China's food and drugs regulatory body said it had suspended its electronic drug monitoring system, a platform operated by Alibaba Health Information Technology Ltd, while it drafts amendments to regulations monitoring pharmaceutical sales.
The China Food and Drug Administration (CFDA) said it will seek comments until March 23 on changes to the way pharmaceutical products are monitored, including online sales, according to statements posted on its website on Saturday.
Ali Health said in a filing on Sunday it had not received notice from the CFDA over the operation of the platform.
The suspension comes after Ali Health's involvement in the platform—which allows consumers to check the authenticity of medical products online—was brought into the spotlight last month.
Hunan-based pharmacy chain Yontinhe Group said last month it was suing the CFDA over the monitoring system, alleging the arrangement gave an unfair advantage to Ali Health, which has its own online drug sales business.
Shares in Ali Health, an affiliate of e-commerce giant Alibaba (baba) Group Holding, fell sharply in the aftermath of the announcement, fueled by concerns that the company could lose the right to run the platform, formally known as the Product Identification, Authentication and Tracking System (PIATS).
Ali Health said it had not received notice from the CFDA to request that it discontinue providing technical support and maintenance services to the platform, according to a filing to the Hong Kong stock exchange late on Sunday.
"The company will therefore continue its operation of the Drug PIATS and provision of services to the drug industry, and will work closely with the CFDA to continue such operations under the CFDA's direction," the company said in the filing.
A spokesman for Alibaba Group declined to immediately comment when contacted by Reuters earlier on Sunday.
China is the world's second largest pharmaceutical market after the United States, and is a magnet for drug makers, hospital operators and medical device firms targeting a wider healthcare bill estimated to hit $1.3 trillion by 2020.
Shares in Ali Health surged in April last year when Alibaba said it was injecting its online pharmacy operations into a Hong Kong-listed affiliate in a $2.5 billion deal.
Beijing hopes to boost retail drug sales at pharmacy chains and online, and wrest some sales away from hospitals, which currently control around three-quarters of drug sales.