China's State Council Cancels Approval Requirements for B and C Licenses in Online Pharmaceutical Transactions
On January 21, the State Council issued the “Decision on the Third Batch of Cancellations of Administrative Licensing Items Designated by the Central Government for Implementation by Local Governments” (hereinafter referred to as the “Decision”), stating that, following research and deliberation, the State Council has decided to cancel 39 administrative licensing items designated by the central government for implementation by local governments.
Previously, the State Council issued two sets of regulations to cancel administrative approvals, covering a total of 230 major items, including business operations and individual employment and entrepreneurship. The State Council stated that abolishing these approval requirements would facilitate decentralization at the local level and make it more convenient for enterprises to conduct their affairs.
According to VCBeat (WeChat ID: vcbeat), among the 39 items cancelled this time, three are related to the pharmaceutical industry, involving pharmaceutical excipients, online drug trading services, and qualification accreditation for drug clinical trial institutions.
With regard to online drug trading services, following the cancellation of approval requirements (excluding third-party platforms), provincial-level food and drug administrations shall strengthen oversight of “Drug Manufacturing Enterprise Licenses,” “Drug Wholesaling Enterprise Licenses,” and “Drug Retailing Enterprise Licenses,” exercising strict control over enterprises engaged in online drug trading. Meanwhile, an online information publication system shall be established to facilitate public inquiries and guide the safe use of medications; an online drug sales monitoring mechanism shall be implemented to enhance supervision and inspection, and illegal activities shall be investigated and dealt with in accordance with the law.
Following the announcement that approval for online drug trading services would be canceled, industry insiders stated that this could benefit pharmaceutical e-commerce. While lowering entry barriers may inject new market forces into the sector, it also imposes higher requirements for the industry’s sound development and standardization.
A marketing executive from a pharmaceutical e-commerce company stated that pharmaceutical e-commerce is undoubtedly a major trend in the future distribution of pharmaceuticals. In terms of platform types, enterprises holding an “A Certificate” primarily serve as information aggregation and publishing platforms, where the required transaction volume is limited; therefore, deregulating approval for this category would have little significance. For B2B models independently established or jointly operated by pharmaceutical manufacturers and distributors, loosening approval requirements would enable all such entities to actively develop e-commerce channels. This would encourage widespread exploration and innovation, particularly at a time when platform-based enterprises have not yet established systematic industry standards. As for enterprises holding a “C Certificate,” which are fundamentally retail pharmacy chains, there are nearly 1,000 large-scale retail chain operators across China. If approval restrictions were lifted, these enterprises would be poised to aggressively expand into e-commerce.
According to data from the National Medical Products Administration, as of January 22, 2017, a total of 831 “Internet Drug Transaction Service Qualification Certificates” had been issued, including 41 Class A certificates (for third-party platforms), 195 Class B certificates (for B2B websites established by pharmaceutical manufacturers and distributors), and 598 Class C certificates (for B2C websites applied for by retail pharmacy chains).
Industry insiders have stated that this is not the first adjustment to policies related to pharmaceutical e-commerce. Since the promulgation of the Interim Provisions on the Approval of Internet Drug Transaction Services (hereinafter referred to as the “Provisions”) in 2005, which established three categories of qualifications (A, B, and C), a pilot program for third-party retail was launched in 2013. The platforms 95095, 800Fang, and Yihaodian were granted pilot status; however, last August, relevant authorities suspended the pilot programs for these three platforms. Consequently, these platforms have begun transitioning to a “self-operated + marketplace” model. While their original transaction functions remain accessible, the transaction process has been modified to require telephone confirmation and offline payment.
He pointed out that this also demonstrates the actual existence of demand space for pharmaceutical e-commerce, and policymakers should not adopt a simplistic “shutdown” approach. The recent loosening of approval requirements for B and C licenses further reflects the regulatory authorities’ emphasis on this sector.
The “Provisions,” which require provincial-level food and drug regulatory authorities to strengthen interim and ex-post oversight mechanisms and establish information disclosure systems and online drug sales monitoring mechanisms, have also prompted new reflections within the pharmaceutical e-commerce industry, such as regarding product traceability systems and consumer trust.
Notably, concurrent with the issuance of regulations abolishing approval requirements, the China Food and Drug Administration (CFDA) also released information related to the “National Drug Code Standard Code Data.” The agency stated that the Standard Code, together with the Regulatory Code and Classification Code, constitutes the National Drug Coding System and possesses traceability functionality. The first batch of published Standard Codes covered 163,800 domestically produced drugs and 3,754 imported drugs.
The aforementioned sources stated that the drug coding system is closely linked to pharmaceutical e-commerce. Consumers can verify the authenticity of medications by querying drug information via electronic supervision codes, which significantly helps build trust in pharmaceutical e-commerce platforms. Previously, the drug coding system transitioned from a government-led model (the electronic supervision code system) to an enterprise-driven approach, with the aim of clarifying the accountability framework. Once a product traceability system is established, trust issues in pharmaceutical e-commerce can be resolved, potentially paving the way for the online sale of prescription drugs.
However, the abolition of approval requirements is not entirely positive news. He also noted that issues regarding post-event regulation remain, including license renewal, cross-provincial sales, and inconsistencies in local policies; further detailed policy announcements are still awaited.