Thinking this week: DRGs promotion, changes in medical service investment in 2022
On November 19, 2021, the National Medical Security Bureau prepared and issued the three-year action plan for DRG / Dip payment method, which plans to accelerate the full coverage of DRG / Dip payment method reform on the basis of the preliminary results achieved in the three-year pilot. This plan mainly emphasizes the following points:
1. Accelerate the full coverage of DRG / Dip payment and ensure the implementation time point of the reform: coordinate the schedule and key time points of regions, medical institutions, diseases and medical insurance fund coverage in the next three years.
2. Improve various mechanisms such as management and assessment, and emphasize strengthening the value measurement and performance management of doctors’ diagnosis and treatment services: make more detailed management of various indicators measuring payment standards, and emphasize the technical value of doctors’ services to promote hierarchical diagnosis and treatment; Establish a more sound performance management and operation monitoring mechanism; Form a multi-party evaluation and dispute settlement mechanism.
3. Strengthen infrastructure construction to ensure the long-term and stable implementation of the reform: strengthen the construction of professional capacity, information system, standards and norms and demonstration sites.
4. Promote the coordinated reform of medical institutions and guide policies to be implemented smoothly in the medical structure: code management, information transmission, medical record quality control and the transformation of internal operation and management mechanism of the hospital.
We believe that this DRG / Dip payment reform is a further promotion of medical insurance fee control, Specifically: (1) The process of domestic substitution of medical devices is expected to accelerate: compared with foreign-funded products, domestic devices have more advantages in price. With the increasingly mature technology of Chinese local enterprises, the gradual development of industrial chain and the higher quality of domestic devices, the proportion of hospitals choosing foreign products will be reduced in the future, which will benefit the medical device enterprises with excellent cost control ability among domestic enterprises And IVD enterprises; (2) Favorable varieties of drugs entering medical insurance: DRG / Dip payment mode encourages hospitals to establish more perfect diagnosis and treatment standards, encourages more patients to seek medical treatment, and benefits innovative drug enterprises and generic drug enterprises that have entered medical insurance and have more advantages in product strength; (3) Hospital IT system management needs to be improved: all management indicators of DRG need data processing, which has higher requirements for the hospital’s ability of data collection, integration and analysis, which is beneficial to medical informatization related enterprises.
Further thinking on the formation of the medical service investment framework in 2022, what is the impact of DRGs on medical services? We believe that under the background of medical insurance fee control, private hospitals will continue to focus on the leader: the medical insurance payment reform requires public hospitals to have stronger fine management ability, and the diagnosis and treatment quality of public hospitals is rising. If private hospitals want to stand out, they must have stronger medical resources to provide better medical services, Small and medium-sized private medical institutions may accelerate the liquidation due to the lack of high-quality diagnosis and treatment resources and price advantages. In this context, it is suggested to pay attention to the industry leaders with high prosperity, strong expansion ability and smooth price increase logic: Aier Eye Hospital Group Co.Ltd(300015) , Topchoice Medical Co.Inc(600763) , haijiya medical treatment and Jinxin reproduction.
Performance this week: the valuation was slightly adjusted, and the circulation of traditional Chinese medicine and drugs performed well
The pharmaceutical sector rose 1.34% this week, underperforming the CSI 300 index by – 1.80 percentage points, ranking 14th. Since the beginning of 2021, the pharmaceutical sector has fallen by 5.4%, underperforming the CSI 300 index by 2.42pct. In terms of trading volume, the turnover of the pharmaceutical industry this week was 365.88 billion yuan, accounting for 6.2% of the total turnover of all a shares, down 1.5pct month on month, 1.9pct lower than the central level since 2018. In terms of valuation, as of December 10, 2021, the overall valuation of the pharmaceutical sector (historical TTM, overall method, excluding negative values) was 34 times PE, down 0.8pct month on month, lower than the central level (38 times) since 2011. The valuation premium rate of the pharmaceutical industry relative to Shanghai and Shenzhen 300 was 172%, down 7.5pct month on month, lower than the central level in the past four years (182%).
