Prescription business poised for takeoff

Buoyed by the huge potential opportunities arising out of China's healthcare reforms, pharmacy benefit managers (PBM), or third party administrators of prescription drug programs, are also making a beeline to the Middle Kingdom.

PBMs usually process prescriptions for the companies that pay for the drugs, mostly insurance companies, and often are in direct negotiations with drug makers and pharmacies. They are also responsible for processing and paying medical reimbursements.

Essentially these companies act as the intermediaries in the healthcare system. They generate their income through the service fees for activities like processing prescriptions and negotiating with pharma companies and drug makers.

"PBM is a new concept in China, but it might have a significant impact on the business value chain in future," says Yang Liankun, director of a private hospital in Xiamen, Fujian province.

In the 1980s, China launched market-oriented medical reforms that encouraged hospitals to generate money for their financing requirements and to improve staff morale. However, many of the hospitals started to make profits at the expense of the patients, as doctors often started to prescribe expensive and sometimes unnecessary medicines.

The arrival of PBMs coincides with the 2009 healthcare reform, which aims to reduce the cost of medical services. The National Essential Drug List (NEDL), which contains 307 drugs under the National Essential Drug System (NEDS), is now applicable to government-funded hospitals, grassroots clinics and other health institutions. This list provides the reimbursement framework for the "urban employees basic medical insurance (BMI) scheme" and the "urban resident BMI scheme".

Sensing the huge potential for PBM services, Express Scripts, a leading player from the US, has already set up a unit in Beijing. Another PBM prototype has come up in Shanghai called Yihaodian (The Store No 1), an e-commerce website.

Unlike other online supermarket websites, The Store No 1 has a medical sublink, that offers discounts and rebates for prescription drugs and medical services. The site also has job advertisements for licensed pharmacists, medical services procurement officers and drug representatives.

"In future, our clients can log in on our system to download and import their medical records. Even if our clients have been to various hospitals, their medical records can be integrated on our medical database for better medical treatment management," says a webmaster from The Store No 1 on condition of anonymity.

The integrated electronic medical records (EMR) will not only help in faster treatment, but also removes geographical restrictions for patients and helps them enjoy uninterrupted access to medical facilities across the country.