CFDA Releases Draft Supervision and Administration Measures for Online Drug Sales, Emphasizing Consistent Online-Offline Regulatory Principles

VCBeat (WeChat ID: vcbeat) reported that on February 9, the China Food and Drug Administration released the “Measures for the Supervision and Administration of Online Drug Sales (Draft for Comments)” (hereinafter referred to as the “Measures”).

The Measures point out that the online sale of pharmaceuticals has developed rapidly, but regulatory laws and regulations have lagged behind, leading to some new issues in regulatory processes. To improve regulation, the China Food and Drug Administration drafted this document and hopes for broad public participation in discussions.

The Measures require that online drug sales adhere to the principle of consistency between online and offline operations; clarify responsibilities and promote collaborative social governance; leverage the technological capabilities and customer stickiness of third-party platforms to implement “online regulation of online activities”; and encourage models such as “order online, pick up in-store” and “order online, deliver from store.”

With the rapid development of e-commerce in China, “online shopping” has become one of the primary modes of daily consumption for Chinese residents. Moreover, obtaining medications via the internet has gained public favor due to its convenience and efficiency.

According to incomplete statistics from the Ministry of Commerce, the total sales volume of China’s directly reported pharmaceutical e-commerce enterprises reached RMB 61.2 billion (including medical devices) in 2016, with the internet pharmaceutical economy maintaining strong growth momentum.

With the introduction of a series of supportive policies, pharmaceutical e-commerce has witnessed rapid growth. The number of pharmaceutical e-commerce platforms and online pharmacies continues to rise, new business models are constantly emerging, and online drug transactions are becoming increasingly active.

The “Interim Provisions on the Approval of Internet Drug Transaction Services,” formulated by the former State Food and Drug Administration in September 2005, was established at an early stage and no longer meets the current needs for the development of internet drug transactions. There is an urgent need for new regulations to provide safeguards.

In recent years, relevant ministries and commissions have successively issued documents to encourage and support the development of emerging industries such as modern logistics and e-commerce, and to protect the legitimate rights and interests of providers and users of internet information services. However, there is a lack of detailed regulations on online drug transactions.

1. In early 2017, the approval requirement for enterprises providing online drug trading services (excluding third-party platforms) was abolished, leading to a substantial increase in the number of companies planning to engage in online drug sales and a corresponding expansion of the regulatory scope. As of September 18, there were 974 enterprises nationwide that had obtained qualifications for online drug trading, including 52 with Certificate A, 240 with Certificate B, and 682 with Certificate C. Regulatory authorities are faced with nearly one thousand qualified enterprises and a large number of companies preparing to launch online sales operations, resulting in significant regulatory pressure.

2. The online pharmaceutical retail sector is expanding rapidly, with a growing number of market participants, while regulatory capacity has failed to keep pace. With advancements in internet technology, legitimate enterprises have evolved their online drug sales models from relying solely on web portals to adopting diversified approaches, including web portals, mobile app clients, and online-to-offline (O2O) models where information is published online and transactions are completed offline. Meanwhile, illegal individual vendors are increasingly selling drugs through public social media platforms such as QQ, WeChat, and Weibo.

3. Internet-based operations are characterized by virtuality, concealment, and cross-jurisdictional reach, posing significant challenges to current law enforcement jurisdiction, case investigation, and evidence preservation. The rapid advancement of internet technology has outpaced the development of regulatory technical capabilities.

In light of the aforementioned issues, it is both urgent and necessary to formulate targeted and practical administrative measures to adapt to the current regulatory landscape and further standardize online pharmaceutical business operations.

At the end of 2016, the Department of Drug and Cosmetic Supervision of the China Food and Drug Administration (CFDA) initiated the drafting of the Administrative Measures for the Supervision and Management of Online Drug Operations (Draft). In December 2016, a special thematic meeting was convened to conduct in-depth research on the current status of online drug transaction supervision, existing problems, and future regulatory strategies. In March 2017, a special symposium was held with relevant officials from drug regulatory authorities in Beijing, Hebei, Shandong, and other provinces, as well as experts from the CFDA Information Center, the National Institute for Food and Drug Control, industry associations, and leading enterprises in the sector, to discuss, revise, and gradually improve the Draft Measures. In May and August, two additional special symposia were organized, inviting representatives from certain provincial drug administrations and related entities to further solicit feedback from regulatory bodies and the industry on the Draft Measures.

On this basis, the leadership of the State Administration convened a special meeting to further discuss the Measures (Draft), study relevant issues, and propose revisions, thereby further refining the draft.

(I)Consistency between online and offline channels.Online drug sales adhere to the principle of consistency between online and offline channels. Drugs sold online must obtain approval from drug regulatory authorities before they can be marketed through online platforms. Enterprises engaged in online drug sales must hold a Drug Operation License to conduct drug transaction activities online.

