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KamLeungPage19/3/2019RxTrainBringingHealthcaretotheBillionAProposalfore-commerceinChinaKamH.LeungKamLeungPage29/3/2019ContentsPageMarketAnalysis31.3BillionPeopleBuys$18BillionofDrugsAnnually3TheGovernmentNeedsSomeoneelsetopayforTheseDrugs3InternetUsageinChina4e-CommerceinChina4CompetitionandThreats4UnevenQualityofCare5Advertisement6Distributors6Three-leggedDebts6WhollyOwnedForeignEnterprise6TheBusinessModel8BusinessPlan8BusinessPlan:Technology8BusinessPlan:Content8BusinessPlan:Distribution(Fulfillment)9BusinessPlan:Payment10Execution10Assumptions11Risks11ManagementTeam12IPOSchedule12TenYearProforma13ProformaP&L:RxTrainOwnsnoInventory14ProformaP&L:RxTrainOwns80%ofitsSales16Appendix:I.NewspaperCoverageofKatrinaLeung18II.:drugs$12.5Billion,nutritionals$2.5B,andtraditionalChinesemedicine(TCM)$3B.WhileclassificationofhealthsupplementsintonutritionalsandTCM’smakethe$5.5Bfigureunreliable,thereislittleargumentthatWesterndrugsareenormouslypopular.Joint-ventureswithmultinationaldrugcompanies(MNC)captureone-thirdofthemarketbutaccountforhalfoftheprofits.NameslikeXianJanssen,ShanghaiSquibb,andSmithKlinearepracticalhouseholdnamesandtheirproductseasilyavailableinstore-frontpharmacies.Thethinlinebetweenprescriptionandover-the-countermedicineinChinabodeswellforRxTrain.Thestore-frontapproachcreatesneedforconsumereducationandbreeds“fakemedicine.”Asanauthoritativewebsiteprovidingthelatestglobalhealthcareadvance,RxTrainwillcreateinstantaneouscredibilityandbrandrecognition.Auser-friendlygraphicinterfacewillhelp(Chinese)consumerstomakeinformedchoicesamongstdrugs,nutritionals,andTCM’sfortheirailment.Directshipmentorpickupfromdesignatedpharmacieswillguaranteecustomersfreedomfrom“fakemedicines.”TheGovernmentNeedsSomeoneelsetopayforTheseDrugsChinaenjoysuniversalhealthcarecoverage.Theworkunitnegotiatesalevelofcarewithadesignatedhospital.Theworkerandfamilymembersseenatthathospitalanditsoutpatientclinicpayforonlyextrasbeyondthatlevelofcare.Basiccareusuallyincludesthecostofdrugs.Inthecities,approximately70%ofthepopulationiscoveredbysuchworkunit(government)sponsoredhealthinsurance,withthebalanceself-paidpatientsatopenhospitals.Intheruralareas,theratioisreversed.Aselsewhereintheworld,suchthird-partyinsuranceinvitesabuse:fordoctorstoprescribemore,andmoreexpensivedrugs.Withdrugpricesspiralingoutofcontrol,Shanghaipublisheda“1000-druglist”in1996.Itdetailedthe1000drugsapprovedforreimbursementunderthemedicalinsurancesystemandlimitedtheiruse.Generallyregardedassuccessful,themodelismuchwatchedandcopiedthroughoutthecountry.KamLeungPage49/3/2019The“1000-druglist”controlsgovernmentexpenditurewhileshiftingthecosttotheconsumer.Incompliancewiththeregulations,andinresponsetomarketingpressurefromthedrugcompanies,doctorssuggestmoreoftenthatpatientspayfornamedrugsoutofpocket.Ontheotherhand,witheconomicreformsimplementedsince1998,allworkunitshavetobeprofitablewithoutGovernmentsubsidies.Asaresult,manyworkersfrombankruptworkunitsareleftwithouthealthcoverage.Thosefromthesolventunitsfaceloweredcoverage.InDecember1999,theChinesegovernmentissuedadirective:“…(allshouldestablisha)nationwideurbanhealthcarecommunityservicesystemby2010…tobesharedbythestate,employersandindividuals.”RxTrainmeetstheGovernment’sneedtocontainhealthcarecostbyshiftingthedrugcoststoeducatedconsumers.InternetUsageinChinaInternetusersinChinahavebeenplacedbetween2to10million.Anotherestimateplacesacomputerin1/3ofthefamiliesinGuangzhou(population8million.)OnJanuary25,2000,thewebsite,“Youare1,434,944thvisitorsinceFebruary18,1998.”Anotherestimateplacedmostareaswiredbyfiberopticswithinfiveyears.Thereappearstobeabasefor,androomtogrowforInternetusageinChina.WithentryintotheWorldTradeOrganization,telecommunicationwillgrowandmightmatchtheproliferationrateofcellularphonesinChina.RxTrain’sSilvermembership(seebelow)isdesignedtoencouragecontrolledInternetproliferation.Workunitspayanominalmonthlyfeesothattheirworkerscangaine-mailaccesstoRxTrain’sdoctorsandjoinperiodichealthconferences.Thuslyonecomputerattheworkplacecanprovidemany“eyeballs”forRxTrain,theworkunitscanshifthealthcarecoststoconsumers,andtheGovernmentcanallowInternetgrowthinacontrolledenvironment.e-CommerceinChinaCurrentlytradeisconductedoverthewebbypickingupatdesignatedstore-fronts,prepaymentatthebank,cashondelivery,debitcards,prepaid“phone”cards,orcreditc