Improving the Development of Online Pharmacies in China

GUO Ying

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

Improving the Development of Online Pharmacies in China

GUO Ying*

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

Objective To put forward some suggestions for the perfection of online pharmacies in China. Methods Literature review and research papers in CNKI were studied and existing problems of online pharmacies in China were analyzed including ineffective supervision system,inadequate online consumers,slow logistics and distribution system,etc. Results and Conclusion Development of online pharmacies in China can be improved by optimizing government supervision system,strengthening the connection between online pharmacies and health care system and perfecting the logistics system.

online pharmacy; management status; suggestion

In 2005,China’s first online pharmacy successfully obtained the “Internet Drugs Transaction Service Certificate”[1]. It marked the beginning of China’s online pharmacy and after that the number of online pharmacies increased year by year. Online pharmacies possess many advantages over entity pharmacies; However,they also face many problems. To improve the development of online pharmacies is what we should do now.

1 Current situation and problems of online pharmacy in China

1.1 Basic situation of online pharmacies

1.1.1 The number of online pharmacies

By the end of May 25,2014,a total of 196 online pharmacies have obtained approval from China Food and Drug Administration,including 37 in Guangdong,22 in Jiangsu,20 in Zhejiang,12 in Beijing,Shanghai,and Shandong respectively,10 in Sichuan,7 in Hebei,6 in Chongqing and Yunnan respectively,5 in Hunan,Jiangxi and Heilongjiang respectively,4 in Gansu,Anhui,Liaoning and Fujian respectively,3 in Shanxi and Hainan respectively,2 in Jilin,Tianjin and Hubei respectively. Therefore,we can find that there is a huge difference among different provinces on the quantities of online pharmacies. There are fewer in the north than the south,and more in the southeast coastal areas than the northwest.

1.1.2 The analysis of willingness to purchase drugs online

According to the national statistics report,a questionnaire survey was conducted in June 2012 and 436 people with online shopping experience were asked,in which 11% of them had experience of purchasing drugs online[2]. While 61%[2]out of the rest 89% without experience of purchasing drugs online wanted to buy drugs online in the future. Therefore,we have a very optimistic outlook for the development of China’s online pharmacies.

1.1.3 The situation of online pharmacies management

Generally speaking,China’s online pharmacies not only sell medicines but also other commodities,such as furniture,books,health care products and medical devices. At present,online consumers have many ways to pay for drugs,such as online bank payment,Pay Pal,Alipay,bank transfer,postal remittance and some websites even use easy methods of payment like paying in advance,integral payment and coupon payment,among which online bank,cash on delivery,Alipay are used mainly. Online pharmaciesprovide the consulting service with QQ,hotline,online conversation window,message window and email,etc. As to the logistics and distribution system,5 ways are applied which include general express,postal EMS,in-store pickup,logistics and ordinary post. On the whole,the development of China’s online pharmacy has a certain scale for the number of consumers,payment methods,marketing and logistics and distribution methods.

1.2 Problems of online pharmacies in China

Although at present China’s online pharmacies have been developed to a certain degree,the development speed is slow,and the number of online medicine consumers is small as well. On one hand,the slow speed is due to the restriction of national policy; On the other hand,online shopping has some security problems. Online pharmacies mainly include the following problems:

1.2.1 Unclear supervision policy

The relevant regulatory policy lags is one of the major reasons for the slow development of online pharmacies. On one hand,China has not set up an effective supervision and management mechanism on the electronic commerce,causing a lot of loopholes in online business. For example,some enterprises without certificates can sell counterfeit medicines or drugs with inferior quality online. In addition,the delivery of drugs can not be done in time and consumers can not make complaints about drug problems. On the other hand,the payment for online drugs can not be covered by medical insurance,causing the inconvenience for online consumers. Therefore,this policy blocks some consumers with medical insurance to buy drugs online to a certain degree[2].

