13 departments issue a document encouraging internet-based healthcare—established chain giants poised to reshape the competitive landscape.

On July 15, 13 departments—including the National Development and Reform Commission, the Cyberspace Administration of China, and the Ministry of Industry and Information Technology—jointly issued the "Opinions on Supporting the Healthy Development of New Business Forms and Models, Boosting the Consumer Market, and Driving Employment Expansion." The opinions highlight—

· We must actively promote internet-based healthcare, leveraging the internet to enhance the medical experience and create a new ecosystem for health-related consumption. Furthermore, we should strengthen the development of smart hospitals and advance online appointment systems for examinations and tests.

· Explore systems for mutual recognition of examination results, online prescription information, and more, while also working to establish robust, patient-led approaches and frameworks for medical data sharing.

· Explore and refine measures for handling online medical disputes. Include eligible "Internet+" healthcare service fees within the scope of medical insurance reimbursement.

· Standardize the promotion of internet-based follow-up consultations for chronic diseases, telemedicine, and online health advisory services. Support platforms in fostering collaborative development across areas such as medical care, health management, and elderly care/health preservation, while also encouraging the cultivation of healthy consumption habits.

In fact, to boost the development of internet-based healthcare in our country, the government has successively introduced a series of significant and favorable policies.

Moreover, the sudden outbreak of COVID-19 has given internet-based healthcare a significant boost, accelerating the implementation of more favorable policies.

Policy affirmation On April 28, 2018, the "Opinions of the General Office of the State Council on Promoting the Development of 'Internet + Healthcare,'" (Guobanfa [2018] No. 26), clearly endorsed and supported the development of "Internet + Healthcare."

Standardized Guidance On February 12, 2019, the "Pilot Work Plan for 'Internet + Nursing Services'" was released. The pilot program covers six provinces and municipalities directly under the central government: Beijing, Tianjin, Shanghai, Jiangsu Province, Zhejiang Province, and Guangdong Province. This initiative aims to standardize and guide the healthy development of "Internet + Nursing Services," while further enhancing the quality and safety of medical care through tailored regulations.

Online payment lays the foundation On August 30, 2019, the National Healthcare Security Administration released the "Guiding Opinions on Improving Pricing and Medical Insurance Payment Policies for 'Internet Plus' Medical Services," clearly stating that eligible "Internet + " medical services will be supported by complementary medical insurance payment policies based on the principle of fairness between online and offline services. Additionally, the guidelines emphasize refining contract management, streamlining settlement procedures, and enhancing relevant performance indicators tailored to the specific characteristics of these services.

Medical insurance payments further relaxed On March 2, 2020, the National Healthcare Security Administration and the National Health Commission jointly issued the "Guiding Opinions on Promoting 'Internet+' Medical Insurance Services During the Prevention and Control of COVID-19," proposing to include eligible "Internet+" medical services—such as online follow-up consultations and telemedicine—in the scope of medical insurance reimbursement. At the same time, they encouraged designated medical institutions to provide "no-contact" medication services, thereby facilitating the orderly implementation of "Internet+" medical insurance services.

Seize the New Retail Arena

With the support and encouragement of internet healthcare policies, pharmacy chain giants have extended their competitive battle to the new arena of "Internet Healthcare + New Retail for Pharmaceuticals."

Recently, pharmacy chain giant Yifeng Pharmacy (603939) announced the establishment of two wholly-owned subsidiaries in Hainan—Yifeng Internet Hospital and Yifeng Remote Medical Center—each with a registered capital of RMB 10 million.

Among them, Yifeng Telemedicine Center is a physical medical institution, while Yifeng Internet Hospital is an internet-based medical facility established under the license of Yifeng Telemedicine Center. Both companies aim to provide users with services such as online medical consultations, prescription-sharing platforms, personalized family doctors, health management, convenient initial inquiries, and patient education.

It's worth noting that as early as September last year, Yifeng Pharmacy announced the establishment of Hainan Yifeng Medical Technology Co., Ltd. (referred to as "Hainan Yifeng Medical"), a joint venture with Hainan Huayi. Yifeng Pharmacy invested 9 million yuan, acquiring a 90% stake in the company. According to available information, Hainan Yifeng Medical operates very closely with Yifeng Pharmacy's newly established Yifeng Internet Hospital and Yifeng Remote Diagnosis & Treatment Center in terms of their respective business services.

Although Yifeng Pharmacy did not mention the situation regarding Hainan Yifeng Medical in today's announcement, repeatedly making moves within just one year clearly demonstrates Yifeng Pharmacy's determination to accelerate its expansion into the "Internet Healthcare + New Retail of Pharmaceuticals" space.

As early as 2013, Yifeng Pharmacy launched its pharmaceutical e-commerce business. In 2016, the company established an e-commerce business group, which subsequently set up several e-commerce divisions—including B2C, O2O, CRM, and E-commerce Technology—centered around CRM and big data to build a new retail model for pharmaceuticals that seamlessly integrates online and offline operations. Currently, Yifeng Pharmacy’s O2O platform has gone live in more than 3,000 stores, covering all major cities across China.

Meanwhile, aside from Yifeng Pharmacy stepping up its expansion efforts, other major pharmacy chains are also refusing to be outdone.

On June 22, 2020, LaobaiXing Pharmacy (603883), renowned for its expertise in capital management, announced a private placement of 600 million yuan to bring in Tencent Capital, strengthening its push into the new retail sector. The move aims to leverage Tencent's financial and technological strengths to foster collaboration at the smart retail level—ranging from precision customer marketing (including membership management and digital empowerment) to reimagining new customer acquisition strategies and enhancing interactive experiences with existing loyal customers—ultimately boosting customer engagement efficiency across the board.

