How Difficult Is It to Lift the Ban on Online Prescription Drug Sales? Insights from Eight Experts

Policy, like the Sword of Damocles hanging over the pharmaceutical e-commerce industry, has left practitioners constantly worried about “systemic risks” that could lead to sudden shutdowns. In the three months surrounding the New Year of 2018, the China Food and Drug Administration (CFDA) released two draft regulations for public comment on the oversight of pharmaceutical e-commerce, intensifying the industry’s sense of mounting regulatory pressure.

“Prescription drugs and drugs subject to special state management requirements shall not be sold online,” and “websites selling drugs to individual consumers shall not publish prescription drug information online.” Online sales of prescription drugs have encountered a regulatory dilemma characterized by a one-size-fits-all approach.

Amid Tightening Regulations, Industry Debates Persist. VCBeat (WeChat ID: vcbeat) has learned that relevant institutions recently organized a gathering of academic research bodies and pharmaceutical industry enterprises to jointly discuss perspectives on the regulation and development of pharmaceutical e-commerce.

At the seminar, Professor Wang Yue’s research team from the Institute of Medical Humanities at Peking University delivered the opening presentation on the reform of online prescription drug management and operations. The report was divided into four parts:

The Evolution of Regulatory Policies for Online Prescription Drug Sales in China

Overview of Online Pharmaceutical Sales in Other Countries

Controversial Issues in the Regulation of Online Prescription Drug Sales and SWOT Analysis

Recommendations for Restructuring the Operational Management Model of Online Prescription Drug Sales

The research group noted that China’s online drug regulatory policies can be broadly divided into three phases:

Before 2000, neither prescription drugs nor over-the-counter medications could be sold online;

From 2000 to 2014, restrictions on the online sale of over-the-counter (OTC) drugs were gradually relaxed. For instance, Document No. 258 issued by the Office of the State Drug Administration in 2000 stipulated that only OTC drugs published by the State Food and Drug Administration could be sold online. By 2013, restrictions on OTC drugs were formally lifted, allowing pharmaceutical retail chain enterprises to sell OTC drugs through drug trading websites.

After 2014, the qualification review for over-the-counter (OTC) drug sales was gradually phased out. For instance, Document No. 40 issued by the State Council in 2015 encouraged exploration and innovation in e-commerce sales and regulatory models for prescription drugs. In 2017, the qualification reviews for the A, B, and C licenses for pharmaceutical e-commerce were successively abolished, shifting to ex-post regulation.

This evolution indicates that regulators are gradually loosening oversight of pharmaceutical e-commerce and encouraging the industry to engage in proactive experimentation.

However, in November 2017, the China Food and Drug Administration (CFDA) released the “Measures for the Supervision and Administration of Online Drug Trading (Draft for Comments),” proposing to tighten regulatory oversight over pharmaceutical e-commerce.

The Opinion states that the scope of online drug sales must not exceed the scope permitted under the enterprise’s Drug Operation License. Where the operator is a drug manufacturer or wholesaler, it shall not sell drugs to individual consumers. Where the operator is a chain drug retailer, it shall not sell prescription drugs or drugs subject to special state management requirements through online channels. The most significant restriction is that websites selling drugs to individual consumers are prohibited from publishing information on prescription drugs online.

In February 2018, the China Food and Drug Administration (CFDA) released the “Administrative Measures for the Supervision of Online Drug Sales (Draft for Comments),” reiterating restrictions on the online sale of prescription drugs and proposing the regulatory principle of “consistency between online and offline operations.”

The above policies,This has introduced significant uncertainty into the operations of pharmaceutical e-commerce, affecting relevant enterprises' planning for future development and exerting a substantial impact on the innovative development of domestic drug distribution.

The United States and the United Kingdom permit the online sale of both prescription and over-the-counter drugs. Japan allows the online sale of over-the-counter drugs but prohibits the online sale of prescription drugs.

