Pharmacy Battle for Chronic Patients' Loyalty

Striving for Chronic Disease Patients

"Currently, about 50% to 60% of our stores are engaged in chronic disease management, and our goal for this year is to reach 70% to 80%. For the stores that have already implemented chronic disease management, we are leveraging the experienced ones to bring in more stores or staff members. Our target for next year is to have all our stores participate," said Liu Luping, Chairman of Jiangxi Changsheng Pharmacy Co., Ltd., to the First Financial Daily reporter recently.

As a chain of pharmacies, Changsheng Pharmacy has approximately 2,000 stores across several provinces in China. Liu Luping introduced that in response to the field of chronic disease management, Changsheng Pharmacy has implemented multiple measures. Firstly, they have established a professional chronic disease management team to track patients' health conditions through health consultations and regular follow-ups. Secondly, the pharmacy is actively introducing digital work related to chronic disease management, such as health monitoring devices. Additionally, they are collaborating with primary healthcare institutions to promote information sharing, ensuring more coherent treatment and management for patients.

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In fact, other major chain pharmacies have already been taking action in providing chronic disease management services. Yixintang stated in its semi-annual report that the company continues to increase comprehensive investment in the construction of a chronic disease service system. As of the end of June 2024, the company had 1,421 specialized stores for chronic and special diseases, accounting for 12.59% of the total number of chain stores, covering stores at the provincial, city, and county levels.

Dacanlin also mentioned in its semi-annual report that the company will undertake the prescription outflow through O2O, chronic disease management, DTP/DTC, and pharmaceutical services, to deeply explore and meet customer needs, and enhance customer loyalty.

Liu Luping feels a sense of urgency regarding the implementation of chronic disease management. "It is imperative for pharmacies to manage chronic diseases. Over the past few years, due to the impact of the pandemic, we have delayed this matter, and now we must accelerate. We always say that serious illnesses go to hospitals, while minor and chronic diseases come to pharmacies. Chronic disease patients are exactly the customers we need to retain."

Liu Luping's sense of urgency comes from two aspects. On one hand, the aging population is increasing the number of chronic disease patients. On the other hand, the pharmacy industry is at a turning point, gradually bidding farewell to its previous high-growth trend.

According to data from the Zhongkang Lingsu system, in the first half of 2024, the average sales per pharmacy nationwide declined by 10.6% year-on-year, with the average transaction value per customer declining by 8.9%. Additionally, the growth rate of the market size is lower than the growth rate of the number of stores. Behind this, changes in individual account policies have led to a decrease in the average medical insurance personal account expenditure in pharmacies, making consumers more cautious when purchasing medication. The implementation of outpatient coordination policies has caused some medication needs to flow back from pharmacies to primary healthcare institutions, especially community health service centers.Liu Luping stated that, generally speaking, the proportion of pharmacy income paid by medical insurance ranges from 30% to 40%, but this ratio has been declining year by year. "Our pharmacies can no longer rely solely on medical insurance income as we did in the past; otherwise, we won't be able to survive. We should think of ways to retain our customers."

What other challenges are there?

The original profit model of the pharmacy industry mainly focused on the simple sale of drugs. How to fully explore the value of pharmacies and use the pharmacy scenario to provide comprehensive solutions for disease types or health issues for consumers has become the direction for each company to explore.

The implementation of chronic disease management has enhanced the professional capabilities of pharmacy staff.

"To do a good job in chronic disease management, reputation is very important. From last year to this year, we have conducted registration and management of customers through telephone follow-ups. We are also implementing a tiered management system for our stores; if they do not meet the requirements, we will not proceed for the time being," Liu Luping said. The introduction of chronic disease management in pharmacies has actually increased the workload and operating costs of the pharmacies themselves. How to motivate employees to participate is also a significant issue. However, in the long term, it is expected to achieve a win-win situation for both customers and pharmacies. "Customers manage their health well, and we retain our customers."

However, pharmacies alone are not enough to manage chronic diseases effectively.

Dong Meiqi, Director of the Brand Strategy Department and Marketing Department of Omron, told the First Financial Daily reporter that traditional chronic disease management, in addition to poor patient compliance, also includes inadequate prevention knowledge dissemination, potential chronic disease patients unable to prevent and treat in time, and chronic disease patients lacking professional chronic disease management guidance and targeted diagnostic services. Therefore, since chronic diseases require continuous monitoring and management, a "hospital diagnosis - external provision of solutions" closed loop for chronic disease management should be established.

"Pharmacies have a wide coverage and can reach more chronic disease patients and potential populations. If they can provide the same level of testing as hospitals, they can play a role in timely detection and intervention. Some people may just come to buy medicine, but they happen to get tested and find abnormalities. In such cases, we can suggest that they go to the hospital for further examination," Dong Meiqi introduced. Omron's MMC Health Convenience Store, in cooperation with pharmacies, places medical institution equipment in pharmacies, allowing the establishment of daily health check-ups and consultation services at the doorstep of the public, diverting traffic from hospitals.

It is reported that Omron's MMC Health Convenience Stores have covered 28 provinces, successfully signed contracts with 94 chain pharmacies, and have now opened 85 stores.

Data from the China Health Pharmacy System shows that as of the second quarter of this year, the number of pharmacies nationwide has reached 701,000, but the number of closed pharmacies has increased from 6,778 in the first quarter of 2024 to 8,792 in the second quarter.In Liu Luping's view, the current increase in the number of pharmacies cannot continue indefinitely. "We have also observed some peers gradually closing down unprofitable stores. On our end, for stores that are unprofitable or have significant losses, we would choose to close them or relocate to a new site. In the past two years, the number of new stores we have opened is not many; there have been openings and closures, but the overall number has remained around 2000. We dare not be aggressive in opening new stores; instead, we pursue steady development."

"For pharmacies, compared to merely selling drugs, transitioning to health management services can enhance consumers' dependence on pharmacies and help them gain an advantage in the fierce market competition," another person from a chain of pharmacies told the reporter.