Home Stocks Alibaba Group Holding Ltd Stops Selling Medicines After An ‘Urgent’ Govt Directive

Alibaba Group Holding Ltd Stops Selling Medicines After An ‘Urgent’ Govt Directive

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Chinese e-commerce behemoth Alibaba has asked vendors on its Tmall marketplace to stop selling medicines due to changes in government regulation. According to China Daily, the Hebei province branch of the China Food and Drug Administration (CFDA) had sent a directive to Tmall requiring “urgent control measures relating to drug products.”

Alibaba cooperating with regulators

Third-party platforms like Tmall were major sources of traffic and revenue for pharmacies and drugmakers selling online. Alibaba said in a statement Tuesday that it would cooperate with the authorities and stop selling medicines on its platform. The CFDA did not explain why the sales were stopped. The regulator’s directive came as a surprise as the Chinese government has been promoting the online sales of over-the-counter (OTC) drugs to solve issues like long hospital queues and high drug prices.

Currently, medicine sales in China are dominated by public hospitals. An industry insider told the China Daily that the directive did not exclusively apply to Tmall. Other online platforms are expected to receive similar orders from the authorities. Alibaba said the new regulation applies only to “drug sales on marketplace websites.” The change in regulation may affect the whole drug e-commerce industry. Online retailers are exploring ways to use technology to improve the traditional drug retailing system.

Will it affect China’s healthcare market reform?

The directive would further hinder the reform of China’s healthcare market. Last year, industry insiders said the reform plans were being held back due to the government’s concerns about challenges of regulating online drug sales. Other websites like Yhd.com and 800fang.cn are also expected to get the directive. 800fang.cn told Reuters that it was yet to be contacted by the regulators, but it was closely monitoring the situation.

Sales of OTC drugs in China are expected to double to 200 billion yuan by 2025, according to data from BMI Research. E-commerce platforms are expected to play a major role in the growth story. A pharmacy chain executive told Reuters that the directive could have a significant impact because a large number of pharmacies relied on sites like Tmall for online sales.

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