In terms of market size, the U.S. online pharmacy market accounts for approximately 30% of total pharmaceutical sales (including online orders with home delivery and online orders with in-store pickup); in Japan, the online pharmacy market is relatively small due to the prohibition on online sales of prescription drugs.

In terms of specific procedures, both the United Kingdom and the United States mandate that prescription drugs be sold only with a valid prescription, while fully leveraging the pharmaceutical care services provided by pharmacists. All three countries also require online drug vendors to obtain prior approval and accreditation.

The market views the deregulation of online prescription drug sales as an inevitable trend. Research conducted by our team reveals that the vast majority of domestic experts and scholars support lifting restrictions on the online sale of prescription drugs.

However, there are also opposing voices arguing that lifting restrictions could lead to a proliferation of counterfeit drugs, threatening the medication safety of the public, and enabling patients to make repeated purchases with a single prescription, which is detrimental to safe medication practices.

There are also concerns that certain medications require stringent storage conditions. Blindly lowering the entry barriers for online pharmacies could lead to compromised conditions during drug delivery, resulting in non-compliance with standards and even undermining the intrinsic quality of the medications, ultimately jeopardizing consumer safety.

Advantages: Convenient and efficient, unrestricted by time and space, reducing transaction costs. Highly transparent information, breaking down information asymmetry.

Disadvantages: Lack of prescription review mechanisms, lack of liability determination mechanisms, absence of industry standards, and no integration with medical insurance systems.

Opportunity: The “Internet + Healthcare” development window aligns with the new healthcare reform’s direction of separating prescribing from dispensing.

A comprehensive analysis of internal strengths and external opportunities indicates that pharmaceutical e-commerce platforms should seize the opportunities presented by the “Internet + Healthcare” initiative to build new advantages and momentum for the development of pharmaceutical operations.

A comprehensive analysis of internal weaknesses and external opportunities indicates that a platform equipped with the necessary hardware and software infrastructure for relevant network technologies should be established, while collaborating with medical institutions to mitigate the risk of fraudulent prescriptions. Furthermore, penalty and exit assessment mechanisms should be improved, and routine supervision strengthened.

The research group recommends that managers of pharmaceutical e-commerce platforms should focus on the following aspects to align with the "Internet Plus" trend, mitigate risks, and explore innovation.

First, leverage the advantages of existing internet platforms while strictly prohibiting the online sale of prescription drugs.

Second, address existing deficiencies by adhering to the principle of consistency between online and offline operations, integrating prescription systems with medical institutions, strengthening the workforce of licensed pharmacists, strictly complying with classified management requirements, and providing dispensing services for medications used in chronic disease management and long-term therapy.

Third, it creates competitive advantages by allowing multiple platforms to sell prescription drugs, thereby avoiding industry monopolies.

Fourth, implement entity responsibility and innovate supervision.

The research team concluded that the government should not impose a blanket ban on the online sale of prescription drugs. Instead, it should mitigate the associated risks through institutional innovation and the leveraging of existing technologies. This approach would not only safeguard public medication safety but also foster innovation in pharmaceutical distribution, thereby promoting the development of the healthcare industry.

The participating guests provided their respective views on the aforementioned topics.

Xue Pingding, General Manager of Beijing 111 Commercial Chain Co., Ltd.

“Support tilting the policy on online sales of prescription drugs toward chain enterprises, and encourage the ‘online order, in-store pickup’ and ‘online order, store delivery’ models.”

Wang Letian, General Manager of Sinopharm Health Online Co., Ltd.

“Under current policies, the state-encouraged models of ‘online ordering with in-store pickup’ and ‘online ordering with home delivery,’ as well as future medication dispensing at primary care levels, lack adequate support. The draft for public comment even stipulates that information on prescription drugs must not be displayed. If such information cannot be displayed, how can online ordering with in-store pickup or home delivery be implemented?”

