Experts on national medical insurance drug access negotiations: "Now it is our entire country to negotiate with you and give you another chance."
Pharmaceutical company negotiator: "4.4 yuan."
Experts on national medical insurance drug access negotiations: "4 is too much, the Chinese find it unpleasant, and then drop 4 cents, 4.36 yuan."
The pharmaceutical company negotiator smiled bitterly: "The deal."
A "soul bargain" video of less than a minute has now received over 10 million views on major video media platforms. This is an episode in the negotiation of medical insurance drug access in November this year, and it is also a microcosm of the current status of the pharmaceutical industry. For some pharmaceutical companies, it is not easy to be eligible to sit at the negotiating table and laugh a bitterly, and more pharmaceutical companies may not even have the qualifications to cry.
At the end of 2018, the implementation of the “4 + 7” urban drug procurement pilot policy resulted in a significant drop in the prices of selected drugs. The National Medical Insurance Negotiations held in November this year was the largest drug negotiation in China since the establishment of the medical insurance system. The average price of the 70 new drugs successfully reduced by 60%. Rounds of "soul bargaining" have compressed the profit margins of pharmaceutical companies one by one. Some listed pharmaceutical companies have ignored the research and development of new products because they have relied too much on several core drugs. And stocks both slipped.
Under the background of continuous deepening of medical reform, the development path of China's pharmaceutical industry is switching from generic drugs to innovative drugs, with volume procurement, collection of high-value consumables, and adjustments to the medical insurance payment catalogue, which forces pharmaceutical companies to reduce drugs from the payment side. The price is good for patients. With the continued rise in medical demand and limited funding for medical insurance, on the one hand, irrational expenditures on medical insurance have begun to shift to effective expenditures; on the other hand, innovative drugs have gained more support at the policy and capital levels. Different pharmaceutical companies have this year In terms of business development, there is a strong contrast between ice and fire.
With the volume of procurement intensified market competition
At the end of 2018, the national drug procurement pilot program was introduced, marking the official launch of volume procurement. The quantity purchase can be simply understood as the country's large-scale drug group purchase behavior. By clarifying the purchase quantity and the lowest bidder, the quantity purchase accelerates the market-based competition between generic pharmaceutical companies. In order to be able to obtain large orders for the centralized procurement of national medicines, pharmaceutical companies can only accept the result of "exchanging price for quantity".
The scope of the belt purchase pilot is 4 municipalities and 7 cities, so it is called "4 + 7" belt purchase in the industry. According to Fu Hongpeng, a researcher at the National Health Development Research Center of the National Health and Medical Commission, belt purchase has three advantages. The first is that there is a certain quantity of goods for volume purchase, and buyers and sellers can negotiate on the details of the transaction; the second is to reduce the gray space in the drug purchase and sales process; the third is to help improve the drug procurement process.
For patients, the intuitive benefit of volume buying is lower drug prices. In addition, the volume purchase also has a huge impact on the original structure of the pharmaceutical market. Once the company wins the bid, it can quickly swallow a large market share. Because of the promised purchase amount, the company does not need to worry about sales after the bid is awarded, which can save a lot of money. Expenses for promotion and distribution. Of course, pharmaceutical companies must pay the corresponding price when they are guaranteed the sales volume. The price is the lowest price.
According to the Ping An Securities Research Report, in the medium and long term, the valuation of generic drugs with negative purchases is negative, and competition will increase corporate performance volatility and performance predictability. In the long run, with the promotion of volume procurement, domestic generic drugs will tend to intensive production. Large generic drug companies rely on low cost and multiple varieties to survive, but the valuation may not be high.
In fact, this year's centralized procurement of drugs, the “4 + 7” volume procurement model has gradually been replaced by the “4 + 7” centralized procurement expansion. Since the beginning of this year, centralized drug procurement has expanded from the original 11 pilot cities to 25 provinces. In addition to Fujian and Hebei provinces, which have already taken the initiative to follow up, 27 provincial administrative regions have been included in the scope of volume procurement.
