(Yicai Global) June 22 -- Shares in Alibaba Health Information Technology plummeted as much as 16.9 percent today and those in JD Health International by up to 17.3 percent as the Chinese government contemplates prohibiting internet healthcare platforms from running their own online drug shops to reduce competition with brick-and-mortar pharmacies.

Alibaba Health’s share price [HKG:0241] closed down 13.85 percent today to HKD4.79 (USD0.61). Earlier in the day it sank to HKD4.62. JD Health [HKG:6618] closed down 14.83 percent at HKD53.40. Earlier in the day it tumbled to HKD51.80.

Last month the National Medical Products Administration issued a revised draft of the Regulations on the Implementation of Medicine Administration Law which included a new provision that third-party platforms should not be involved in the direct sale of medicines.

If the new clause is implemented, e-commerce platforms will no longer be in direct competition with brick-and-mortar pharmacies. But it will be hard for this new ruling to be executed, a market insider told Yicai Global.

Drug sales make up a big proportion of internet healthcare firms’ income. Alibaba Health raked in revenue of CNY20.7 billion (USD3.1 billion) in the first quarter, 64 percent of which came from its self-run drugstore. And JD Pharmacy accounted for 85 percent of JD Health’s earnings in 2021 at CNY26.2 billion.

If the new ruling comes into effect, e-commerce giants are likely to spin-off their e-pharmacies into independent entities, analysts said. JD Health’s self-operated online drug store in any case is run by a subsidiary called Qingdao Anjitang Pharmacy.

Editor: Kim Taylor