to be listed on the Hong Kong stock market, and at present, Health 160 and Ark Yunkang have also submitted listing applications on the Hong Kong Stock Exchange.
Once upon a time, the market value of JD Health, Ali Health, and Ping An Good Doctor exceeded 100 billion yuan (reaching their respective peaks so far).
- On December 31, 2020, JD Health's market capitalization was nearly HK$500 billion;
- On December 31, 2020, Alibaba Health's market value was nearly HK$400 billion;
- On June 30, 2020, Ping An Good Doctor's market value was nearly HK$150 billion;
However, the shrinkage of 100 billion yuan is not limited to Chinese companies, Teladoc, a leader in the US telemedicine industry, has also suffered a sharp decline in market value, from nearly US$50 billion (about HK$380 billion) in 2021 to US$1.75 billion currently.
- Teladoc is the world's first listed Internet medical company, whose main business is online consultation, disease management, etc., and does not involve "pharmaceutical e-commerce", and has not yet made a profit, with a loss of US$220 million in 2023.
After the bubble dissipated, both the global capital market and the big health field have a more realistic understanding of Internet medicine; At present, it may be difficult to return to the valuation of hundreds of billions.
In view of the current situation of China's medical industry, there are high hopes for Internet medicine, perhaps to fill the gap of more than 200,000 general practitioners; Obviously, this cannot be achieved by human beings alone.
When the magical power of AI models swept the world, the Internet medical field also actively integrated into this wave and showed a strong momentum of development. According to incomplete statistics, from February to September 2023 alone, China has released nearly 50 large medical models.
In September 2023, led by the China Academy of Information and Communications Technology and jointly researched and drafted by more than 20 relevant industry-university-research units, including the Medical Service Guidance and Management Center of the National Health Commission, Peking Union Medical College Hospital, West China Hospital of Sichuan University, and the Institute of Precision Medicine of Tsinghua University, the "Technical Requirements for the Application of Large Models in the Medical and Health Industry" was officially released, becoming the industry's first technical standard for the application of large models in the medical and health field.
Therefore, the next battlefield for these Internet medical head companies may be in the field of AI.
In July 2023, JD Health released the "Jingyi Qianxun" medical model. The model integrates clinical guidelines, medical literature, and expert knowledge, and can quickly transfer and learn to various medical and health scenarios, providing technical support for telemedicine services. Based on the "Jingyi Qianxun", JD Health provides online doctors with tools such as cloud clinics, post-diagnosis follow-up, expert consultations, clinical scientific research, doctor IP incubation, and "intelligent doctor assistants".
Ali also released Tongyi Renxin - a personal exclusive health assistant.
Based on Ping An Group's five major databases and the knowledge graph in the medical field, Ping An Health has built a multi-modal medical model of "Ping An Medical Botong". In addition, the "Ping An Medical Family" doctor workbench has been upgraded, which can assist doctors to quickly generate medical guides, saving time and worry. AI can also achieve full quality inspection, covering online consultations, medical records, prescriptions and other links to ensure safety and compliance.
Zhiyun Health has launched the self-developed ClouDr Brain, and established two industry models: ClouD GPT and ClouD DTx. GPT is used for AI-assisted diagnosis and treatment, while DTx focuses on AI-assisted medical devices and real-world research. These models aim to provide more personalized care, improve the quality of life of patients with chronic diseases, and optimize the quality and efficiency of physicians' work to alleviate the strain on medical resources. In addition, Zhiyun Health also cooperated with Baidu Wenxin Yiyan to try to apply conversational language model technology to domestic digital chronic disease management service scenarios, and comprehensively open up the in-hospital and out-of-hospital medical treatment scenarios for domestic chronic disease patients.
In addition to continuing to speed up the offline layout, Dingdang Health has written the business-level content such as precise digital disease specialties and telemedicine services, and innovative AI digital empowerment consultation and consultation services into the new five-year plan. In 2023, it will release "Dingdang HealthGPT" and launch the application-oriented pharmaceutical AI product "Dingdang Pharmacist and Nutritionist AI Assistant" based on it.
In the early morning of June 19, 2024, the market capitalization exceeded $3 trillion, and Nvidia became the world's most valuable company. The success is due to its world's strongest chip, which can increase AI computing power by 30 times.
Perhaps the next "return" of the market value of Internet medical companies will be when their AI empowerment explodes.