“Online sales of prescription drugs should be managed under the principle of consistency between online and offline channels. In scenarios where online sales of prescription drugs are prohibited, extended services such as cash-on-delivery may be offered, or consumers may pick up their medications in-store for on-site transactions; however, both logistics and invoicing must remain subject to regulatory oversight in accordance with the original processes stipulated by Good Supply Practice (GSP).”

Huang Zhilu, Deputy Secretary-General of the China Association for Drug Supervision and Administration Research, and Chairman of the Professional Committee on Drug Distribution Regulatory Research

“Numerous issues regarding the online sale of prescription drugs remain to be resolved. These include challenges related to drug returns and exchanges, rational drug use, information asymmetry, pharmaceutical care services, and insufficient regulatory capacity at the local level. Any deregulation must take these factors into consideration.”

Song Hualin, Professor at the Law School of Nankai University

“Regulatory oversight of online drug sales should be strengthened across the pre-, during, and post-transaction phases, operators’ awareness of their primary responsibility should be reinforced, consumers should be educated and guided, and regulatory frameworks should be progressively improved.”

Zhu Hengpeng, Director of the Center for Public Policy Research at the Chinese Academy of Social Sciences

“Problems should not be used as a justification to restrict the online sale of prescription drugs. The online sale of prescription drugs should be gradually liberalized, with clear delineation of liability boundaries, and relevant departments should actively cooperate and provide encouragement. Meanwhile, the role of market regulation should be leveraged, making full use of the market’s self-correcting mechanisms.”

Professor of Tsinghua University Law School, Wang Chenguang

“Online sales of prescription drugs are an inevitable trend, but systematic, in-depth, and rigorous research should be conducted to thoroughly understand domestic and international regulatory experiences. Restrictions on online drug sales can be gradually relaxed, starting with medications for chronic and common diseases.”

Liu Xuanlin, Associate Professor at Capital Medical University

“Online pharmacies should be viewed as a supplementary channel for pharmaceutical supply. Under the current market conditions, the legal, operational, and regulatory prerequisites, as well as consumers’ ability to discern product authenticity, are not yet in place for the full liberalization of online drug sales.”

“Assuming online sales of prescription drugs are permitted, how should regulatory oversight be differentiated between chain pharmacies and independent pharmacies?”

Associate Professor Deng Yong, Beijing University of Chinese Medicine

“The State Council, the National Development and Reform Commission (NDRC), the Ministry of Commerce, and other agencies have issued numerous policy documents to encourage development. The China Food and Drug Administration (CFDA) will not turn a blind eye to policy directions and market trends. The CFDA may use the draft guidelines as an opportunity to extensively solicit market feedback in order to inform its next steps in policy formulation. All relevant individuals and entities should actively participate in providing feedback on the draft, ensuring that the CFDA hears the most comprehensive, objective, authentic, and rational voices.”

Based on the above topics and guest perspectives, it is evident that the market holds an overall positive attitude toward online pharmaceutical sales, recognizing the efficiency gains brought about by innovations in the online pharmacy model.

Regarding the prohibition on online sales of prescription drugs mentioned in the draft for public comments by the China Food and Drug Administration, most enterprises and experts hold a negative view, arguing that it would hinder innovation in pharmaceutical distribution, dampen corporate enthusiasm for innovation, and prove detrimental to the development of pharmaceutical retail.

However, there is no consensus within the industry on whether the online sale of prescription drugs should be liberalized, and if so, to what extent. The most core and critical issue is that the current regulatory frameworks, operational requirements, and market maturity for the online sale of prescription drugs are still inadequate. Only after these conditions have reached a certain level of development can gradual liberalization be attempted.

Problems should not serve as a justification for imposing restrictions. It is essential to recognize the trend of “Internet Plus” pharmaceutical innovation and the alignment between pharmaceutical e-commerce and healthcare reform policies. Adhering to the regulatory principle of “consistency between online and offline operations,” restrictions should be gradually relaxed to guide market self-regulation and foster new business models.