Not only has the scope of volume procurement expanded across the country, but also the procurement rules have been further optimized, from "exclusive winning" to dividing the procurement volume market according to the number of selected companies, and establishing "violation lists", reporting companies, and selected companies And if distribution companies offer kickbacks, commercial bribery, malicious competition at below-cost prices, etc., they will be included in the "violation list". On the one hand, they will be disqualified from declaration and the other will be selected;
The "4 + 7" centralized mining expansion has intensified the competition among pharmaceutical companies while reshaping the rules of the pharmaceutical industry. Previously, the price of generic drugs was not much lower than that of original drugs, and there was a lot of profit in sales. However, after the implementation of the new national procurement policy, the gray space of the pharmaceutical industry has been greatly compressed, which is conducive to the sunshine of the pharmaceutical industry. For specific pharmaceutical companies, the original pharmaceutical companies with a large market share will be affected by the New Deal with low volume drug prices to reduce the price of the drug. The market increase itself will not be too high, which will inevitably lead to a decline in profits; those drugs that originally had a small market share If the company can win the bidding with quantity and successfully enter the national market, it can realize small profits and high sales, and its profits will increase significantly.
Huahai Pharmaceutical was one of the first batch of beneficiary companies with volume purchases. Because of the cost advantage of the integration of raw materials and preparations, Huahai Pharmaceutical has selected “4 + 7” for volume purchase. The company's net profit in the first half of 2019 reached 335 million yuan, a year-on-year increase of 45.95%.
After the successful bidding of "4 + 7" with the purchase volume of Cologne Pharmaceutical's Biolot, it quickly covered more than 200 tertiary hospitals in 11 key cities, which significantly promoted the overall sales growth. The sales volume in the first half of this year increased by 97.14% year-on-year.
Dezhan Health has become a typical representative of the negative impact of volume procurement. The lipid-lowering drug "Ale", which accounts for 95% of the company's revenue, is Lipitor's first generic drug in China and has led the domestic market share for many years. Although "4 + 7" volume purchases have significantly increased the sales of "Ale", due to the decline in the unit price of sales, the company's net profit in the first half of this year fell by 45.48% year-on-year. In the "4 + 7" centralized procurement and expansion bidding in September this year, "Ale" has changed from the previous "exclusive bid" and has become a direct player.
Following the implementation of the new policy on drug procurement, the procurement of high-value medical consumables has also been put on the agenda this year. Li Tao, deputy director of the National Medical Security Bureau, said at a regular briefing held by the State Council in August that centralized procurement is one of the most effective ways to reduce the price of high-value medical consumables. Then, the National Medical Insurance Bureau, based on the previous experience of “4 + 7” centralized collection and expansion of medicines, combined with the characteristics of high-value medical consumables, researched and formulated the corresponding centralized procurement plan.
A brokerage pharmaceutical investment research analyst said in an interview with the "Securities Daily" reporter that volume purchase stimulates price competition and R & D speed of generic drug companies, because drugs have a life cycle, and generic drugs must first pass a consistency evaluation Before they can run for volume purchases, under the pressure of small profits but quick turnover, pharmaceutical companies must devote themselves to the development of fast generic drugs and innovative drugs in order to survive.
Policies add firewood and gunpowder companies to increase innovation
The impact of volume purchases and medical insurance negotiations is undoubtedly negative for existing generic drug companies, but it is a different story for innovative drug companies. On November 14th, the domestic innovative drug Zebutinib was approved by the FDA for marketing. The approval of the breakthrough therapy was completed within three months of the application. The efficiency of the FDA made people in the pharmaceutical industry amazed.
What's even more gratifying is that the new approval rules for new drugs are about to be implemented. From November 8th to 13th, the Drug Evaluation Center of the State Administration of Drug Administration issued a number of working procedures for comments. The three documents of the "Guiding Principles", "Working Procedures for Breakthrough Therapeutic Drugs" and "Working Procedures for Priority Review and Approval" are all aimed at improving the efficiency of the approval of innovative drugs.
In the "Priority Review Review and Approval Work Procedures", a more specific review of priority review review products such as medicines with breakthrough therapeutic drug procedures, drugs included in conditional approval for listing and registration, and clinically urgently needed shortage drugs, etc. Examination and Approval Period: The application period for the drug registration is 120 days, of which the evaluation period for the urgently needed overseas marketed rare disease drugs is 60 days; after receiving the results of inspection, inspection, etc. Complete the comprehensive evaluation report within 30 days, and make an approval decision within 10 days. In the past, if it was not a specially approved variety, it would take about one to one and a half years to complete the review and approval, and the new regulations significantly shortened the review and approval time.