Against the backdrop of the rapid rise and robust development of the new retail model, Yixintang (002727) is actively deploying and expanding its new retail business through its network of more than 6,400 directly operated chain pharmacies. Building on the traditional e-commerce B2B and B2C models, Yixintang continues to leverage its physical stores to develop and explore direct-operated O2O services.

In addition, Dacanlin (603233) has also been actively promoting the development of O2O and B2C e-commerce models, seamlessly integrating online and offline operations. Currently, Dacanlin has established order placement options—such as "online ordering with store delivery"—through third-party platforms as well as its own self-built shopping channels, including WeChat official accounts, mini-programs, the Dacanlin Online Mall app, and the PC platform.

The off-hospital market kicks off a price war.

In addition to supportive internet policies, recent years have seen the gradual implementation of tiered diagnosis and treatment, separation of medicine from healthcare services, and initiatives like reducing the "drug-to-revenue ratio" in public hospitals while eliminating drug markups. Coupled with ongoing national centralized procurement policies such as the "4+7" program and its subsequent expansion, the stage has been set for the "outflow of prescriptions" and the integration of basic medical insurance funds into pharmacies. As a result, the off-hospital market for prescription drugs has become a fiercely contested battleground for major pharmacy chains and retail giants.

In 2019, Yifeng Pharmacy's official WeChat account issued a notice promising that if consumers purchased pharmaceutical products of the same brand and specification—available at retail or member prices—from other market institutions within a 2-kilometer radius at prices lower than those offered by Yifeng—it would promptly reimburse the difference based on the product’s smallest sales unit upon verification.

Without a doubt, Yifeng Pharmacy's move is highly confrontational. First to face them head-on is Laobaixing Pharmacy.

Following this, Laobaixing Pharmacy announced that if consumers purchase the same brand and specification of medication from another pharmacy within a 2-kilometer radius at a lower price than what Laobaixing is selling, they can present their sales receipt to receive a refund—within 30 days—of three times the price difference for the smallest unit of the medication purchased. Laobaixing Pharmacy emphasized that the company is leveraging its nationwide network and scale to actively negotiate with major pharmaceutical manufacturers. Furthermore, the company remains firmly committed to adhering to the nationally approved pricing, ensuring that over 5,000 stores and hospitals across 22 provinces maintain "same medicine, same price" nationwide.

Additionally, Shandong Shuyu Pingmin and Xi'an Yikang Pharmaceutical have also announced their participation in the national centralized procurement. Meanwhile, provinces and cities such as Shandong, Zhejiang, Jiangsu, and Shanghai have already integrated their pharmacies into the centralized procurement platform.

It can be seen that as the scope of the 4+7 volume-based procurement expands to include pharmacies, the price gap between hospitals and pharmacies will also disappear. Looking ahead, whether policymakers will consider allowing pharmacies to participate in centralized procurement is another key area to watch.

The Mad Land Grabbing Expansion Campaign

On one front, established pharmacy chain giants are leveraging the internet to aggressively expand into out-of-hospital markets and compete fiercely in the new retail arena. Meanwhile, their longstanding, relentless battle through aggressive mergers and acquisitions to secure prime market positions is also raging full steam ahead.

Yixintang primarily operates through company-owned stores: According to available data, among the four listed chain drugstores, Yixintang (002727) currently boasts the largest number of outlets—exceeding 6,400—and all of them are directly managed by the company. Notably, in recent years, Yixintang has focused mainly on organic growth through self-built expansion, with relatively few acquisitions undertaken.

Lao Bai Xing, operating across 22 provinces nationwide: Since 2015, Lao Bai Xing has aggressively pursued mergers and acquisitions, expanding its store network from over 1,400 to more than 5,438 outlets within five years. Today, the company spans 22 provinces and over 100 prefecture-level or higher cities across China. In 2019 alone, Lao Bai Xing completed 13 M&A deals, acquiring a total of 370 pharmacy stores at a combined cost of approximately 468 million yuan.

Yifeng Pharmacy leads the industry in merger and acquisition speed: Data shows that from 2015 to 2019, the company’s store network achieved an annual compound growth rate of 45.34%. Notably, in 2018 alone, Yifeng Pharmacy added a net 1,552 stores, while from early 2019 to the end of the first quarter of 2020, it opened an additional 1,008 directly operated stores—though at a slightly slower pace. As of March 31, 2020, Yifeng Pharmacy had grown its total number of stores to 4,869.

Da Shen Lin, deeply rooted in South China and expanding nationwide: From early 2019 to the first quarter of 2020, Da Shen Lin completed a total of 15 mergers and acquisitions within the same industry, along with one equity investment, involving transactions worth approximately RMB 714 million. During this period, the company opened 516 new stores, acquired 501 stores through M&A deals, and closed 88 stores. Currently, Da Shen Lin operates a total of 4,809 directly managed retail outlets.

It's worth noting that the rapid expansion of leading chain drugstores has helped reshape the retail industry, moving it away from its previous "small, fragmented, and chaotic" structure and boosting industry concentration. Meanwhile, these four major players have also achieved impressive growth in their financial performance, with each company surpassing the 10-billion mark in revenue by 2019.

Overall, the trend of major retail giants expanding their store networks has slowed somewhat, yet it remains ongoing. Meanwhile, a strong focus on developing new pharmaceutical retail models—such as "Internet Plus," artificial intelligence, chronic disease management, and capturing the emerging market for "prescription outflow"—is set to become the next big growth driver for these industry leaders.

*Disclaimer: This article is written by a contributor to Sina Medicine News, and the views expressed herein solely represent those of the author and do not reflect the position of Sina Medicine News.