Alibaba's Ali Health is said to be in talks with China's food and drug regulator on handing over its electronic drug monitoring system to the authority.
The regulator suspended the system on Saturday, saying it is soliciting public opinion to revise regulations monitoring pharmaceutical sales.
The suspension came after a pharmacy chain in Hunan sued the regulator over the monitoring system last month.
The Yontinhe Group alleged that the arrangement gave an unfair advantage to Ali Health, which has its own online drug sales business.
However, Ali Health has previously claimed that, though the platform was operated by the company, it was actually owned by the regulatory body.