In recent years, a series of supporting policies in the field of innovative drugs have been released in China, such as the reform of the classification of chemical drugs registration, the trial of the marketing authorization holder system, priority evaluation of innovative drugs, patent compensation, and protection of drug trial data. These policies have broken new drugs. Policy obstacles in research and development have accelerated the pace of drug companies' new drug research and development.
Innovative drugs and innovative technologies have also become the hotspots of industrial capital chasing. Many innovative drug R & D companies have successively obtained large amounts of financing this year. Microchip Biotech, Borui Pharmaceutical, etc. have been listed on the science and technology board, and have obtained important capital support. In addition, a large number of returnees continue to return to China for employment, bringing domestic first-class drug research and development enterprises with world-class R & D personnel.
Listed companies also gained new performance growth points because of their active involvement in research and development. Junshi Bio achieved revenue of 309 million yuan in the first half of this year, compared with the previously reported 2018 annual loss of 724 million yuan. The main reason for the reversal of the company's performance is the continuous heavy volume of Teripril monoclonal antibody PD-1 (brand name: Tuoyi). According to the semi-annual report released by Junshi Biological, Teripril monoclonal antibody in the first half of this year Sales revenue accounted for 99.69%.
Junshi Biological's performance is just a microcosm of the development prospects of innovative pharmaceutical companies. Innovative medicine leader Hengrui Pharmaceutical achieved operating revenue of 10.026 billion yuan in the first half of 2019, an increase of 29.19% over the same period; net profit of 2.412 billion yuan, an increase of 26.32% over the same period. The continuous heavy volume of company performance is inseparable from the continuous investment in research and development. In the first half of this year, Hengrui Medicine invested 1.484 billion yuan in research and development funds, an increase of 49.13% over the same period of the previous year, and R & D investment accounted for 14.80% of sales revenue.
The "Research Report on the Chinese Pharmaceutical Industry Market Prospects and Investment Opportunities 2019-2024" issued by the China Commercial Industry Research Institute states that under the joint promotion of policies, capital, talents and other factors, pharmaceutical companies with outstanding R & D capabilities and strong new drug creation capabilities will Stand out from the crowd, pharmaceutical companies' R & D strategies and market strategies will usher in a major transformation, and innovative pharmaceutical companies will benefit from favorable policies and usher in unprecedented development opportunities. The products launched by domestic domestic innovative drug companies will shift from lower-level Metoo (following strategy) and Mebetter (improved imitation) drugs to higher-level Firstinclass and Bestinclass drugs.
The state not only provides more lenient policy space for innovative medicines, but also actively encourages the localization of high-end medical devices. In 2018, the State Council issued a clear statement that the domesticization of six major categories of medical devices should be accelerated. This year, medical device reward policies have been continuously introduced. The release of the reform plan for high-value medical consumables has improved the price formation mechanism on the one hand and reduced the falsely high price of high-value medical consumables on the other hand; on the other hand, it has improved the level of localization, which is expected to benefit innovative enterprises.
Guo Tongjun, senior vice president and director of Lepu Medical, said in an interview with the Securities Daily reporter that in recent years, the state has issued a number of policies to support domestic medical device companies, optimize medical device review and approval, and accelerate innovation in medical devices and clinical A lot of work has been done on the urgent need for medical device approval. The advancement of these policies has effectively helped the development of domestic medical device companies, greatly reducing the company's research and development costs and time costs, accelerating the market launch of products, and accelerating the process of domesticizing medical devices.
"Taking the field of cardiac stents as an example, foreign companies completely monopolized this market ten years ago, and now the domestic heart stents occupy more than 70%. Behind this, in addition to the company's own research and development efforts, policy assistance is indispensable." Guo Tongjun said, "In the medical industry, innovation ability is the foundation to ensure the long-term sustainable development of enterprises. The leading technological competitiveness brought by innovation can greatly consolidate the company's advantageous position. During the 20 years of entrepreneurship, Lepu Medical has obtained cumulative patent rights. There are more than 920 applications and more than 230 applications are underway. The next four or five years will enter the harvest season of dozens of major innovative device registration sales. "
Negotiations on medical insurance drug access point to a new way for pharmaceutical companies
"Promoting the price reduction of generic drugs is not unique to our country." Professor Zhang Lan, director of the Pharmaceutical Department of Xuanwu Hospital, Capital Medical University, said in an interview with the Securities Daily reporter that from international experience, when there are many manufacturers of the same generic drug, Countries often compete in the market to reduce their prices to a level that looks appalling, but is actually within the reach of enterprises.
