Below is a full transcript of our AliCast with AliHealth’s Ma Li.

Adam Najberg: Time now for AliCast, a deep dive into innovative and emerging trends in e-commerce, online payments and digital entertainment, brought to you by Alibaba Group. We’ll offer insights about Chinese consumers and brands doing business in China. We’ll delve into global online retail, cloud computing, big data and other must know topics and issues in and around one of China’s largest companies. I’m Adam Najberg.

Like nearly everything else in China, the country’s healthcare system is massive. China achieved universal healthcare for its population of 1.3 billion in 2011, but keeping the system going is a challenge. With the bulk of China’s population still in rural villages, how do patients get access to doctors at tier one urban hospitals? How can you ensure the medicine you’re buying is authentic or still good? That’s where companies like AliHealth come in. I spoke with its vice president Ma Li recently about these and other issues, and what kinds of solutions AliHealth provides.

So, what is AliHealth?

Ma Li: AliHealth is a Hong Kong-listed company and is part of the Alibaba group. Its major business is focusing on healthcare. And Jack Ma announced the double H strategy, so we are one of the double H.

Adam Najberg: What are the double H’s?

Ma Li: Double H’s are health and happiness. So, these two H’s represent the new strategic focus of Alibaba Group.

Adam Najberg: Could you talk to a little bit of the history of AliHealth as you know it?

Ma Li: I remember in 2015, Alibaba Group invested in a company, which is called 21st Century. At that time, 21st Century, this company is already Hong Kong-listed, and its major business is for China medicine-tracking system. In Alibaba group, we think this company is very interesting because it has a lot of insights in China medicine production and distribution, all the way to who is using what medicine. This kind of thing. And so, we can use this platform to improve the efficiency of the industry. So I think, that’s the background logic, why Alibaba invested in this company.

Adam Najberg: At the base of every company is usually, it starts with the question of what problem are we trying to solve? So, what problem is AliHealth trying to solve?

Ma Li: We just talk about the Double-H strategy. That said, we are trying to improve the whole healthcare system. To improve that, to offer better, safe, effective services to the whole population. So, you can say that’s the vision we’re trying to solve. It’s not just about doing some e-commerce or healthcare product, right? It’s broader. We are doing e-commerce, we’re doing healthcare services, and also health management, so it’s full blown, the scope is broader.

Adam Najberg: No, that’s fine. So, when you talk about the full-blown mission that you’re carrying out. Let’s take something like authenticity of medicine. Sometimes that’s not something you can take for granted in a country like China. But overall, you have systems in place that are making, not just more-efficient but safer as well, is that right?

Ma Li: Exactly, exactly. So, with the tracking system, we not only can know who produced the product, when it’s off the production line and who distribute it. The first-tier, second-tier, third-tier distributor, and all the way to the end channel. We hope using that system we can help the whole system to have a safer product. And also we can use it to a lot of other things, for example, using it as a channel to connect the pharma companies with the end user. ‚Ä® There’s a lot of like the patient’s education, all the information transferring, and interactive things can happen between these two ends.

Adam Najberg: Could you break this down for me a little bit? It feels like for everything that a consumer might want, need, or think about, Jack Ma and Alibaba Group have a product or a service or a platform. Can you talk about the platform here, how does all of what you just described happen? So, let’s say I am a seller of medicine, how do I get involved with AliHealth?

Ma Li: So I just mentioned that we’re building a platform of e-commerce for healthcare products. That’s the first part. And the second part is healthcare services. In the third one, of course, we have our own tracking code. And we call it Mashang Fangxin (“Be Right at Ease”) in Chinese, which means that with a cold you have a peace of mind.

Adam Najberg: That’s a great name, Mashang Fangxin. Yeah, I like it.

Ma Li: Yeah, exactly, and the fourth part is our healthcare-management platform. With these four pillars, we have our full-blown business scope. So, to your question just now that, how a pharma company can get involved in our platform, there are different ways. Of course, we work with pharma companies to promote their disease knowledge. And if they are doing over-the-counter, because there are some regulatory barrier there. But if they are doing nutrition, medical device, TCM, traditional Chinese medicine, or OTC products, we can help them to promote their brand or their product. And also, we can help them to understand their users better.

Adam Najberg: Is that done with data like on other Alibaba platforms?

Ma Li: Of course, we protect the privacy of the user, but in different ways, we can give them some interesting observations. Like what kind of consumers have different behaviors, like different sex, different age, different geography distribution, they care what kind of topic. For example, we did some analysis in different cities, who’ll care more about certain healthcare topics.

Adam Najberg: So, it’s kind of like high-level marketing and also demographic information for the sellers, so that they have some kind of insight into how to position themselves, right?

