Foreign Online Pharmacies: Diversification and Its Enlightenment

MENG Ling-quan, WU Zhi-ang, ZHOU Ying

(School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China)

Foreign Online Pharmacies: Diversification and Its Enlightenment

MENG Ling-quan, WU Zhi-ang, ZHOU Ying

(School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China)

Objective To provide references for online pharmacy development in China. Methods The diversification of foreign online pharmacies was studied on the basis of nature analysis of e-commerce development and literature review. Results and Conclusion The study indicates that there are diversified operation forms abroad, such as electronic enterprises, large pharmaceutical chain stores, the non-drug retail stores and the government agencies carrying out the operation of online pharmacies. In order to promote the development of online pharmacies in China, we can learn from the foreign experiences and allow the electronic enterprises, the nondrug retail stores and the government agencies to become the subjects of online pharmacies based on the current situations in China.

online pharmacy; diversification; operation form; operation subject

The 30th China’s Internet network information center report showed that[1], by the end of June, 2012, the number of Chinese Internet users had reached 538 million and Internet penetration rate was about 39.9%, which was higher than the world’s average level of 30.2% in 2011. Huge amounts of Internet consumers accelerated the network consumption and provided vast space for the development of online pharmacies.

By the end of November 16, 2012, China’s online pharmacies had been 68[2]. By the end of 2010, retail chain enterprises with pharmaceutical trade license in China had reached 2310[3], online pharmacies accounted for less than 3% of pharmaceutical retail chain enterprises (data acquisition: 68/2310). In 2011, online pharmacy sales accounted for 0.0424% of the retail share[4], and the online pharmacies in the United States and other countries accounted for nearly 30% of the market share[5]. Online pharmacies in China can not scale effect and it has not become the fourth drugs terminal market as hospital, pharmacy, countryside and community[6].

Compared with foreign online pharmacies, China’s online pharmacies are not mature both in scale and management, the government is strict with online pharmacies. The government should have further policy support to break through the bottleneck for the development of online pharmacies. This paper analyzed the development of online pharmacies in other countries and put forward strategies to increase the number of domestic online pharmacies.

1 Following the law of development of online pharmacy

1.1 The electronic commerce influences online pharmacy enterprise organization form

Under the environment of e-commerce, enterprises face tough competition. More and more enterprises realize that it is hard to adapt to rapidly changing business environment by their own resources and abilities. Therefore, they start trying to build a more flexible organization and management model, such as virtual enterprises, outsourcing, strategic alliance, etc. Such management model means the traditional enterprise organization form is deconstructed and restructured by electronic commerce. This requires enterprises focus on their core business and some of the non-core business should be outsourced.

1.2 The essential attribute of online pharmacies

Online pharmacies belongs to the medical e-commerce B2C trading patterns, its main function is theonline drug retail and online pharmacy services. Without the particularity of medicine, it has the same e-commerce properties as the general online goods, it also follows the law of the electronic commerce development.

1.3 The nature of electronic commerce

Robbins classified electronic commerce into three kinds of forms[7]. (1) Enhanced type: namely, the traditional organizations should not only establish electronic enterprise but also maintain their organization form of entity. (2) Enabled type: organization uses the Internet to better complete some traditional business function, but it does not sell anything. In other words, the Internet enables organizational members to be more efficient and effective in their work. (3) Complete type: organization is a fully electronic business at the beginning, and its business is totally based on the Internet.

The enabled type can help a traditional enterprise use information technology to enhance work efficiency and effectiveness. The enhanced and complete forms are electronic commerce form. Online pharmacies can use entity plus electronic platform or pure electronic platform.

2 Research on foreign online pharmacies diversification development

The United States has more than 12000 online pharmacies[8], online shopping for medicine is one of the consumers’ reasons to surf the Internet. Online pharmacy sales ranks second after drugstore chain. It is related with the multiple online pharmacies. Just as the States, Britain and Netherlands also allow registered pharmacy, wholesalers, sales agents or any traditional sales organization to sell pharmaceutical products including prescription drugs through the network[9].

2.1 The forms of foreign online pharmacies

2.1.1 Online pharmacies with entity stores

This kind of online pharmacies is to develop sales channels for traditional retail chain pharmacy, and it works as a supplement and extension of traditional channels. For example, the second largest retail drugstore CVS (Consumer Value Stores) took over Soma.com company to carry out online pharmacy business[10].

2.1.2 Online pharmacies without entity stores

The pure online pharmacies without entity stores in the United States are the earliest in the world, such as Drugstore.com, Soma.com, PlanetRx.com, Caremark.com, HealthWarehouse.com and Savon.com, etc. They are pure electronic pharmacies. They are a threat to both traditional pharmacies and online pharmacies with entity stores in terms of selling health care products and prescription drugs.

