INTERPRETATION

How to Sell OTC Drugs to China via Cross-Border E-Commerce

by Grace Wang
Sep 16, 2022

To market over-the-counter (OTC) drugs in China, stakeholders used to obey the same documentation requirements and marketing authorization application procedures as prescriptions drugs.

*Please refer to the article to learn about OTC drug marketing authorization application procedures in China.

In recent years, cross-border e-commerce has been developing as a different approach to enter China's OTC drug market. Cross-border e-commerce (CBEC) refers to selling goods on a third-party online CBEC platform from one country to individual consumers in another country.

This article introduces

  1. China's OTC Drug Market Overview

  2. Differences Between CBEC and General Trade

  3. CBEC Positive List

  4. Three Delivery Modes for CBEC

  5. How to Establish an Online Drugstore on a Chinese CBEC Platform

  6. BaiPharm's CBEC Service for Overseas Medical Suppliers

Related Webinar

webinar-how-to-sell-otc-drugs-to-china-via-cross-border-e-commerce.pngChemLinked BaiPharm Webinar: How to Sell OTC Drugs to China via Cross-border E-commerce

1. China's OTC Drug Market Overview

OTC drugs in the Chinese market mainly include cold drugs, cough drugs, pain relievers, gastrointestinal prokinetic drugs, gastric antacids, vitamins, anthelmintics, tonics, constipation drugs, drugs for external use, contraceptives, skin care drugs, etc.1

China's OTC Drug Catalog, released by National Medical Products Administration (NMPA), currently covers over 5,000 drugs. The catalog occasionally changes as NMPA sometimes makes Rx-to-OTC switches and vice versa based on the monitoring and evaluation of relevant drugs.

China's huge OTC drug market scored the revenue of 109.22 billion yuan2 (circa US$17.13 billion) in 2020. In 2021, 140 OTC drugs (79 traditional Chinese medicines and 61 chemical drugs) were each estimated to have the revenue of over 100 million yuan3. The top five best-selling chemical OTC drugs' therapeutic areas were

① Gastrointestinal system & metabolism

② Skin diseases

③ Respiratory system

④ Genitourinary system & sex hormones

⑤ Sensory system.

Top 5 Therapeutic Areas of Chemical OTC Drugs According to Estimated 2021 Revenues in China.jpg

Due to the aging population and the stronger awareness of healthcare, the OTC drug sector is gaining momentum. According to Market Data Forecast, the Chinese OTC market is predicted to reach US$26.35 billion4 by the end of 2027.

2. Differences Between CBEC and General Trade

To market OTC drugs in China, some companies choose CBEC instead of general trade. A major reason is that CBEC's takes shorter time for market access. OTC drugs sold to Chinese consumers via CBEC do not need to go through China's time-consuming and costly marketing authorization procedures. CBEC only takes 2-3 months, mainly spent on appointing a Chinese agency, filing records at Chinese customs, choosing Chinese CBEC platforms to set up online stores, etc.

                                             Comparison Between the General Trade and CBEC


                      General Trade

     Cross-border E-commerce (CBEC)

China's Marketing   Authorization

Mandatory

Not mandatory for OTC drugs transported via C2C direct mail mode;

Already obtained for OTC drugs transported via B2B2C bonded warehouse model or B2C direct mail mode

Market Access Period

2-3 years (clinical trials not   required);

4-5 years (clinical trials required)

2-3 months

Sales Channel

Hospitals, drugstores, supermarket (Category II OTC drugs only), Chinese domestic online sales platforms, such as www.jianke.com

Chinese CBEC platforms

Responsibility Entity

Marketing authorization holder (MAH) as the main responsibility entity; MAH's agency taking joint liability

Seller and the CBEC platform as direct   responsibility bearers

Payment

Partly covered by national medical   insurance, while partly paid by the patient

Paid by the customer

Delivery

Domestic delivery

Delivered via Chinese bonded warehouses, or directly from overseas

Limit

-

For personal use only; prohibited to be sold again

2. CBEC Positive List

It is noteworthy that China's government regulates a list of products that are permitted to be imported into China via CBEC, which is named as List of Imported Retail Goods for Cross-border E-commerce. First issued in 2016, the latest 2022 edition of the list includes 8 categories of medical products, such as traditional Chinese medicinal liquor and cooling balm.

