Expanding China's Cross-Border Pharmaceutical E-commerce: Challenges and Policy Recommendations

Expanding China's Cross-Border Pharmaceutical E-commerce: Challenges and Policy Recommendations

The cross-border pharmaceutical e-commerce market in China is experiencing rapid growth, with the industry scale conservatively estimated to have reached RMB 11 billion in 2023, with over 100 million transactions and more than 20 million consumers. Despite this momentum, industry leaders and regulators acknowledge a significant gap between supply and consumer demand, prompting policy recommendations aimed at expanding product accessibility and enhancing regulatory oversight.

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The Supply-Demand Gap and Current Constraints

While pilot programs in cities like Beijing have demonstrated the potential for safe, convenient access to imported medicines, supply remains severely restricted:

• Limited Product Scope: The Positive List of approved products for cross-border e-commerce remains small. In Beijing, after more than four years of the pilot, only two expansions have occurred, bringing the total number of brands to approximately 12, covering around 150 varieties. This represents only 3% of the actively traded cross-border pharmaceutical brands.
• Slow Expansion Pace: The pace of expansion for the "White List" (白名單) of approved SKUs is slow, failing to keep up with the market's rapid growth. For example, in 2023, the Beijing TianZhu Bonded Warehouse only expanded the list by 4 SKUs, a fraction of the demand seen on major e-commerce platforms.
• Specific Category Shortages: Consumer surveys on platforms like JD Health show that approximately 32% of consumers report insufficient variety, with strong unmet demand concentrated in specialized areas like ophthalmology, dermatology, and pediatrics.

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Policy Recommendations from Industry Leaders

During the recent Two Sessions (兩會), key industry delegates put forward proposals to address these limitations:

• Expand the Positive List (曹鵬, JD Group): Propose accelerating the expansion of the Positive List for medical devices and pharmaceuticals. The recommendation suggests prioritizing non-prescription drugs (OTCs) that have already been reviewed and marketed in regions with large Chinese populations, such as Hong Kong and overseas Chinese regions, as a safe reference for initial expansion.
• Support Personal Postal Purchase (行郵) Model (曹鵬, JD Group): Encourage supporting the Personal Postal Purchase (行郵) model, which facilitates the direct mailing of small quantities of self-use medicine from overseas, and explicitly allow domestic e-commerce platforms to provide information display and overseas platform jump links for this channel.
• Promote Interconnection (李楚源, Guangyao Group): Suggest further promoting the mutual recognition and interconnection of Chinese patent medicines (中成藥) and health products within the Greater Bay Area (大灣區).
• Align with International Standards (李丹, PwC): Advocate for strengthening China's regulatory system to align with international standards, with the goal of China becoming a recognized reference country for approvals, thereby dismantling international trade barriers.

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Addressing Safety and Regulatory Gaps

While growth is strong, the sector faces risks from unaddressed grey markets:

• Dual Model Complexity: Current imports mainly rely on two models: the regulated Bonded Warehouse model (for listed items) and the less-regulated Personal Postal Purchase (行郵) model (for self-use items).
• Grey Channel Risks: A significant number of consumers still rely on high-risk overseas purchasing agents (代購) and other grey channels, which lack the quality assurance, traceability, and consumer protection required for safe drug use.
• Lack of Guidance: The industry currently lacks targeted, unified guidance for cross-border pharmaceutical e-commerce, leading to market disorder and legal risks.

In response, major e-commerce platforms (including JD Health, Meituan, and potentially Douyin) are increasing investment in supply chain, warehousing, and platform accountability to build safety and compliance into the purchasing process.