Will Telemedicine Platforms Continue Pharmaceutical Wholesaling Amid 'Market Disruption' Controversy?

Concerns Over DoctorNow's Preferential Treatment for Partner Pharmacies and New Forms of Rebates
Difficulties in Passing the Bill Amid "Killing Startups" Narrative
Restrictions on Patient Choice and Increasing Commercialization of Healthcare

The medical community is closely watching whether the amendment to the Pharmaceutical Affairs Act, which would prohibit telemedicine platforms from simultaneously operating pharmaceutical wholesale businesses, will be passed. There are growing concerns that if the bill fails to pass, it will become increasingly difficult to prevent irregular practices in the pharmaceutical distribution market.

According to the medical community and the Ministry of Health and Welfare on December 8, related industries are on high alert regarding whether the amendment to the Pharmaceutical Affairs Act will be presented at the plenary session on the last day of the regular National Assembly session, December 9. On December 2, the amendment to the Medical Service Act, which allows telemedicine, was passed by the National Assembly. However, the amendment to the Pharmaceutical Affairs Act, which was expected to be processed together, was ultimately not presented at the plenary session due to opposition from the platform industry, which criticized it as a "death sentence for startups."

Nicknamed the "DoctorNow Prevention Act," this bill prohibits telemedicine platforms from obtaining pharmaceutical wholesale licenses and restricts platforms from providing rebates to pharmacies or directing patients to specific pharmacies. Currently, DoctorNow is the only telemedicine platform that also operates a wholesale business, which is why the bill has been given this name.

Founded in 2019, DoctorNow participated in telemedicine pilot projects during the COVID-19 pandemic and, starting in February last year, established Bijin Pharmaceuticals to enter the pharmaceutical wholesale business. The rationale was that by having the platform directly supply medicines, it could more accurately track pharmacy inventory and prevent patients who received telemedicine consultations from having to search for pharmacies that stock the prescribed specialty medicines.

DoctorNow has partnered with approximately 3,200 pharmacies, and about 1,200 of them have received pharmaceutical supplies from DoctorNow's subsidiary. Based on the supply volume and dispensing history of these pharmacies, DoctorNow checks real-time remaining inventory and guides users to pharmacies capable of dispensing medicines through its application. For patients (consumers), this offers the convenience of being able to check where to purchase prescribed medicines received via telemedicine.

The problem began when DoctorNow started directing prescriptions to certain pharmacies. DoctorNow only granted the "Now Pharmacy" status to pharmacies that purchased a pharmaceutical essential package worth 1 million won from Bijin Pharmaceuticals and gave them priority exposure in the app with a "NOW Inventory Confirmed" label. The current Pharmaceutical Affairs Act prohibits pharmaceutical companies or wholesalers from providing financial benefits to pharmacies or medical institutions to induce the supply or dispensing of specific medicines, as this constitutes a rebate. DoctorNow's business model has been interpreted as a rebate prohibited by the Act.

As controversy grew, DoctorNow announced that it had merged Bijin Pharmaceuticals and now operates it as its own online wholesale mall, and that it had abolished the requirement for pharmacies to purchase pharmaceutical packages. However, even now, only pharmacies that purchase medicines through the DoctorNow wholesale mall are labeled as "NOW Inventory Confirmed," which continues to steer dispensing toward specific pharmacies.

Additionally, even before a pharmacist decides whether to dispense a prescription, DoctorNow recommends substituting with its own strategic products containing the same ingredients. It is also reported that, in addition to platform margins on telemedicine prescription drugs, the platform charges pharmacies up to a 14% commission when consumers purchase over-the-counter medicines or other products. Most notably, from March to October, 77% of DoctorNow's reported supply items to the Health Insurance Review and Assessment Service were non-reimbursed medicines such as those for hair loss, obesity, and acne, accounting for over 95% by value. This shows a significant gap between the original goal of resolving patients' difficulties in finding pharmacies and the actual business operations.

Experts warn that platforms linking specific pharmacies or medicines to attract patients and influence prescriptions and dispensing infringe on patient choice and may encourage unnecessary medication use. Currently, the Pharmaceutical Affairs Act strictly separates the supply, prescription, and dispensing stages of medicines, prohibiting not only medical institutions and pharmacies from operating pharmaceutical wholesale businesses, but also transactions between medical institutions or pharmacies with special relationships to wholesalers. There are concerns that platforms may further commercialize by charging brokerage fees or subscription fees, or that they may accumulate personal data such as medical records and health information and link it to other profit-driven industries like insurance in the future.

Park Sungmin, professor at Seoul National University Graduate School of Public Health, pointed out, "Telemedicine platforms are an innovation, but platform innovation and operating a wholesale business should be considered separately. When a platform directs prescriptions only to pharmacies that transact with its own wholesale business, it is ultimately viewing wholesale margins as its revenue model."

Ahn Kijong, head of the Korea Alliance of Patients Organization, emphasized, "If every platform company starts operating its own pharmaceutical wholesale business and focuses solely on expanding commercial functions, the telemedicine environment will be severely distorted," adding, "For medicines directly related to patient lives, the entire distribution process must be strictly managed to ensure quality assurance and prevent misuse."

This content was produced with the assistance of AI translation services.