1.2.2 Problems in the sales of prescription drugs

Rx is not allowed to sell online without doctor’s prescription in China. But most of China’s online pharmacies sell Rx without doctor’s prescription. Usually when consumers want to buy prescription drugs,they can not choose “direct purchase” option or the warning information—“it is a prescription drug”,or the words“this product is a prescription drug which is not allowed to sell online” should be given to the consumers. But in fact,the consumers can purchase the Rx without providing the doctor’s prescription. Therefore,the management and supervision on online Rx sales is not perfect.

1.2.3 Problem of counterfeit drugs

Internet has become an important channel for the circulation of counterfeit or substandard drugs,and China’s drug supervision department has cracked down many illegal drugs sale online. For instance,the SFDA carried out the nationwide rectification action on the drug information service and drug transaction service in 2008[3],and it issued“Internet Consumption Safety Warning Notice” in March,2008. Totally 59 illegal websites were cracked down in 2011 and 22 in 2012[3]. But compared with the huge illegal online pharmacies,this is only a small part. Since a large number of illegal websites can reopen by substituting IP address or server in overseas so that they can avoid regulation. Because of the concealment system and low cost,it is hard to get the evidence of illegal websites for online drug sales. The traditional regulatory approach can not meet the requirements of online supervision. In addition,the current penalties for the illegal sale of drugs online are not stipulated clearly,and the payment security for online drug purchase has not been well defined.

1.2.4 Imperfect logistics and distribution system

The logistics and distribution system plays a vital role in online drug sales. For the entity pharmacies,the logistics and distribution system is standardized while online pharmacies are lagging behind. Online pharmacies usually adopt such distribution methods as the parcels mailing or express mail from post office,or the delivery from express company. But these distribution methods may not be compatible with some drug transport conditions and storage conditions. For example,it is difficult to deliver the liquid medicines. Besides,it is hard to meet the need of the temperature,humidity and drug delivery time which will affect the quality of the drug. The number of third party logistics enterprises with good qualification is small in China. If the enterprises built logistics system by themselves,it will cause the rising cost which makes the online trading lose its advantage.

2 General situations of online pharmacies in the developed countries

Online pharmacy business model first appeared in the US market. At present,the United States possesses 170 billion dollars market. The first UK’s online pharmacy–Pharmacyzv was opened in November,1999[4],selling prescription and non prescription drugs to consumers. In thedeveloped countries,online pharmacies have become the most common channel for people to purchase drugs.

2.1 Supervision method

The regulation of online pharmacies in the developed countries is different from that in China. The major difference includes the following aspects such as who formulates the relevant laws and regulations,the registration of pharmacies,the approval of licensed pharmacists and the supervision of the pharmacy. Three major modes represent their characteristics and they are pluralism,corporatism and nationalism. Their advantages and disadvantages are referred to Table 1[5].

Table 1 Major supervision modes in USA,UK and Germany

2.2 Supervision on Rx sales

In the developed countries,Rx are allowed to sell on the internet,but the online pharmacies which sell Rx must pass strict examination and get certifications. For instance,online pharmacies in USA must get the “VIPPS Certification”. Besides,NABP (National Association of Boards of Pharmacy) also set a series of measures to ensure the safety of online sales of prescription. While in the UK,online pharmacies with approval are allowed to sell Rx but physician and patients must have consultation online,and they are not allowed to provide detailed information on prescription drugs before consultation. Even so,they still use intelligent technology to conduct random checks ononline Rx sales. Once online pharmacies sell counterfeit and inferior drugs or they are not in accordance with the provisions of the sale,MHRA (Medicine and Healthcare Products regulatory Agency) will take a series of actions and litigation activities. All in all,every country will not allow Rx to be sold online without the appropriate security measures.