According to the classification of wind CITIC medicine, The sectors with the highest growth rate this week were traditional Chinese medicine Pieces (+ 5.2%), medical circulation (+ 4.6%), and medical devices (+ 3.1%); chemical raw materials (- 2.1%) were the sectors with the largest decline. Considering that CITIC pharmaceutical’s classification involves the cross business of some companies, according to the classification of key Zhejiang pharmaceutical companies, the Pharmaceutical Commerce (+ 6.7%) and medical services (+ 6.5%) were the sectors with the highest growth rate, and traditional Chinese medicine (+ 2.5%) and biopharmaceutical (+ 1.9%) sectors also improved; characteristic API enterprises (- 3.0%) were the sectors with the largest decline. From the performance of individual stocks, traditional Chinese medicine stores in the pharmaceutical business sector generally performed better, Yixintang Pharmaceutical Group Co.Ltd(002727) , Yifeng Pharmacy Chain Co.Ltd(603939) , Dashenlin Pharmaceutical Group Co.Ltd(603233) increased by 17.9%, 14.4% and 12.6% respectively. In the medical service sector, Autek China Inc(300595) , Topchoice Medical Co.Inc(600763) , Eyebright Medical Technology(Beijing) Co.Ltd(688050) They rose 12.6%, 10.6% and 10.5% respectively, leading the growth of the sector. The Zhejiang Ausun Pharmaceutical Co.Ltd(603229) (- 9.5%) of characteristic APIs and Beijing Strong Biotechnologies Inc(300406) (- 11.0%) of medical devices decreased significantly.
Optimistic about the continuous embodiment of “China’s advantages” behind the high prosperity track
We believe that in the long run, the policy’s encouragement of innovative products and the suppression of homogeneous products are bound to lead to differentiation due to the differences in the competitiveness of their own products. The enterprise value that can provide economic, high-quality and efficient products will be more prominent. It is suggested to make a positive layout under the callback. We adhere to the three stock selection ideas of “innovation and empowerment, manufacturing upgrading, cost reduction and efficiency enhancement”, and are optimistic that China’s high-end pharmaceutical manufacturing industry will stand out in the new round of global competition. Specifically, it is recommended to focus on:
1) Innovation empowerment: grasp the essence of product competitiveness under import substitution, and move from Chinese innovation to global innovation. Innovative equipment enterprises that have a forward-looking layout, adhere to R & D innovation and continuously improve the global competitiveness of products; Innovative drug enterprises that grasp the Chinese market and have a global vision and layout under the background of price reduction negotiation; It is a leading R & D outsourcing enterprise under the improvement of innovation quality and service empowerment.
2) Manufacturing Upgrading: give full play to China’s advantages and deeply participate in the global industrial division of labor. Characteristic API enterprises that break the “consensus” of industrial transfer by accelerating the expansion of new production capacity and new business; Production outsourcing enterprises with accelerated orders and continuously strengthened advantages under the background of industry prosperity; The opportunity of epidemic situation and centralized mining force the export equipment enterprises that accelerate the embodiment of China’s manufacturing advantages and accelerate the process of internationalization.
3) Cost reduction and efficiency increase: chain hospitals, ICLs and pharmacies with the ability to continuously expand scale and improve efficiency. In combination with the company’s texture and valuation, we recommend: Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Pharmaron Beijing Co.Ltd(300759) , Porton Pharma Solutions Ltd(300363) , Pharmablock Sciences (Nanjing) Inc(300725) , Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Joinn Laboratories (China) Co.Ltd(603127) , Hangzhou Tigermed Consulting Co.Ltd(300347) , Apeloa Pharmaceutical Co.Ltd(000739) , Nanjing King-Friend Biochemical Pharmaceutical Co.Ltd(603707) , Zhejiang Xianju Pharmaceutical Co.Ltd(002332) , Hainan Poly Pharm.Co.Ltd(300630) , Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) , Guangzhou Wondfo Biotech Co.Ltd(300482) , Guangdong Hybribio Biotech Co.Ltd(300639) , Sansure Biotech Inc(688289) , Shanghai Runda Medical Technology Co.Ltd(603108) , viatas, Shanghai Aladdin Biochemical Technology Co.Ltd(688179) , Shanghai Titan Scientific Co.Ltd(688133) , etc.
Risk statement
Changes in industrial policies; The price of core products exceeded expectations; R & D progress is less than expected.