Ma Li: Yeah, you can understand it that way, but more importantly, I think we position as serving our users as our first priority. Because, you know, right now, some people are still thinking that we are just an e-commerce platform. Like, you know, I go there to purchase some product.

Adam Najberg: Right, very transactional, buy, sell.

Ma Li: Right, right, but what we’re trying to do is healthcare, which is very different from selling other products.

Adam Najberg: How is it different?

Ma Li: Yeah for example, if you purchase a cell phone, your purpose is to get a cell phone and plug in and make phone calls. That’s it, right? But if you purchase a box of medicine, your purpose is not to open it up and take the pill. Your purpose is to cure your disease, right? So, that said, sounds like it’s a trivial difference but trust me.

Adam Najberg: No, no, not at all. It sounds very personal. You’re putting something in your body, right?

Ma Li: Yeah, and it’s a very significant difference, because we have to provide a lot of professional services around that. That is not the only transaction, right? We have thousands of doctors working with us to provide consultation online. So, when a consumer, they have some questions regarding a product or regarding to their own symptom, we can provide quick consultation services. That said, we can help them to give them guidelines on what you should take, or you should not take. That is very different from just a normal consumer goods commercial.

Adam Najberg: So, if I’m an AliHealth customer, then what I can expect is, yes I can buy what I want to buy, but I can also learn about it. I can educate myself about it, I can hear about it from professionals, and I also can be pretty guaranteed that this is an authentic safe product as well.

Ma Li: Exactly, exactly. And we are thinking about launching a new product called “Help You Choose.” Because for healthcare products, it’s not very transparent to the consumers. When consumers purchase a cell phone, they know what brand, what type, right? They purchase, they understand the product, but for healthcare product they may not understand.

Adam Najberg: So, you’ve mentioned a couple of key initiatives that you have going or are thinking about now. How are you doing on your mission? I know that Alibaba has a timeline for business units. How are you feeling right now in your initiatives?

Ma Li: Yeah, we are progressing very fast. For example, the e-commerce platform I just mentioned, we are the largest healthcare e-commerce platform in China, taking about 60% to 70% of the market share, the largest, yes. And we’re not only looking at a scale, but as I mentioned that we are thinking about how to enrich our services, knowledge, information to help our consumers better in this particular vertical sector. And secondly, we work with the regular pharmacy to form an online-to-offline regular pharmacy pilot project. The logic that we try to explore New Retail in healthcare products. So, as I said, the selling of a healthcare product is not only a transactional thing, right? Not just sell it and that’s it, but there are a lot of services around it. And when a consumer walks into a regular pharmacy, there are a lot of services we can provide. And online tools can empower your regular pharmacy to do it better.

Adam Najberg: Could you give me an example? For the online, I can envision that. It’s basically going to a website and there are buttons or things I can pick, I can have a doctor consult with me. But now I walk into a pharmacy and I have to say, Alibaba is now getting known for new retail in different areas. I didn’t realize it was reaching into AliHealth as well, so I’m very interested in hearing how that works.

Ma Li: As an example that in the regular pharmacy, you can build in some blood pressure-testing machine, right? And you can provide it as a service to the elderly who cannot use a cell phone or to use the smart device to do it. 
 And that person-to-person interaction can improve the stickiness to attract more consumers to the regular pharmacy. At the same time, because you provide those kinds of service, you can test all those, blood pressure, blood sugar. And also you give them advice on what kind of product you should take or should not take. 
So these kind of services can give the consumers a well-rounded service package.

Another example is that when you have a child, and he has a fever, for example, you can not wait for three days to wait for the product to be delivered through B2C platform, right? So, we work with the alliance, the regular pharmacy which is close by you. And the way you place the order online, the product can be sent within one hour to your home. So that is how the online offline can work together.

Adam Najberg: Part of this is on one hand, you sign up customers to purchase with the platform. You also sign up vendors, sell them the platform, but then you’re going out and you’re looking for off line pharmacies that are willing to participate in this system. And in fact, what you’re describing goes way beyond transactional. Sounds more like you’re trying to use AliHealth as a way to make itself a touch point in China’s medical system. Is that right?

Ma Li: Yeah, you can think of that way. Another example would be that, I’m not sure whether you’ve heard about one of the healthcare reform initiatives called the coupling of medical service and prescription. There’s a trend that medicine products, mostly before, were channeled from healthcare institutions, but they’re now moving to the regular pharmacies. How can we take that law to serve the consumers better? For example, a consumer goes to hospital to see the doctor, and then they need prescription drugs. Whether they can get the drug from a regular pharmacy close to their home or close to their offices, not purchased from the hospital. That needs a whole system to support that.

Adam Najberg: Could you actually step us back even a little bit further and explain to our listeners. How does China’s medical system work? And I imagine yes, it’s one system, but you also have very large tier-one cities, you have tier-two cities, and you also have a gigantic rural population in China. So could you talk about the health system? Just generally, what does it look like and how does it work?