2.3 Payment method

Online drugs can be paid with the medical insurance card in some developed countries. Such as in the United States,the customer can use bank card and the medical insurance payment as well. The large online pharmacies such as CVS.COM and DRUGSORE.COM can expand their scales rapidly just because they cooperate with the local social insurance department. They become two biggest chain drugstores in the US. The integration of their online pharmacies and the local social insurance prompted the rapid expansion of their scales[6]. For online pharmacies in Germany,very few customers adopt the direct payments. Most of the expenses are covered by insurance companies[4].

2.4 Product categories

There are many different product categories in online pharmacies in the developed countries. In the United States,online pharmacies also sell many healthy-related products,such as fitness equipment,books,cosmetic and healthy foods. In Japan,online pharmacies will sell cosmetics,toiletries,cleaning supplies,non fresh food and even alcohol and beverage.

3 Suggestions on the development of China’s online pharmacies

3.1 Suggestions on perfecting regulatory policy and Rx sales

The good supervision system is the basis for the development of online pharmacies. Because of the nature of medicine,strict supervision and management of online drugs should be carried out in China.

It is urgent that China should establish internet laws and regulations for online pharmacies,especially the internet drug service management specification. We must clear the main body of law enforcement and the responsibility of each relevant department. In the developed countries,the law enforcement body and the responsibility of relevant departments are clear. In addition,there are not clear penalties for publishing false information,importing,purchasing and selling,distributing counterfeit and substandard drugs online,and consumption litigation procedure is not simplified. All of these problems should be solved. With the rapid development of internet,the laws and regulations should be adjusted effectively according to the situation.

In addition,as to the problem of online Rx sales,our government should also establish a series of measures like those in the developed countries to ensure the safety of Rx sales online. Otherwise,it will bring more problems and hidden dangers to sell Rx online without corresponding measures.

3.2 Medical insurance payment can be used to solve the problem of online payment

Payment method can also affect the development of online pharmacy. At present,China’s basic medical insurance system has covered the whole country,but customers can not use medical insurance card to pay for the online pharmacies,which restricts consumers’ enthusiasm of buying drugs online. Yet in some developed countries,the health insurance card can be used. Therefore,China’s government should coordinate the health department,information department,administration department and the social security departments as soon as possible to achieve the effective connection between online pharmacies and health care system.

3.3 Industry associations can play a role for the security of online purchase

Industry associations will also have a great effect on the development of online pharmacies. Self-discipline of the industry association is the key factor. In UK,their industry associations play an important role for the security of online pharmacy and China can learn from the practice of UK. The industry association can make the industry specifications,such as medication consultation specification,quality assurance,and the introduction of supervision mechanism to encourage social media and internet users spontaneously to organize anti fraud groups,thus forming a strong social supervision to promote online pharmacies. Although the power of industry associations in China’s is less than in the United Kingdom,they still can participate in the development of relevant laws and regulations actively,inparticular,the supervision. For example,on January 23,2010,more than 10 online pharmacies including Jxdyfcom,Tasly health network,Baiyang pharmacy network,Pharmacy network,daoyao.com and so on set up “China’s online pharmacy alliance” in Beijing,which became the first step of internet pharmacy industry supervision[7].

3.4 Taking a variety of delivery methods to solve the problem of slow logistics

We should develop logistics distribution system complying with China’s logistics policy. Especially,the third party logistics enterprises with good quality are greatly encouraged in China today. On this condition,online pharmacies can develop their own logistics system. If the cost of their logistics is high,they can adopt the mode of combining online pharmacy and pharmacy entity. In addition to the online drug traditional distribution mode,online pharmacies can actively cooperate with multiple entity pharmacies so that the entity pharmacies will be drug distribution outlets and consumers can get the medicines conveniently from the entity pharmacies. Moreover,if the consumers have problems,they could also go to the entity pharmacies to make complaints,which not only solves the distribution problem of drugs,but changes the phenomenon of inadequate online pharmacy distribution service.

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* Corresponding author: GUO Ying,lecturer. Major research area: strategic management. Tel: 8613514263056,E-mail: 13514263056@ sina.com