2.1.3 Online pharmacies launched by partnership

Drugstore.com is an online pharmacy in the United States and it was launched by the online book retailer Amazon.com which cooperated with the pharmacy chain Rite Aid. Therefore, consumers can get the drugs on the day they do online shopping (Rite Aid has 3800 stores in the United States). It expands the advantages of Internet pharmacy distribution[10,11].

2.1.4 Online pharmacies for sales agent

The National Association of Boards of Pharmacy in USA (NABP) has formulated a set of strict rules about Verified Internet Pharmacy Practice Sites (VIPPS), and one of the terms about licensing is[12]that the authentication of online pharmacies must provide the necessary information to NABP so that it can verify personals attached to online pharmacies including all through contracts or other forms of existence who are engaged in business activities have been officially registered and filed for a legal business license, or within a certain range. It means online pharmacies in the United States allow personals with legal license to sell drugs by using other legal practice platform. It can also be understood as online pharmacies can sell drugs for individuals or business agent.

2.2 The body of foreign online pharmacies

2.2.1 Electronic enterprise

Electronic enterprise[7]refers to an organization which uses the electronic to link its key stakeholders including employees, customers, suppliers and partners so that it can achieve its goals more efficiently and effectively. It is the product of information technology and Internet development. It appeared in the United States, in 1999, and Drugstore.com is the example. Such enterprise with “.com”as the suffix is electronic business.

2.2.2 Traditional enterprise or organization

(1) Large pharmaceutical chain stores

American online pharmacies are generally developed from large pharmaceutical chain stores[13]. CVS (that has 4200 outlets and provides 280 million yuan of the prescriptions for 55 million patients), has invested $30 million in the famous Soma.com company in 1999 to carry out online pharmacies[14]. The main chains of pharmacy enterprises have their own web sites. By developing B to C e-commerce model through web sites, they can not only have online trading, but also provides other services such as consulting, medical and health information and electronic prescription, etc[15].

(2) Industry of non-pharmaceutical sales organization

The national federation of community pharmacies launched ComerDrugstore.com to have online pharmacies. Some health-care companies’ shareholders, such as drug insurance financial planners and the existing online pharmacies jointly run the e-pharmacy[11].

(3) The non-pharmaceutical retail enterprises

The non-pharmaceutical retail enterprises also entered the business-to-consumer market to sell low-priced drugs or special drugs, and distributed medicines by the 3rd party courier network (such as Fedex)[16]. The non-pharmaceutical retail enterprises can be understood as a pharmaceutical producing enterprises, pharmaceutical wholesale enterprises, single drug retail pharmacies, etc.

(4) Monomer drugstores run by licensed pharmacists

Netherland allows online sales of drugs but the premise is a registered pharmacist must be responsible for the online pharmacy[17]. Germany provides that whether it is traditional pharmacy or online pharmacy, the practitioners must have pharmacist qualification and they must be the members of German Medical Association of Pharmacists. Patients are required to show their doctors’ prescription to buy prescription drugs. For over-the-counter drugs, patients only can reserve them in pharmacies which are the members of the pharmacist association[18]. More than 90% of the pharmacies in the pharmacist association have carried out the online drugs booking service. Therefore, patients can buy what they need at home. Currently in the industry, experts discussed whether to use digital medical record or electronic prescription to help patients get the remote medical service[19]. Since January 1st, 2004, the German government has changed the regulation that a pharmacist can only open a drugstore, allowing a pharmacist to open three stores at the same time so that they can reduce costs through the chain-like management[19]. It is clear that foreign online pharmacies can be monomer pharmacies run by licensed pharmacists.

2.2.3 The official institutions

The drug regulatory agency in Italy has been officially supporting B to C transaction and prohibiting B to B transactions. Italy’s National Pharmacists’ Association web site provides information about the drugstores across the country and a large number of information about the symptoms and the product, the registered pharmacists in this web site can help patients through e-mail, they also can have the individual drugs online retail in the electronic trading zone[15]. Therefore, Italy allows pharmacists to offer drug retail services on the official website.

3 Research on domestic online pharmacies diversification

According to the Interim Provisions on the Internet for Examination and Approval of Drug Transaction[20], only the entity of the pharmaceutical retail chain enterprises can start online pharmacies in China, and they must sell the non-prescription drugs produced by their own enterprise. Therefore, online pharmacy in China is the enhanced form for pharmaceutical retail chain enterprises to develop e-commerce. Compared with the diversified forms abroad, form and body of online pharmacies in China is simple, the diversification of foreign online pharmacies can provide a reference for us.