Ma Li: In China, totally, I think there’s about 20,000 hospitals, and of course there are many primary institutions.

Adam Najberg: So primary care comprises a part of that 20,000?

Ma Li: No, outside of these 20,000 hospitals there are many like the village clinics or community healthcare centers like those, there are many. And within this 20,000 about 2,000 are class-three hospitals, and then class-two hospitals and class-one hospitals. Class-three hospitals are the largest and most of them are located in big cities. As you said, a lot of rural areas, they lack sophisticated doctors at institutions. So that is the one major issue. The resources are not balanced. The second thing is that, overall, the healthcare input in China is not sufficient. Compared to US, the healthcare expenditure out of GDP is, I don’t know, 15%, 17%, but in China it’s about 5%, 6%.

Adam Najberg: But is everyone covered in China?

Ma Li: Yeah, well, you can say 90% of people are covered but-

Adam Najberg: So, I have a cut on my hand. I can walk into a primary care physician and get treated?

Ma Li: Right.

Adam Najberg: Under national health?

Ma Li: Right, national health has broad coverage, but not deep coverage. So, the purpose is to make sure everybody has the basic service covered. But, if you have the means to better service, if you will, like more expensive drugs or better doctors, or something, you’re not covered as well as in other countries.

Adam Najberg: So, what do people do? Are they covered at all, or is there a burgeoning private insurance industry that’s cropping up in China or how does it work?

Ma Li: Private insurance is emerging. People are seeing a very steep growth rate these past few years. But still, it only maybe accounts for less than 10% of the total market.

Adam Najberg: As mostly supplementary, I would imagine, right?

Ma Li: Exactly, exactly.

Adam Najberg: If we could go back to your example, you talked at little bit about some of the areas of China are lacking the same services as in a big city. What’s the challenge there? Let’s say you’re in a village, you have an elderly person or a child who’s injured. I’m sure there are primary care doctors there, right?

Ma Li: Well, you call it primary doctors, but most of them are not as educated as compared to the US. So that’s one other initiative, that China’s government is trying to train primary care doctors. One of the risk factors of the China healthcare system is very weak primary doctors. We have big hospitals and sophisticated doctors, which may be comparable to U.S. doctors, but for the basic layer, the primary care, it’s very weak

Adam Najberg: So, how does AliHealth fit into this equation? If you take that rural example, how does it work? So, let’s say the doctor diagnoses something. You need a drug for this or some medicine for this. Is it readily available there, or at what point do you get involved as AliHealth, in that kind of primary rural healthcare situation.

Ma Li: What we do first in healthcare services, one challenge people really get is my doctor in county hospital says it may be cancer. So, that’s very threatening, but whether it’s really cancer or, maybe it’s just a nodule in the lung. So, I do need a better doctor to have a second opinion. Usually, what people do is to take the train to go to Beijing and Shanghai, to wait four nights to get a registration to a doctor and get a second opinion. What we are trying to do is we provide online services. So right now, I just mentioned that we have thousands of doctors working with us.

And among them, there are quite some class-three doctors in class-three hospitals. Their experiences are sophisticated enough, and they can answer questions. People can even submit their exam results, like blood or urine. Simple results, and also what my local doctor says and get a second opinion.

Adam Najberg: Is that free? Is that a paid service?

Ma Li: Our online consultation has different layers. Most of them, I would say, are free, and you can get them in 30 seconds. We guarantee that. But for doctors in class-three hospitals, they are more experienced and they have less time, so their services are charged.

Adam Najberg: Right, so if we keep following this through, now we’re in Beijing, and someone needs something. They need a diagnosis or a further explanation of a condition that they have. Maybe they live in the outskirts of Beijing, not near a hospital, they’re elderly. How can you help? Is it different in a rural situation?

Ma Li: Yeah, of course This is easier, compared to a rural area people. But what we do is, as I mentioned, the online consultation. The other thing we’re trying to do is to work with the healthcare institutions to build the tertiary medical service system. Like they can build referral mechanism, and we also help class-three hospital doctors give advice or guidance to the lower-tier doctors.

And when a lower-tier doctor has some difficulty, or this disease I cannot diagnose or I cannot treat, they can send the patients to the class-three hospitals. At least, the patients, for example, if they need surgery they have to go, right? But at least these patients do not need to wait in line four nights to get registration. 
And also, they can have very targeted doctors because the local doctors says this doctor is already an expert in treating your problems. So, we are using the Internet-based mechanism to help different layers of healthcare institutions to build a collaboration mechanism.

Adam Najberg: You’ve been listening to AliCast, a regular podcast from the Alibaba Group. Thanks for tuning in. I’m Adam Najberg.