China Lifts B and C License Requirements for Pharma E-commerce, Paving Way for Online Prescription Drug Sales

VCBeat (WeChat: vcbeat), April 8 – Major boost for pharmaceutical e-commerce as online drug sales are fully deregulated.

Recently, the China Food and Drug Administration issued a notice to define internet drug/medical device transaction services, stating that it will fully implement the relevant requirements for canceling administrative licensing items and do a good job in interim and ex-post supervision and coordination.

On January 21, the State Council issued a decision to abolish a series of administrative licensing items designated by the central government for local implementation. Three of these items are related to the pharmaceutical industry, covering medical dressings, online drug trading, and qualification accreditation for clinical drug trials. (See “State Council Abolishes 39 Administrative Licensing Items, Including Review of Class B and C Certificates for Pharmaceutical E-commerce” for details.)

The move that has sparked heated debate in the industry is the abolition of the review process for Class B and Class C licenses for pharmaceutical e-commerce. Previously, applications for these two licenses had to be submitted by provincial food and drug administration authorities to the national regulatory agency. Many pharmaceutical companies lacked sufficient understanding of the procedure and thus had little incentive to enter the pharmaceutical e-commerce sector. With the full implementation of the cancellation of this administrative approval, a large number of pharmaceutical enterprises, particularly pharmaceutical retailers, are expected to follow suit.

Based on current market conditions, pharmaceutical e-commerce is categorized into three types: third-party trading platforms (Class A License, B2B), self-built business websites established by industrial and commercial enterprises for transactions with other enterprises (Class B License, B2B), and retail pharmacy websites conducting business with individual consumers (Class C License, B2C). Class A Licenses require filing with the China Food and Drug Administration (CFDA), while the latter two are subject to approval by provincial-level food and drug regulatory authorities.

According to data from the Food and Drug Administration, as of the end of January this year, approvedThere are 40 companies with Certificate A, 195 with Certificate B, and 598 with Certificate C.. Prominent platform-based enterprises include Yaoshibang, Medicine Terminal Network, My Medicine, Weiming Penguin, Yaoyaohao, and Yaodou.com; B-license holders include Huazhong Pharmaceutical Exchange (under the Gangling Group), Jointown Pharmaceutical E-commerce Platform, and Huadong Medicine Business Network; while those directly serving individual consumers include Jianke, 1 Drug Store, AliHealth, Qilekang, Haoyao Shi, and Kangaiduo.

According to market statistics from the Ministry of Commerce, pharmaceutical e-commerceThe overall market size is 120 trillion.approximately, with B2B accounting for over 90%, while conventional pharmaceutical e-commerce (To C) has a market size of less than RMB 20 billion.

From the perspective of industry development, the long-standing constraint on the growth of pharmaceutical e-commerce has been the challenge of profitability. The B2B model facilitates rapid scaling but yields lower profit margins; the B2C market is relatively small and faces challenges such as price competition and low consumer trust. (In fact, the primary source of profitability for most B2C pharmaceutical e-commerce platforms comes from non-pharmaceutical products, including medical devices, health supplements, and adult products.)

For this very reason, pharmaceutical e-commerce companies are vying for market share through capital infusion strategies such as financing. According to statistics from VCBeat, as of the end of March this year, four pharmaceutical e-commerce enterprises had secured cumulative financing exceeding RMB 1 billion, 15 companies had raised over RMB 100 million, and seven companies had completed more than three rounds of financing.

Focusing solely on B2C pharmaceutical e-commerce, additional real-world pressures stem from restrictions on the online sale of prescription drugs, which the industry widely regards as “What can be sold yields no profit; what is profitable cannot be bought.”. In this context, pharmaceutical e-commerce platforms have also begun to explore businesses such as mobile healthcare, internet-based healthcare, and insurance, aiming to retain consumers and achieve baseline profitability by building a closed-loop consumption ecosystem.

B. After the cancellation of approval for Class B and C licenses, a large number of pharmaceutical commerce companies will inevitably enter the market, potentially driving the industry toward sound and healthy development. Business-level explorations can also force administrative reforms, promoting the full liberalization of online drug sales and greater accessibility to prescription drugs.

However, new entrants should also pay attention to the balance between cost and benefit, and not blindly follow the trend. Zhang Dingding, Marketing Director of Haoyaoshi Online Pharmacy, warned pharmaceutical companies interested in entering the market that they should engage in pharmaceutical e-commerce business according to their own business layout, avoiding a rush into the field when policies are relaxed.

Zhang Dingding also stated that the cancellation of qualification approval for pharmaceutical e-commerce has impacted internet healthcare (Mobile Healthcare) is also of great significance, as it allows for low-cost entry into the pharmaceutical e-commerce industry, serving as an expansion of its own business and an exploration of profitability.