(II)Clarify Responsibilities, Promote Collaborative Social Governance.The State Administration is designated as the competent authority responsible for overseeing the regulation of online drug sales nationwide, while the food and drug regulatory authorities in the localities where the physical entities of drug distribution enterprises are located shall be responsible for supervising enterprises engaged in online drug sales. Third-party platforms are tasked with verifying the qualifications of participating merchants, monitoring transaction activities, retaining data, and managing drug recalls; online drug sellers are held accountable for ensuring compliance with relevant laws and regulations throughout their business operations. Furthermore, the framework emphasizes advancing the development of a credit system, promoting inter-departmental collaboration, encouraging the reporting of illegal activities, and leveraging the roles of industry associations and consumer rights protection organizations to foster co-governance by society.

(3)Technical Support: Network-Based Management.Leveraging the advantages of third-party platforms, such as their network technology and customer stickiness, efforts should be made to encourage them to regulate and constrain the business practices of onboarded merchants through contractual agreements. The State Administration for Market Regulation shall establish a nationwide unified monitoring system for online drug sales. Information on suspected illegal activities identified through monitoring shall be transmitted via the Online Drug Operation Monitoring System to the provincial-level food and drug administration authorities in the jurisdictions where the violations occurred for handling.

(IV)Encourage "online ordering with in-store pickup" and "online ordering with store delivery."In accordance with the principles of “online order, in-store pickup” and “online order, store delivery,” regulate the distribution practices for online drug sales, requiring that all delivery operations comply with the Good Supply Practice (GSP) for Pharmaceutical Products.

(5)Adhere to risk control and problem-oriented approaches.Currently, conditional deregulation is being implemented, such as allowing the sale of medications to individual consumers through third-party platforms. Areas not yet ready for deregulation remain prohibited; for instance, the online sale of prescription drugs to individual consumers is still banned, as is the online sale of drugs by standalone pharmacies.

(1) Incorporate online drug sales activities on mobile internet platforms into regulatory oversight.

In recent years, mobile internet applications (mobile apps) in the pharmaceutical and healthcare sector have emerged. Drug transactions on platforms such as Weibo and WeChat have increased, while current laws and regulations governing online drug supervision remain inadequate to regulate these activities. Therefore, the Measures expand their scope of application from the traditional internet to the mobile internet, bringing drug sales activities conducted via mobile internet and third-party transaction services within their regulatory purview.

(II) Strengthening the Obligations of Third-Party Platform Providers for Drug Transactions.

Strengthening the obligations of third-party platform providers for drug transactions can yield significant results in regulating online drug operations with half the effort. The Measures stipulate two categories of obligations for third-party platform providers of drug transactions: first, general obligations, including establishing registration and review of business entities, ensuring transaction security, reporting adverse reactions (adverse events), handling emergencies, preserving information data and evidence, maintaining confidentiality, assisting in product recalls and retrievals, and cooperating with inspections; second, management obligations, including reviewing the market access of business entities, auditing drug information, and conducting routine inspections. By prescribing these two types of obligations for third-party platforms involved in drug transactions and strengthening regulatory oversight, the Measures ensure that liability for drug safety issues in online drug operations is clearly assigned to responsible parties, thereby facilitating the prompt resolution of disputes.

(3) The online sale of pharmaceuticals must comply with the Good Supply Practice (GSP) for Pharmaceutical Products.

In line with the principle of “consistent oversight for online and offline channels,” the Measures stipulate that online sales of drugs must comply with the Good Supply Practice for Pharmaceutical Products, with specific details to be further clarified through forthcoming supplementary annexes. The delivery of drugs sold online must also adhere to the relevant provisions of the Good Supply Practice for Pharmaceutical Products.

(4) Establish a unified monitoring system.

Strengthening the supervision of online drug sales and demonstrating the enforcement authority of drug regulatory agencies hinges on whether technical regulatory capabilities can truly keep pace. The Measures stipulate that drug regulatory authorities shall establish specialized bodies or assign professional technical personnel to conduct routine supervision of online drug trading activities. A nationally unified information monitoring system for online drug operations shall be established to monitor such activities, with tiered responses implemented for information indicating suspected illegal acts identified through monitoring. Cooperation with relevant departments shall be strengthened to enhance the effectiveness of collaborative law enforcement.

(V) Regulatory Subject Responsibility.

Food and drug regulatory authorities shall conduct supervisory inspections of online drug trading activities in accordance with their statutory powers as prescribed by laws, regulations, and rules. In accordance with the principle of territorial regulation, third-party platforms shall be subject to routine supervision by the food and drug regulatory authorities at the place where the enterprise is registered, while merchants operating on such platforms and those operating self-built websites shall be subject to routine supervision by the food and drug regulatory authorities at the location of their physical stores.

Public Consultation on the Measures for the Supervision and Administration of Online Drug Sales (Draft for Comments)

http://zqyj.chinalaw.gov.cn/draftDetail?listType=2&DraftID=2379