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Citing Government Rule Change, Alibaba Tells Vendors to Halt Online Drug Sale


05/30/2016


Citing Government Rule Change, Alibaba Tells Vendors to Halt Online Drug Sale
Citing reasons that a local regulator has issued an "urgent" directive halting drug sales via third-party platforms, Chinese e-commerce firm Alibaba Group Holding Ltd has told vendors on its Tmall website to stop selling medicine.
 
A circular from the Hebei province branch of the China Food and Drug Administration (CFDA) on "urgent control measures relating to drug products" was cited by Alibaba to all retailer in a notice dated May 27. However the company did not elaborate on reasons in the notice that was circulated.
 
With a pledge to harness technology to solve issues as varied as high drug prices and snarling hospital queues, the government has been promoting retail sales of over-the-counter (OTC) medicine and therefore the regulator's directive comes as a surprise to many in the industry. At present, drug sales are dominated by public hospitals.
 
Alibaba said that the directive only applies to drug sales on marketplace websites. However it is such sites that generate most of the traffic to pharmacies and drugmakers who are selling online.
 
"From today please do not sell or dispatch any more of these kinds of products," Alibaba said. The notice also clarified that the directive does not apply to other medical products.
 
Alibaba's medical products site Yao.Tmall.com was "cooperating and complying with the government's new policy to stop online drug sales on third-party platforms", a company spokeswoman told Reuters while talking about the issue.
 
"While the policy change might impact the whole medicine e-commerce business including Yao.Tmall.com, industry players are exploring new ways to use internet technology to help improve the traditional drug retail system," the spokeswoman said.
 
There were no comments from the Hebei CFDA.
 
China's healthcare market is undergoing a well thought out reform and the directive is the latest hold-up in the reform process for the market.
 
Partly due to the concerns over the challenges of regulating the sale of drugs online, the reform plans that included the opening up the online drug market were being held back, industry insiders had said last year.
 
According to BMI Research, with online retailers widely expected to play a growing role, the OTC market where sales are set to double by 2025 to almost 200 billion yuan ($30.40 billion) is at stake due to this delay and inaction by the government.
 
The directive's impact could be significant because many firms relied on Tmall for online sales, a senior executive at a pharmacy chain with a store front on Tmall told Reuters.
 
"Most online pharmacies have a presence on Tmall. It will affect the whole industry," said the executive, who declined to be identified due to the sensitivity of the matter.
 
The impact of the directive on business of other firms licensed to run third-party, direct-to-consumer drug sales platforms was not immediately clear. CFDA data showed that such companies include 800fang.cn and Wal Mart Stores Inc's Yihaodian.com.
 
(Source:www.reuters.com) 


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