The China Food and Drug Administration (CFDA) has begun a consultation on good supply practices and traceability after suspending the use of a drug monitoring system run by Alibaba-subsidiary Ali Health. In revising its traceability document, CFDA has removed references specific to the electronic drug monitoring system in favor of more general recommendations about good supply practices.

CFDA’s actions come nearly one month after it was sued by a pharmacy over the involvement of Ali Health in the electronic drug monitoring system. The lawsuit alleged the involvement of Ali Health is a conflict of interest. Over the weekend, CFDA formally responded to scrutiny of the platform with two statements, one of which confirmed it is suspending the Ali Health-run system. Reports that CFDA would transfer responsibility for supporting the program from Ali Health to a nonprofit have circulated since the regulator was served with legal papers, but its action goes a step further.

The action amounts to a complete suspension of the implementation of the system. CFDA’s revisions to its good supply practice document further the impression that it is looking to move away from the platform. In the revised text, CFDA has deleted references to the process of scanning barcodes and uploading data to an electronic drug monitoring system, the workflow that is at the heart of the platform built by Ali Health. The text retains the demand for traceability but shies away from setting out exactly how companies should achieve this goal.

In proposing this less prescriptive approach to traceability, CFDA has raised doubts about the future of the platform Ali Health created and the value of investments companies made to bring systems into line with traceability requirements that came into force at the end of 2015. Ali Health has said it is working with the regulator on the potential handover of the platform and is yet to receive a notice telling it to stop providing technical support and maintenance services. Some companies have made significant investments to comply with the Ali Health-focused traceability model.

Ali Health and its investors are already bracing for the loss of the electronic drug monitoring system business. Shares in Ali Health fell 14% following CFDA’s statements, which the company admits could negatively affect its business. Attention is now turning to the outcome of CFDA’s consultation, the feedback period for which is set to close on March 23.