Medical insurance and drug price reform: it will lead to a slowdown in the growth rate of the pharma

Medical Network March 15th UBS Research believes that the reform of medical insurance and drug pricing system will be the main theme in 2016-2017, which will lead to a slowdown in the growth rate of the pharmaceutical industry and a long-term reduction in gross profit margins.

2016-2017 is known as the great year of medical administration due to the intensive release of medical reform policies by the government. The industry concluded that the medical reform policy mainly focuses on medical insurance and pricing system, both of which will have a profound impact on the pharmaceutical industry.

On March 13, UBS convened a special study for this purpose, and concluded that the control of medical insurance fees will lead to a slowdown in the growth of the pharmaceutical industry; the reform of drug prices will lead to a long-term decline in the gross profit margin of the industry.

However, this far-reaching impact has not yet appeared. In 2016, the revenue of China's pharmaceutical industry was 2.8 trillion yuan, a year-on-year increase of 9.7%; the profit was 300.2 billion yuan, a year-on-year increase of 13.9%.

"The starting point of this reform is structural adjustment, not the previous substantial increase in investment, but some people benefit, some people are neutral, and others may suffer." Zhao Bing, an analyst in the pharmaceutical industry at UBS Securities, believes: "Pharmaceutical The industry will not grow by 20 to 30 percent every year like it did when the medical reform was first started, but now it is on a declining stage.”

Industry growth slows down due to fee control

The signs of medical insurance fee control began after 2010, and since 2011, some areas such as Shanghai Medical Insurance have shifted from increasing income to reducing expenditure. In 2013, the income growth rate of the medical insurance fund was lower than the expenditure growth rate, and the balance was narrowed or even "the revenue could not cover the expenditure". In 2015, the growth rate of income and expenditure of the medical insurance fund dropped to 15.55% and 14.48% respectively. At the same time, bidding price cuts and medical insurance fee control have become the norm in the industry.

"Medical insurance fee control will lead to a slowdown in the revenue growth of the pharmaceutical industry." Zhao Bing explained that since 2009, the main achievements of the medical reform have been the increase in government spending, driving the growth of the pharmaceutical industry, and establishing comprehensive coverage and affordable medical expenses.

The new contradiction is that after the decline in GDP growth rate, the pressure on the continuous investment in the pharmaceutical industry has increased. Zhao Bing believes that "in the situation where the growth rate of medical insurance expenditure is higher than the growth rate of financing, in order to maintain the balance of revenue and expenditure of the medical insurance fund, cost control will In the long run, it has become the core of medical insurance reform. At present, the reform of the pharmaceutical industry and medical insurance is essentially to control the growth of medical expenses through structural adjustment on the demand side."

"From 2011 to 2015, the revenue of the pharmaceutical industry achieved a compound annual growth rate of 15%. However, we predict that the revenue growth rate of the pharmaceutical industry will slow down by 10% in the next three years." Zhao Bing added.

In addition, the dividend brought by the increase in the number of drugs in the new version of the medical insurance catalog is not as large as imagined. On February 23, the Ministry of Human Resources and Social Security issued the "National Basic Medical Insurance, Work Injury Insurance and Maternity Insurance Drug Catalog (2017 Edition)". There are 2,535 drugs, 339 more than the 2009 version of the catalog, an increase of about 15%.

"However, under the constraints of medical insurance payment prices, most varieties will not see the rapid increase in volume after the implementation of the 2009 version of the catalog." Liu Qian, founder of Unicorn Studio, told the reporter of 21st Century Business Herald, "The expansion of the new catalog implies structural adjustment. And the means of cost control will continue to be implemented, and the biggest beneficiaries of the medical insurance catalog are patients rather than pharmaceutical companies."

Long-term decline in gross profit due to drug price reform

On January 6, Li Bin, director of the National Health and Family Planning Commission, stated at the "National Health and Family Planning Work Conference" that all drug markups will be canceled in 2017. He Sheng, director of the Medical Reform Office of the State Council, re-emphasized this policy at a press conference on March 11.

He Sheng said: "This means that my country's public medical institutions will bid farewell to the era of 'supplementing medicine with medicine'. Before the reform, public hospitals used three subsidy channels: service charges, drug mark-up income and government subsidies. After the reform, we will Drug mark-ups have been canceled, and it has become two channels of service charges and government subsidies."

The above-mentioned reforms will directly affect drug prices. In addition, reforms in bidding and medical insurance payment systems will also have a huge impact on drug prices.

According to the analysis of the UBS research report, hospitals and medical insurance departments will be more involved in the drug price setting process; medical insurance payment prices will replace bidding prices; there will be more adjustments to bidding prices before hospitals purchase.

The consequence of the decline in drug prices is to reduce the gross profit margin of the pharmaceutical industry. Zhao Bing said, "The purpose of drug price reform is to form a pricing system that ensures affordable drug prices and takes into account the enthusiasm of pharmaceutical companies. At present, drug pricing is increasingly showing a dual pricing system, that is, the price is combined by bidding and medical insurance payment. Decide."

According to the above report, the lower prices of drugs generally appeared in 2015 and 2016, which means that the prices of recent rounds of bidding have shown a clear downward trend. The gross profit margins of China's pharmaceutical industry in the first three 5-year periods were 35% (1999-2003), 31% (2004-2009) and 29% (2010-2015). The overall decline in gross profit margin is mainly due to the increase in labor and production costs, and the further decline in drug prices. UBS predicts that the downward trend in gross profit margin will continue in the next five years.

Recently, public opinion has heatedly discussed that the medical insurance payment and settlement price limit introduced by Fujian and other places will have a greater impact on original drug manufacturers. "This is not necessarily a bad thing. Many original drugs used in China are expired, and only expired original drugs This kind of worry and worry will be there,” Zhao Bing told the 21st Century Business Herald reporter, “Excessive prices occupy a very large proportion of medical insurance funds, usually in the areas of major diseases such as diabetes and hypertension. But in fact, the domestic There are good generic drugs on the market, why do we need to set higher prices for expired original drugs?"