Compliance with regulations has become an insurmountable red line for the survival and development of retail pharmacies.

According to People’s Daily, some pharmacies, including Laobaixing Pharmacy and Yangtianhe, were recently exposed for allegedly misusing medical insurance funds. On the 22nd, the Hunan Provincial Medical Insurance Bureau urgently summoned these pharmacies and urged relevant cities and prefectures to complete on-site inspections of the involved stores.

A preliminary investigation by the medical insurance department showed that the 10 involved pharmacies had violations such as swapping products and settling payments with substitute cards. The confirmed issues involved a total of 3,267.14 yuan from employee personal medical insurance accounts. No misuse of the medical insurance pooling fund was found in the related pharmacies.

The swift response and serious handling by relevant authorities reflect a zero-tolerance attitude toward fraudulent use of medical insurance funds. In recent years, the National Medical Insurance Bureau has continuously strengthened fund supervision and intensively issued policies to solidify regulatory responsibilities. Compliance has become an insurmountable red line for the survival and development of retail pharmacies.

Involving Listed Pharmacy Chains

According to reports, specific violations at the involved pharmacies included: swapping cosmetics and health foods for settlement as “medicines”; promoting prescription drugs through “buy medicine, get medicine free” promotions; staff skillfully evading surveillance, forging prescriptions, and arranging “medicine swapping schemes”; and some individuals regularly assisting others in swiping medical insurance cards, forming a fixed operational model.

This incident involves several well-known pharmacy chains, including the listed chain Laobaixing. Specific stores include Huaihua Xuanqi Laobaixing Health Pharmacy, Hunan Hengyang Laobaixing Health Pharmacy (Institute of Technology store), and Hunan Shaoyang Laobaixing Pharmacy Shuiying Mingcheng store, involving both directly operated and franchised stores, sparking widespread concern.

This is not the first time Laobaixing Pharmacy has been involved in medical insurance violations. According to a previous notice from the National Medical Insurance Bureau, in June 2025, six Laobaixing Pharmacy stores in Loudi, Hunan, were found to have swapped health products for medical insurance drug settlements and failed to verify identities while assisting in purchasing drugs under fake names. The involved stores were ordered to return the fraudulently obtained funds, fined administratively, and had their medical insurance service agreements terminated.

The frequent fraudulent activities at Laobaixing Pharmacy are linked to the company’s pressure from industry adjustments affecting performance growth. Currently, the retail pharmacy industry is no longer in the era of “rapid expansion.” It is shifting from pursuing scale to intensive management. Under the influence of multiple factors, such as tightened policies and intensified market competition, many listed pharmacy chains are facing performance pressure.

Financial data shows that in 2024, Laobaixing achieved revenue of 22.358 billion yuan, a year-on-year decrease of 0.36%; net profit attributable to shareholders was 519 million yuan, a sharp decline of 44.13% year-on-year. Both indicators fell for the first time in a decade. In 2025, the company’s revenue was 22.237 billion yuan, down 0.54% year-on-year; net profit attributable to shareholders was 382 million yuan, down 26.44% year-on-year. Excluding the impact of goodwill and land impairment, net profit was 620 million yuan, still down 1.0% year-on-year.

On the other hand, these cases also expose shortcomings in internal control management among some leading pharmacy chains during rapid expansion. Although the pace of industry expansion has slowed in recent years, the store counts of listed companies like Dashenlin, Laobaixing, and Yixintang remain above 10,000.

As of the end of 2025, Laobaixing had stores covering 18 provinces and more than 150 prefecture-level cities and above, totaling 14,975 stores, including 9,732 directly operated stores and 5,243 franchised stores. Additionally, as of the third quarter of 2025, Laobaixing had over 23,000 alliance pharmacies, with cumulative equity investments in 176 partner companies involving 10,085 stores.

Notably, among its more than 9,000

Laobaixing Pharmacy

Laobaixing Pharmacy, whose name translates to “Common People’s Pharmacy,” is a historic and culturally significant traditional Chinese medicine shop. Originating in the late 19th or early 20th century, it became known for providing affordable and accessible herbal remedies to the general public. Today, it stands as a symbol of community healthcare and the enduring legacy of traditional Chinese medicine.

Yangtianhe

Yangtianhe, located in Hunan Province, China, is a scenic reservoir area known for its pristine waters and terraced rice paddies. Originally constructed as part of a hydroelectric project in the mid-20th century, the site has since become a popular tourist destination, offering stunning landscapes and hiking trails. Its history is tied to local agricultural development and the transformation of the region’s natural environment for energy and irrigation purposes.

Hunan Provincial Medical Insurance Bureau

The Hunan Provincial Medical Insurance Bureau is a government agency in Hunan Province, China, responsible for managing and regulating the region’s medical insurance system, including basic health insurance, maternity insurance, and medical assistance programs. Established as part of China’s broader healthcare reforms in the early 2000s, it works to ensure accessible and affordable healthcare for residents by overseeing insurance funds, reimbursement policies, and medical service pricing. The bureau plays a key role in implementing national health insurance policies at the provincial level, adapting them to local needs.

National Medical Insurance Bureau

The National Medical Insurance Bureau is a key Chinese government agency established in 2018 to oversee the country’s medical insurance system, including the management of the national drug reimbursement list and price negotiations. Its creation was part of broader healthcare reforms aimed at improving affordability, efficiency, and coverage of medical services for China’s vast population. The bureau plays a central role in regulating medical insurance funds and policies to ensure sustainable access to healthcare.

Huaihua Xuanqi Laobaixing Health Pharmacy

Huaihua Xuanqi Laobaixing Health Pharmacy is a traditional Chinese medicine pharmacy located in Huaihua, Hunan Province. It is known for offering herbal remedies and health services rooted in centuries-old Chinese medical practices, serving the local community’s wellness needs. While specific historical records are limited, it reflects the enduring cultural tradition of “laobaixing” (common people) pharmacies that have provided accessible healthcare in China for generations.

Hunan Hengyang Laobaixing Health Pharmacy (Institute of Technology store)

The Hunan Hengyang Laobaixing Health Pharmacy (Institute of Technology store) is a modern retail pharmacy located in Hengyang, Hunan Province, serving local residents and students near the Institute of Technology. As part of the Laobaixing pharmacy chain, it reflects the broader development of community healthcare services in China, offering both traditional Chinese medicine and Western pharmaceuticals. While specific historical details about this particular store are limited, it represents the ongoing expansion of accessible health services in urban areas.

Hunan Shaoyang Laobaixing Pharmacy Shuiying Mingcheng store

The Hunan Shaoyang Laobaixing Pharmacy Shuiying Mingcheng store is a traditional Chinese pharmacy located in Shaoyang, Hunan Province. It is part of the well-known “Laobaixing” (Common People) pharmacy chain, which emphasizes accessible and quality traditional medicine services. The store serves the local community by offering herbal remedies and pharmaceutical care, reflecting the enduring role of such pharmacies in China’s healthcare culture.

Dashenlin

Dashenlin, also known as the “Great Deep Forest,” is a vast and ancient forested area in China’s Heilongjiang Province, renowned for its dense, pristine woodlands and rich biodiversity. Historically, it was part of the homeland of the Manchu people and served as a vital source of timber and wildlife for local communities. Today, it is recognized as a significant ecological reserve and a popular destination for nature tourism and scientific research.