Abstract: In the era of the Internet, the self-medication becomes an important method to keep healthy because of the convenience of consulting and buying pharmaceuticals online. To achieve more market share, pharmaceuticals providers choose to add an online channel to sell pharmaceuticals, which competes with medical institutions. However, medical institutions need to get profits from pharmaceuticals profits for self-development because of the policy named "pharmaceuticals-maintaining-medicine". The addition of online channel leads to the profit decrease of medical institutions, which causes the resistant of medical institutions. To prevent the profit decrease of pharmaceuticals caused by the prescription leakage, some medical institutions adopt "code prescription". Thus, there exists one reality problem which needs to be solved in pharmaceuticals supply chain, namely, how to mitigate the impact of profit decrease of medical institutions when an online channel is added.
Focused on the channel conflict caused by pharmaceuticals providers adding an online channel to sell pharmaceuticals, the price cap policy and public welfare are taken into consideration to establish price decision models in different channel strategies, where the medical institution was the leader and followed by pharmaceuticals providers. Further, the impact of some parameters, including price cap policy and public welfare and self-medication, on the equilibrium results is analyzed. And then, the optimal channel strategies are proposed and the impact of added online channel on traditional pharmaceutical supply chain from the perspective of supply chain and the perspective of public welfare is analyzed, respectively. Finally, the pharmaceutical policy and proposed corresponding managerial insights combined with the analysis result are analyzed.
Firstly,the impact of price cap policy and public welfare of medical institution on the pricing and performance of pharmaceutical supply chain in single channel strategy and dual channel strategy is analyzed respectively. The studies show that, when the price cap is low, the optimal price of medical institution equals to the price cap, while the price of online channel won't be influenced by the price cap. When the pharmaceutical price of medical institutions is regulated, lowering price cap can increase supply chain profit and enhance social welfare. When the price cap of medical institutions isn't regulated, improving public welfare of medical institutions would decrease the pharmaceutical price and increase supply chain profit along with social welfare.
Afterwards, the system performance in the single channel strategy is compared with that in dual channel strategy. The results show that, when the pharmaceutical providers add the online channel, the profit of pharmaceutical providers and consumer surplus will increase while the profit and utility of medical institution will decrease,which causes the resistance of medical institution. Furthermore, it is found, when the price cap is relatively low, the channel conflict between the medical institution and pharmaceutical providers cannot be coordinated. When the price cap is relatively low and the public welfare is high or the price cap is unconstrained, the channel conflict can eliminate by coordination contracts and generate larger social welfare.
Finally, the opportunity and challenge of pharmaceutical providers to add an online channel is evaluated and management enlightenments are put forward correspondingly. The results show that, when the price cap is relatively low, increasing the price cap or abolish the price cap policy is benefit for the development of pharmaceutical dual channel supply chain. When the price cap is relatively high, the resistance of medical institution for the added online channel will be eliminated by designing the appropriate profit transfer contract.

Key words: pharmaceutical supply chain, pricing, channel strategies, price cap policy, public welfare