Medical Products in the List of Imported Retail Goods for Cross-border E-commerce (The list was expanded5 in 2019 and adjusted6 in 2022. The current 2022 version has been effective since March 1, 2022)

Tariff Code

Goods

Notes

30049051

Traditional Chinese medicinal liquor (mixed or non-mixed; for preventing or treating diseases; with prescribed dose or retail packages)

Except the species commodity that is listed in the Catalog of Wild Fauna and Flora Commodities for Import/Export and can't provide the certificate issued by the Endangered Species Import and   Export Management Office of the PRC to prove the commodity is not listed in the aforementioned catalog

30049054

Cooling Balm (Qing Liang You) (mixed or non-mixed; for preventing or treating diseases; with prescribed dose or retail packages)

/

30051010

Plaster bandage (having been immersed in or applied with drugs, with retail packages for medical use in surgery/ dentistry, or by veterinarian)

/

30051090

Other adhesive dressings, or objects with adhesive coating (having been immersed in or applied with drugs, with retail packages for medical use in surgery/dentistry, or by veterinarian)

/

30059010

Absorbent cotton, gauze, and bandage (having been immersed in or applied with drugs, with retail packages for medical use in surgery/dentistry, or by veterinarian)


30059090

Other soft medical filler or similar objects (having been immersed in or applied with drugs, with retail packages for medical use in surgery/dentistry, or by   veterinarian)

Except the goods regulated as medical devices

30061000

Sterile surgical catgut;

sterile ecklonia kurome, sterile   adhesive plaster, sterile absorbent hemostatic material, sterile anti-adhesion barrier material for surgery or dentistry use, or other similar sterile materials

Except the goods regulated as medical devices

30067000

Gel products for human use or veterinary medicines (as an emollient between different body parts during surgery or physical examination, or as a coupling agent between body and medical device)

Except the goods regulated as medical devices

 *Notes:

  • Overseas Marketing authorization: OTC drugs imported via CBEC to China must have overseas marketing authorization.

  • OTC status in China: If a drug is listed as an OTC drug in a foreign country/region, but as a prescription drug in China, such a drug cannot be imported via CBEC to China.

  • Classification of OTC products: If a product is an OTC drug according to overseas classification, but an OTC cosmetic or health product according to China's classification, then the Chinese classification shall prevail for CBEC imports.

  • China NMPA's marketing authorization is not mandatory for drug qualified to be imported via CBEC. Exception: OTC drugs approved to be imported under Beijing's or Henan's CBEC pilot programs already have NMPA's marketing authorization.7

  • Commodities imported via CBEC into China are for personal use only and cannot be sold again.8

3. Three Delivery Modes for CBEC

There are three delivery modes for transporting products to China via CBEC:

(1) bonded warehouse mode (B2B2C, customs supervision code: 1210):

The overseas supplier stores bulk products at duty-free bonded warehouses in China. When a Chinese customer orders a product and finishes the payment on the CBEC platform, the supplier send a single parcel to pass the customs, then the logistics company will deliver the parcel to the customer.

cross-border-e-commerce-via-bonded-warehouse-2.jpgCross-border E-commerce via Bonded Warehouse

(2) direct mail mode (B2C, customs supervision code: 9610):

The overseas supplier stores products overseas, and sends the parcel directly from overseas to China across the Chinese border.

baipharm-cross-border-e-commerce-via-direct-delivery-from-overseas.jpgCross-border E-commerce via Direct Mail from Overseas

(3) direct mail mode (C2C):

Similar to the second delivery mode, the overseas supplier stores products overseas, and send the parcel across China's border to the customer. C2C delivery mode does not mean that the seller is an individual. Rather, C2C is interpreted as a way that China's customs supervise how the products are transported into China. Currently, most OTC drugs sold on China's CBEC platforms are transported via C2C mode.

The three delivery modes mainly differ in permitted products, tax, and transaction limit.

Delivery Mode

Permitted Product

Tax9

Transaction limit

Chinese bonded warehouse (B2B2C)

1. Limited by the CBEC positive list (except Henan OTC Drug CBEC Pilot Program);

2. Having obtained marketing   authorization in the country of the overseas supplier;

3. Not in the Catalog of Wild Fauna and Flora Commodities for Import/Export or Catalog of Precursor Chemicals;

4. In the positive list of the specific CBEC platform on which the OTC drug is sold;

5. In positive list of the specific customs through which the OTC drug is transported into China.

Zero tariff; (Consumption tax + VAT) x   70%

Single transaction ≤ 5,000 yuan and annual transactions ≤ 26,000 yuan

Direct mail from overseas (B2C)

Direct mail from overseas (C2C)

1. Not limited by the CBEC positive list;

2. Having obtained marketing authorization in the country of the overseas supplier;

3. Not in the Catalog of Wild Fauna and Flora Commodities for Import/Export or Catalog of Precursor Chemicals.

50 yuan of the transaction exempted   from tax; 13% tax.

Single transaction (from Hong Kong SAR, Macao SAR, and Taiwan, China) ≤ 800 yuan or (from other countries and regions) ≤ 1,000 yuan.