The price of the original research drug is high because it includes not only the production cost of the drug, but also the research and development compensation for the drug. Only by recovering the initial research and development costs from the market can the subsequent innovation of pharmaceutical companies be supported, so the original research drugs are often expensive. Generic drugs are another development model. After the patent of the original drug expires, the generic drugs can apply for marketing. Compared with the original drug, the generic drug can refer to the data of the original drug, eliminating the process from drug discovery to preclinical research. Therefore, the development of the generic drug has the characteristics of low cost, short time and low difficulty.
The "Forecast and Investment Strategic Planning Analysis Report of the Chinese Pharmaceutical Industry Market" released by the Foresight Industry Research Institute shows that although the domestic generic drug market size has reached 500 billion yuan, the industry concentration is extremely low, with the Indian generic drug industry concentration rate of 52.31%, the United States Compared with the concentration rate of the generic drug industry of 52.96%, the concentration rate of the generic drug industry in China is only 18.82%. Due to the lack of compulsory evaluation requirements for generic drugs approved for marketing in China in the past, some generic drugs are far from the original drugs in terms of efficacy, poor industry profitability, gross profit margin and other indicators are far below the international average, and international competitiveness insufficient.
The quality side is controlled through consistency evaluation, and the market side is controlled through volume procurement. The reform of the generic drug industry has entered the deep-water area this year. The national medical insurance negotiations in November this year pushed pharmaceutical companies to "require prices in the market." Dilemma. The entry list for the negotiation involved a total of 150 varieties, with more than 70 companies participating. It was the largest pharmaceutical negotiation since China established the medical insurance system. 97 varieties were negotiated successfully, 27 varieties were successfully renewed, and new negotiations were added. 70 varieties successfully.
The list released by the Medical Insurance Bureau shows that there are many foreign companies among the pharmaceutical companies selected by the Medical Insurance Bureau this time, which means that the original research drugs have entered the scope of market competition, and this is only included in the scope of medical insurance. Some popular varieties of medical insurance negotiated a large price reduction. For example, Hisco's arginine and glutamic acid reduced by 84%. However, some products also had smaller price reductions. For example, Hengrui Pharmaceutical's apatinib only reduced its price by 13%. As long as there are no competing products in the market, the bargaining power of pharmaceutical companies is still sufficient.
In the past, for those drugs that could not be included in the national medical insurance for the time being, it was possible to enter the local medical insurance first through the local supplementary list, but now this road is no longer feasible. The Medical Insurance Bureau clearly stipulates that all places must strictly implement the "Drug List", and must not formulate the list by themselves or use alternative methods to add drugs in the list, or adjust the limited payment scope of drugs in the list by themselves. For the Class B drugs that were added to the original provincial drug list according to regulations, they should be gradually digested within 3 years. In the process of digestion, each province should give priority to adjusting the drugs included in the national key monitoring scope out of the payment scope.
The medical insurance catalog adjustment and negotiation access brought new challenges to the pharmaceutical industry. Companies are facing many pressures, such as price cuts for drugs, adjustment of top-level design for market access, expiration of patents for original research drugs, and squeezed market space by generic / innovative drugs. The medical insurance catalog is imperative.
After the implementation of the medical insurance catalog adjustment and negotiation access, although the competition facing pharmaceutical companies is becoming increasingly fierce, it also points out a new way out. This year, 70 new drugs were successfully negotiated, far exceeding the number of renewal negotiations, and have a two-year validity period. If a generic drug is launched, the generic drug will also face renegotiation. These regulations are sufficient to show that the state encourages the launch of innovative drugs and is ready to include them in medical insurance.
Shanghai Securities pointed out in its research report that medical insurance negotiations will further drive the replacement of medical insurance funds and will continue to promote the development of the domestic innovative drug industry chain. The performance of listed pharmaceutical companies may continue to differentiate. Investors are advised to pay attention to the high-level segment leaders and industry leaders, including innovative drug companies with rich product lines, strong R & D capabilities, and high-quality disease tracks, as well as service providers such as CRO / CMO / CDMO.
