China's FDA Forbids Merchants on Tmall Drugstore from Selling OTC Drugs
Yigoonet.com, 5/27/16
Tmall Drugstore, the third-party B2C medicine e-commerce platform operated by Alibaba Group's (NYSE: BABA) healthcare subsidiary Alibaba Health Information Technology (0241.HK), notified merchants on its platform today that they will no longer be allowed to sell over-the-counter (OTC) drugs anywhere in the country, according to a notice sent to Tmall Drugstore by the Hebei provincial branch of the China Food and Drug Administration (CFDA). Sales of other medical device and health products are not affected by the announcement.
In 2014, Alibaba Group acquired a 54% stake in investment holding company CITIC 21CN, later renamed Alibaba Health Information Technology, thereby obtaining access to the online third-party retail pharmaceuticals sales pilot project license held by B2C drug e-commerce marketplace Yao.95095.com, operated by a subsidiary of CITIC 21CN. Tmall Drugstore was originally operated by Alibaba Group, but was transferred to Alibaba Health in April 2015, effectively giving Tmall Drugstore the license held by Yao.95095.com.
The Hebei FDA has reportedly restricted Tmall Drugstore from offering further OTC drug sales owing to the expiration of the license held by Yao.95095.com. Tmall Drugstore has not given an official explanation for the matter.
At present, consumers can still place drug orders through Tmall Drugstore, and Tmall Drugstore said that it would give merchants on the platform a period of time in which to adjust to the new regulations.
Editor's Note: The CITIC 21CN subsidiary that initially obtained the online third-party retail pharmaceuticals sales pilot project license used by Yao.95095.com was registered in Hebei province, which may explain why the Hebei FDA would have jurisdiction over business operations conducted using that license. For more information on this topic, please see "Tmall Wins Own Third-Party Medicine E-commerce Platform License," MD 9/10/15 and "Alibaba Group Integrates Online Pharmacy Business into Alibaba Health," MD 4/14/15 issues. Reuters also reported that in the notice Alibaba sent to merchants on its TMall Drugstore platform, Alibaba cited an "urgent" directive from the Hebei Food and Drug Administration halting drug sales via third-party platforms (i.e. suggesting that the directive did not apply only to TMall Drugstore, but to all third-party e-commerce platforms.) The Reuters article also quoted Alibaba as saying that "the directive only applies to drug sales on marketplace websites," but added that such sites generally provide the bulk of traffic to pharmacies and drugmakers selling online. To read Reuters's full article, please click here.
Keywords: e-commerce Internet license B2C Alibaba Group Alibaba Health 0241.HK BABA Tmall Drugstore regulation online healthcare