3.1 Online pharmacies run by electronic enterprises

By the end of April 16th, 2013, China had had 3979 drug information site, taking out 133 Internet drug trading website, 3846 websites were qualified to release drug information[21]. These websites include Netease, Sina, Baidu and Tmall, etc. These emerging network companies are mainly electronic enterprises. If policy allows, these electronic enterprises will be able to join the team of online pharmacies. Just as the Tmall Company, they must get approval for the sake of security.

3.2 Online pharmacies run by large pharmaceutical chain stores

Beijing Wei Yuan Hua pharmaceutical company has covered 93 cities across the country, with 4299 chain pharmaceutical stores and it launched the first online pharmacies, Pharmacy Network[22]. Having more than 300 chain stores in Beijing, Gold Elephant pharmacy opened the third domestic online pharmacies - Gold Elephantnetwork[22]. At present, domestic online pharmacies owners are large pharmaceutical chain enterprises, which conforms to the international development trend. The reason is that the scale operation can reduce costs and improve delivery speed at the same time. But some non-pharmaceutical retail chain enterprises are not able to develop online pharmacies.

3.3 Online pharmacies run by the non-pharmaceutical sales organization

In USA, the National Federation of Community Pharmacies is allowed to run online pharmacies. Likely, some domestic associations such as Pharmacists Association, Physicians Association should be allowed to establish the online pharmacy industry and they can have the self-discipline system of certification as well. The registered pharmacists and physicians in the association are allowed to provide services as remote diagnosis and treatment, medication consultation, electronic prescription and drugs retail business, etc.

3.4 Online pharmacies run by non-pharmaceutical retail enterprises

Pharmaceutical production enterprises, pharmaceutical wholesale enterprises and pharmaceutical retail enterprises are not allowed to run online pharmacies in China. But the former two types of enterprises are allowed to have online wholesale business. By the end of April 16th, 2013, enterprises had had established 46 websites for drug wholesale. With the development of online drugs wholesale, it is technically feasible for some non-pharmaceutical retail enterprises to run online pharmacies, and the key factor comes from policy.

3.5 Online pharmacies monitored by the official

In order to better evaluate the pharmaceutical enterprise’s honesty and regulate the online drug trading, the Administration of Medical and Health should be responsible for the construction of unified online platform[23]. Pharmaceutical production enterprises, pharmaceutical wholesale enterprises, single drug retail enterprise and pharmaceutical retail chain enterprises can become a member of association so that they can carry out online retail.

3.6 Online pharmacies run by monomer drugstores with licensed pharmacists

When applying for online pharmacies in China, it must have at least two licensed pharmacists who can offer consultation on the Internet. Cultivation of licensed pharmacists is one of the strategies for online pharmacies. Once the policy is made, pharmacists will be allowed to engage in consultation and online trading services in the non drug sales store or official institutions.

3.7 Online pharmacies run by the partnership

MENG Ling-quan put forward the idea that many retail companies could establish a unified platform for the online pharmacies in his book Pharmaceutical E-Commerce in 2007[24]. He offered three kinds of solutions to building the platform of online pharmacies: The first is the allied platform, including large, medium and small pharmaceutical retail enterprises alliance, monomer retail pharmacies alliance and chain and monomer alliance. Such online pharmacies platform can avoid repeated construction, save investment and improve the comprehensive competitiveness of enterprises so that the small and medium-sized pharmaceutical retail chain enterprises have opportunities to run online pharmacies. The second is the platform based on third party solutions to online pharmacies construction[25]. With the help of existing type independent third party to build B2B trading platform, we can develop the third party online pharmacies platform. The third is an independent third party that will be responsible for running online pharmacies platform and pharmaceutical retail chain enterprises work as the center, the pharmaceutical retail chain enterprises are in charge of medicines, professional services and logistics supply and the third party is responsible for network operations.

3.8 Online pharmacies for sales agent

Some small or medium-sized pharmaceutical enterprises can carry out electronic commerce by adopting the follow up strategy. Namely, they can use the existing online pharmacies’ platform to publish and sell drugs. This form and third-party B to B form is the same. First, they should become a member of the trading platform and they will be charged for a commission. After that, the member companies can carry out online pharmacies at low cost. The advantage of doing so is that the member of online pharmacies’ drugs should be the complementary varieties for online pharmacies.

In conclusion, in the development of foreign online pharmacies, the large retail chains, monomer drugstores,licensed pharmacists, pharmaceutical production enterprises, pharmaceutical wholesale enterprises or the enterprise alliance open online pharmacies. They provide a reference for us to speed the development of Chinese online pharmacy and enlarge our market share. No matter what form and main body of online pharmacies, drug quality, safety, and distribution should be guaranteed.

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* Shenyang pharmaceutical university Bayer science projects;

Author’s information: WU Zhi-ang, Professor. Major research area: Pharmaceutical technology evaluation and drug risk management, etc. Tel: 024-23986542, E-mail: zhiangwu@163.com