China's internet healthcare pivots to AI disease management

New prescription rules favour compliant platforms as regulations tighten.

China's internet healthcare sector is shifting from online drug retail towards artificial intelligence (AI)-enabled chronic disease management as regulatory reforms and healthcare policies reshape the market, according to UOB Kay Hian.

The brokerage attributed the shift to grassroots medical insurance reforms, innovative drug inclusion, compliance-driven marketing changes, and the commercialisation of generative AI.

UOB Kay Hian said new compliance guidelines for online prescription drug retail require licensed pharmacists to review prescriptions, prohibit AI from conducting prescription reviews, enforce a prescription-first model, and tighten oversight of third-party platforms.

The brokerage said the measures would increase compliance costs and pressure retail demand in the short term but strengthen larger compliant operators through industry consolidation.

"Whilst raising compliance costs and creating short-term pressure on the sector by curbing impulsive demand, the framework will drive industry consolidation, improve patient safety, and ultimately benefit leading compliant platforms like Ali Health and JD Health over the longer term," the report said.

The report also highlighted policy support for internet healthcare, where the country introduced graded diagnosis policies in April requiring Class III hospitals to redirect routine follow-up care for chronic diseases to primary and community healthcare providers.

This positions “internet hospitals as the core online channel and sustaining volume growth in chronic care management.”

It also included 12 AI-assisted diagnostics in the national Category B reimbursement list, enabling hospitals to charge reimbursable service fees, and creating new opportunities for AI-assisted diagnosis and chronic disease management.

UOB Kay Hian said leading platforms are expanding beyond prescription fulfilment into AI-driven patient management, supported by partnerships with pharmaceutical companies.

It said the shift could increase patient retention and revenue per patient, positioning internet healthcare companies to benefit from demand for AI-enabled healthcare services.

The brokerage maintained a market weight rating on China's healthcare sector and retained buy ratings on Ali Health, Ping An Good Doctor, and Medlive, citing growth from innovative drugs, AI adoption, and disease management services.