CCTV-NEWS：赵克锋：ONLINE MEDICINE SALES

发布者：admin发布时间：2016-08-11浏览次数：400

Q1：What's the influence on China's online pharmacy industry? Is it a setback?

The directive surprised the market participants. In stark contrast with the recent directive that essentially let China became the first major economy to legalise car-hailing platforms, many people argued that the current medical directive seemingly went the other way round. It could possibly stop part of the booming online drug sales cold-turkey but with a catch. Let us see if that’s really true.

There are three licenses related to online drug sales in China. So far the Chinese government has issued less than 20 License A, around 100 License B and around 200 Licence C. These licenses differ largely according to their permission to allow B2C and B2B sales.

In particular, the dominant market is the B2C market. The new directive does not affect companies with license C directly. What it aims to regulate are the platforms without license C and those without physical outlets to sell drugs.

If we go deeper into the business models, there are three models of B2C online drug sales. First, a platform displays the drug information and redirects to a company with license C to complete the purchase. Second, a platform purchases another platform with a “temporary experimental permit”. These two models have been used by Alibaba, which accounts for over 60% of the market share of online drug sales. The third model is for platforms to apply for a “temporary experimental permit”. This model has been used by yihaodian and babaifang.

So with the new directive all companies using “temporary experimental permits” are going to be affected. We are seeing companies evading this already though. Companies have just started offering a new service of “paying on arrival” because online sales are regulated if the whole process of purchase is completed online. So placing an order online and paying at your door is okay.

In all we cannot conclude immediately this is necessarily a setback because it might be an intermediate step towards a greater reform of a better system.

Q2:For a better system in the industry, what can we do more?

A better system should imply less rent seeking opportunities for officials. We should always strive for a license application process that truly respects due process. We should always question if a directive is being issued simply because that particular regulating department wants to improve market efficiency or simply to avoid potential risks that jeopardise one's job in the department.

A better system should also imply that the drugs sold are safe and authentic. We should ask questions like: Does it enjoy economies of scale in authentication if a company is more vertically integrated in the value chain? So we could track problems more easily? Should we involve more the medical insurance companies in the online platforms? Or should we sell OTC as well as prescription drugs?

Well, while we need to be fair to the regulators sometimes as some scenarios are too new, we also need to study what are happening elsewhere on earth. For example, as opposed to the Chinese market, the US online drug market is predominantly for prescription drugs not OTC drugs, and a lot of these sales are completed on platforms without physical outlets. My understanding is that there is an issue about liabilities of platforms and drug stores. That is, when a drug sold is problematic, which part of the selling process should compensate the customers. While this issue is important, there are also many ways to share the liabilities properly rather than a one-size-fits-all halt of the experiment. For example, online safe habour provisions that require some minimal liabilities shouldered by online platforms are commonplace elsewhere.