Digital transformation race in medical sector

Businesses in the healthcare industry are rushing to promote digital transformation and develop e-commerce to shorten check-up and treatment waiting times.

According to e-Conomy SEA, a unit jointly developed by Google and Temasek to track Southeast Asia's digital economy, the gross market value (GMV) of Vietnam's digital economy was estimated at $23 billion in 2022, a year-on-year increase of 28%, of which e-commerce GMV accounted for $14 billion, up 26%.

E-commerce continues to attract customers following the Covid-19 pandemic thanks to its convenience and competitive prices. Online sales of Mobile World Investment Corp (MWG) and FPT Retail increased by 52% and 39% year-on-year, respectively, in the first nine months of 2022.

MWG and FPT Retail are big players in the retail market in general and the pharmaceutical industry in particular with their respective brand names An Khang Pharmacy and Long Chau Pharmacy. The market has also seen the entry of another major player: Pharmacity of Maroon Bell JSC.

While An Khang and Pharmacity both cut back on new stores in the second half of 2022 as demand for dietary supplements and self-medication eased, Long Chau aggressively opened new outlets with a focus on prescription drugs and medicines for chronic diseases, rather than functional foods or drugs to treat mild symptoms.

Long Chau Pharmacy was acquired by FPT Retail in January 2017. By 2020, Long Chau had reached a revenue of VND1,191 billion ($50.52 million), a surge of 133%, but its profit was still negative due to expansion investment.

Long Chau started to make a profit in the second half of 2021, the peak time of Covid-19 in Vietnam, when the demand for pharmaceuticals and healthcare products skyrocketed.

The latest report by FPT Retail showed that Long Chau's revenue by the end of the third quarter of 2022 had reached VND6,562 billion ($278.34 million), an increase of 2.6 times compared to the same period in 2021, with online sales hitting VND3,958 billion, up 39% and accounting for 18% of total consolidated revenue. This unit also expanded its network to 1,000 pharmacies nationwide in the past year.

Meanwhile, Pharmacity has set a revenue target of $1.5 billion by 2025 with 5,000 existing stores. However, it has continuously reported after-tax losses, with VND265.7 billion ($11.27 million) in 2019 and VND194.2 billion in the first half of 2020.

In 2021, Pharmacity's revenue reached VND3,567 billion ($151.3 million), double that of 2020. It revealed that it started to become profitable in July 2021, according to the EBITDA (earnings before interest, taxes, depreciation and amortization) index.

The drug giant swelled in just a short time to about 2,000 stores across the country. However, recently, the brand has closed hundreds of inefficient pharmacies to restructure and promote online sales.

Digital transformation an inevitable trend

According to experts, the Covid-19 pandemic created a faster shift in the revenue structure of the medical and pharmaceutical industry in different ways. Technology has crept into every nook and cranny of social life and community behavior, and habits have also changed through technological improvements. The medical industry is no exception.

In a report reviewing the retail industry in 2022 and forecasting growth in 2023, top Vietnamese securities broker Saigon Securities Inc. (SSI) said that the healthcare industry is moving towards modernity with the rapid expansion of modern commercial pharmaceutical chains. To promote health, people tend to buy functional foods mainly sold through modern commercial pharmacies rather than traditional ones.

According to SSI, a drug shortage is also one of the reasons that have helped modern commercial pharmacies to win customers from traditional stores, which often have weak bargaining capacity to ensure sufficient stocks.

The Ministry of Health has set a deadline for implementing e-prescriptions. Accordingly, pharmacies will need to connect to the national electronic prescribing system. This has proven difficult for traditional pharmacies while modern commercial ones are quickly adapting to the new regulation.

Meanwhile, a report by market research units shows that rents of premises in big cities such as Hanoi and Ho Chi Minh City have been increasing. This is also one of the reasons why many pharmacies have closed their stores and put their products on e-commerce floors.

Blooming telehealth applications

The application of healthcare applications on mobile platforms has opened up a new treatment trend. Platforms and applications for drugs, medical examination and treatment are now favored by many people, and serve as a bridge connecting supply and demand.

In fact, these applications can "shorten" patients’ hospital stays and ease hospital overloading. In the pharmaceutical market, many distributors, including familiar names such as Long Chau, Pharmacity, and An Khang, do not stand outside the e-commerce game.

However, pharmaceutical brands are tending to use technology to optimize the customer experience and support their traditional sales channels via existing stores. Technologies for medical consultation, examination and treatment scheduling are what many applications like Medigo, Medpro, Hellobacsi and Youmed are aiming for.

For example, Medigo, developed by Medigo Software Co., Ltd., is popular with many users thanks to its "quick doctor" feature, which helps shorten patients' hospital stays with online consultations with doctors on a digital platform.

The user can have a video call with a doctor anywhere and at any time for an initial consultation. These applications are considered a "savior" by many patients in the context of overcrowded hospitals where people have to queue from early morning for medical examinations and results.

"In the era of the 4.0 Industrial Revolution, most industries have applied digital transformation to their business activities, which is considered a trend of the times,” said Le Huu Ha, director of Medigo Software.

Amid the strong development of the pharmaceutical industry, digital transformation and technology application is now the main target. This will also solve patients' remote healthcare needs, he noted.