4. Two Regional OTC Drug CBEC Pilot Programs in Beijing and Henan

China launched its first pilot program for importing overseas medicines via CBEC in Beijing on Dec. 30, 2019. Beijing's pilot program allows overseas suppliers to sell medicines via Chinese partners' CBEC platforms. The medical products are limited to those which have been should be stored at Chinese warehouses in Tianzhu Comprehensive Bonded Zone and delivered only to individual Chinese consumers.10

The Chinese partners should provide online purchase platforms, customs clearance service, warehouse storage, and delivery service. Each storage warehouse should be no smaller than 500 square meters in Tianzhu Comprehensive Bonded Area. The Chinese companies are also required to establish a system for tracing each medicine sold in retail packages, and keep the medicines’ information for no less than three years and transaction information for no less than five years.

By March 2022, five Chinese CBEC companies—Alibaba, Jingdong, Beijing Yaodou, Dingdang Kuaiyao, and Wandou Gongzhu—have joined the Beijing program and realized more than 1.07 transactions worth over 110 million yuan.11

The second pilot program for importing OTC drugs via CEBC, approved by the State Council on May 8, 2021, is being carried out in Henan province. Henan’s pilot program will last for three years.12 One breakthrough about this program is that it includes 13 OTC drugs that have NMPA's marketing authorization but are outside of the List of Imported Retail Goods for Cross-border E-commerce.

Related: China to Pilot Cross-Border E-Commerce Retail Import of Drugs in Henan Province

The two programs both adopt the bonded warehouse mode, but they differ in CBEC platforms, permitted drugs, and organization modes.


Beijing

Henan

CBEC   Platform(s)

Alibaba (parent company of Tmall);

JD.com;

Beijing Yaodou;

Dingdang Kuaiyao;

Wandou Gongzhu.

Global Bay (owned by Zhongdamen Internet Technology Group)

Permitted   Drugs

Drugs in the CBEC positive list

13 OTC drugs from Japan, Thailand, Singapore, and Hong Kong, China

Check out the specific drugs at page 25 of the slides.

Organization   Mode

The CBEC platform companies take the primary responsibility for drug safety. They organize the sellers, logistics companies, and storage companies in the CBEC business.

The CBEC platform companies, overseas sellers, and Chinese agencies take separate responsibilities.

5. How to Establish an Online Drugstore on a Chinese CBEC Platform

Overseas medical suppliers are permitted to present and sell OTC drugs on Chinese CBEC platforms, such as Tmall Global and JD Worldwide. Take Tmall Global as an example, it requires companies to go through four phases13 to open an online store:

                                            Four Phases to Open an Online Store on Tmall Global

Phase 1: Submit information

  • Choose the store type, brand type, and business category;

  • Fill in the brand information;

  • Fill in the seller information;

  • Name the online store;

  • Submit the above information for review.

Phase 2: Wait for review

  • Brand evaluation;

  • Evaluation of the seller's qualification.

Phase 3: Prepare for opening the store

  • Activate  the seller's account and log in;

  • Sign the agreement and pay the deposit.

Phase 4: The store goes online

  • Release commodity information;

  • Pay the annual fee and have the store go online.

As for documentation requirements14, companies which own exclusive stores, specialty stores, and galaxy franchise stores need to submit the following documents for proving their qualification as sellers:

  1. Registration documents of the business entity of the store;

  2. Statement of the authorized representative of the business entity;

  3. Identity document of the authorized representative of the business entity;

  4. Overseas bank account opening certificate or bank statement of the business entity.

To prove brand qualification, the former two types of stores need to provide trademark-related documents and the letter of authorization from the brand owner. Galaxy franchise store do not need to submit any documents for brand qualification.

In addition, special documents for OTC businesses should be provided:

  1. A business license and related certificates for selling drugs according to the business scope and complying with relevant laws and regulations.

  2. A product liability insurance policy with an amount of RMB 10 million.

6.. BaiPharm's CBEC Service for Overseas Medical Suppliers

BaiPharm has established online stores on Tmall Global and JD Worldwide, which are licensed to help foreign pharmaceutical companies sell OTC drugs to individual Chinese consumers. Also, we can help foreign suppliers open their own online stores and serve as a local agency for running the online businesses.

BaiPharm's specific CBEC services include

Local Agency Services

  • Local agency on Tmall Global, JD Worldwide, and TikTok

  • E-commerce business operation

  • Distribution channel

Pre-market Research

  • Market analysis

  • Competitive analysis

Marketing and Branding

  • Brand strategy

  • Content dissemination and promotion on Little Red Book, TikTok, Kuaishou, etc.

Contact BaiPharm and get professional solutions to market your OTC drugs in China.

Grace Wang
ChemLinked Regulatory Analyst
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