Allow unprofitable pharmaceutical companies to go on the market
"Unprofitable and unable to go public" was once a "red line" drawn by the Chinese capital market for corporate listings. The launch of the science and technology board has made this "red line" history. The establishment of the Science and Technology Innovation Board and the trial registration system have shown more inclusiveness to technological innovation enterprises.
The Science and Technology Innovation Board sets up five sets of differentiated listing indicators, of which the fifth set of requirements stipulates that the expected market value of the reporting enterprise is not less than RMB 4 billion, and the main business or product needs to be approved by the relevant state departments. Sexual achievements and a certain amount of investment from well-known investment institutions. Enterprises in the pharmaceutical industry need to obtain at least one second-class clinical trial approval for a new type of drug. Other companies that meet the positioning of the science and technology board must have obvious technical advantages and meet corresponding conditions.
Northeast Securities Research Director Fu Lichun said in an interview with "Securities Daily" reporter that the introduction of "market value" indicators, combined with financial indicators such as income, cash flow, net profit and R & D investment, set up five sets of differentiated listing indicators, It can meet the listing requirements of various types of science and technology enterprises that have broken through the core technology or achieved staged results and have good development prospects but have different financial performance through continuous R & D investment in key areas. In particular, companies that have not made up for their losses or profits are allowed to go public, opening the capital market door to early-stage pharmaceutical innovation companies with high R & D investment.
On October 30, Zexun Pharmaceutical passed the audit and became the first biomedical company to successfully use the fifth set of standards of the science and technology board. Zeyu Pharmaceutical currently does not have any drug sales revenue, and has continued to lose money since 2016. As of the end of March 2019, the company's accumulated undistributed profit was -180 million yuan. However, in terms of R & D achievements, Zeyi Pharmaceuticals has a rich background and is currently developing 11 innovative drugs, including donafenib tosylate (for the treatment of liver cancer and gastric cancer), recombinant human thrombin (for hemostasis) and Jack hydrochloride Various indications of tinib (for the treatment of bone marrow fibrosis) have been in Phase II / III clinical trials.
In addition to Zeyu Pharmaceutical, among the biopharmaceutical companies currently applying for the IPO of science and technology board, Biotech, Tianzhihang, Shenzhou Cell, Junshi Bio, and Frontier Bio have also adopted the fifth set of listing standards. The common point is that R & D is powerful but has not yet achieved large-scale profits. Taking Biotech as an example, the prospectus shows that from 2016 to 2018, the company's research and development expenses accounted for more than 90% of the total expenses, and the annual research and development expenses doubled, and the 2018 research and development expenses reached 540 million yuan. In the first half of the year, R & D investment was 350 million yuan.
Although the science and technology board is unprecedentedly inclusive, the information disclosure of unprofitable pharmaceutical companies has not been relaxed, requiring the company to remind investors of risk factors and follow a strict delisting system. Anxin Securities pointed out in the research report on Zeyu Pharmaceutical that if the company's unprofitable status may continue after the listing or the accumulated unrecovered losses may continue to expand, which may lead to the triggering of the "Shanghai Stock Exchange Science and Technology Board Stock Listing Rules" Conditions for delisting, and according to the "Continuous Supervision Measures for Listed Companies on the Science and Technology Innovation Board", if the company touches the termination of listing standards, the shares will be terminated directly.
The research and development of innovative drugs has high technical requirements, difficult development, and long research and development cycles, including drug discovery, preclinical research, phase I to III clinical research, and approval by the drug regulatory department. The risk of failure is often accompanied by the development process. Various reasons, such as uncertain efficacy and safety issues, lead to the failure of R & D or the failure to obtain approval from the regulatory authorities, which in turn affects the recovery of initial investment and the realization of economic benefits of innovative drug R & D enterprises.
Fu Lichun said that on the one hand, the inclusiveness of the science and technology board allows more companies in the early R & D stage to have the opportunity to obtain capital support; on the other hand, the marketization model of the science and technology board urges these companies to increase the speed of scientific research transformation , Strive to achieve performance growth, otherwise it will be abandoned by the market. The market-oriented capital environment encourages companies to continue to make breakthroughs. (Apprentice reporter Guo Jichuan)
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