In 2021, the epidemic did not stop completely due to the improvement of vaccine coverage, but the prosperity of the pharmaceutical industry in 2020 is difficult to continue.
In the third year of volume procurement, the scope of centralized procurement varieties has been expanded and the pace has been accelerated. The impact of this heavy policy on medical enterprises has erupted in an all-round way. The market sentiment brought by the epidemic gradually returned to calm, and investors suddenly found that the industry had come to the storm center of centralized mining.
According to wind data, in 2020, the average annual increase in the share price of listed medical enterprises reached 36.96%, but in 2021, nearly half of the shares of listed medical enterprises fell, with an average increase of 14.81%. Popular epidemic concept stocks such as Chongqing Zhengchuan Pharmaceutical Packaging Co.Ltd(603976) , Intco Medical Technology Co.Ltd(300677) , Sansure Biotech Inc(688289) are no longer popular, and the share price is almost halved.
In the past year, the National Medical Insurance Bureau organized the 4th-6th batch of centralized drug procurement and the 2nd batch of medical consumables procurement.
The fourth and fifth batches of drugs involved 45 and 61 varieties respectively, and the purchase amount reached 25 billion yuan and 55 billion yuan respectively. The average decline of the selected products reached 52% and 56%. The Sixth Batch of drugs were purchased for insulin, and the average decline of the selected products was 48.75%. The centralized purchase of biological products has taken a historic step. The average decline of selected products in the procurement of artificial joint belt announced in September reached more than 80%.
In addition to the national centralized procurement, the centralized procurement of testing reagents, which opened in Anhui in August, broke the illusion of “centralized procurement safety zone”. The “centralized procurement of all things” is no longer a joke, but a reality in the near future.
Centralized procurement has brought about the most drastic changes in the pattern of the medical industry in recent years. The results of a paper centralized purchase can make the fledgling “barefoot enterprise” a new favorite of the market, or pull down the industry leader. Structural adjustment, team abolition, business divestiture… Under the pressure of centralized procurement step by step, enterprises are forced to “save themselves” in 2021.
Downsizing and layoffs of multinational pharmaceutical enterprises
On December 31, Yin min, general manager of AstraZeneca’s China Cancer division, and Wang Dong, head of AstraZeneca’s retail division, ended their term of office in AstraZeneca, which is the sixth and seventh senior executives of AstraZeneca to leave in the past six months. On the first day of the new year, AstraZeneca China Omni channel business department will officially appear. This department will be responsible for AstraZeneca China and county chronic disease business department, retail business department, community business department, flying eagle business department and East five county markets.
AstraZeneca’s drastic personnel changes are only a microcosm of the current situation of multinational pharmaceutical enterprises. After more than 30 years of smooth development, multinational pharmaceutical enterprises have encountered an unprecedented survival crisis in the Chinese market.
In the pharmaceutical industry, the patent protection period of an innovative original drug is generally 20 years. After the protection period, due to the competition of generic drugs, the profit margin of the original drug enterprises may plummet, which is the so-called “patent cliff”.
Before the centralized purchase, the “patent cliff” almost never appeared in the Chinese market, but the centralized purchase has completely changed the rules of the game in the China Meheco Group Co.Ltd(600056) market. According to the data of China Medical Insurance Research Association, after one year of centralized procurement, the annual procurement of unselected original drugs decreased by 46.03%, and the annual procurement of selected drugs increased by 265.19%, which means that the substitution effect of selected drugs on original drugs is very obvious.
Multinational pharmaceutical companies that were not interested in centralized procurement had to change their attitude and actively embrace centralized procurement. In the fifth batch of centralized purchase of drugs opened in June this year, 11 products of 10 foreign-funded enterprises were selected, while in the third batch of centralized purchase in August last year, only 3 original varieties were selected.
Even the original drug that failed to win the election had to lower its price in order to survive in the Chinese market. Taking atorvastatin and rosuvastatin as examples, after centralized collection, the prices of the original drugs Lipitor and Keding decreased by 20.65% and 19.03% respectively.
However, in the face of cruel centralized procurement results, multinational pharmaceutical enterprises inevitably ushered in a “wave of layoffs”.
Japanese Pharmaceutical Company No. 1 Sankyo plans to merge cardiovascular, anti infection and respiratory analgesia lines and lay off relevant teams. Lesong tablets (loxoprofen sodium) of its respiratory analgesia line and cola bituo (levofloxacin) of its anti infection line were included in the fourth batch of centralized purchase, but No. 1 Sankyo was selected as the original manufacturer; Lilly announced the adjustment of the sales and regional marketing team of outangjing (engeliejing), and abolished the sales teams of several products such as xinbaida (duloxetine hydrochloride) and xiaili (tadalafil). The above three Lilly products were not selected; In July this year, AstraZeneca merged the digestion and respiratory atomization properties. It is speculated that the reason behind the adjustment is still centralized procurement; After the intensive purchase of insulin, Novo Nordisk, which participated in the selection of all products, announced that it would lay off 15% – 20% of its employees nationwide
Low price winning is far from the final victory of centralized mining
Multinational pharmaceutical companies are having a hard time. Chinese pharmaceutical companies that actively reduce prices and “roll life and roll death” are also facing many problems.
On August 20, the state organized joint drug procurement office (joint procurement) announced that the third batch of selected enterprises North China Pharmaceutical Company.Ltd(600812) of ibuprofen sustained-release capsules, which were centrally purchased by the state, failed to supply the agreed procurement volume in Shandong Province, and the supply situation had not been improved after repeated interviews and consultations with relevant departments, so it decided to include North China Pharmaceutical Company.Ltd(600812) in the “list of violations”, Cancel North China Pharmaceutical Company.Ltd(600812) from August 11, 2021 to May 10, 2022.
North China Pharmaceutical Company.Ltd(600812) is not the first enterprise to cut off supply, but it is the first enterprise to be punished. According to incomplete statistics, before North China Pharmaceutical Company.Ltd(600812) , about 20 enterprises had cut off supply for various reasons after centralized mining and selection, but they were not punished. North China Pharmaceutical Company.Ltd(600812) explained that the supply interruption was due to the lack of existing production capacity and the superposition of the impact of the epidemic, so the company could not guarantee the normal supply.
North China Pharmaceutical Company.Ltd(600812) being punished fully shows that winning at a low price is far from the final victory of the centralized purchase game. The real challenge is the capacity supply, the adjustment of the sales team and the performance pressure after winning the election.
Zhang Yunhe, a middle-level manager of a large pharmaceutical company in China, disclosed to times finance that his company has made three rounds of layoffs this year. Layoffs begin with business personnel and some functional departments, and then to grass-roots managers. The third round of layoffs has involved some middle-level cadres. After three rounds of layoffs, the number of the company’s sales team may be halved.
It is understood that Zhang Yunhe’s company has won the qualification of centralized purchase, but the price reduction of centralized purchase has put great pressure on the company’s performance. Although he is not worried about being laid off at present, when receiving the invitation of headhunters, Zhang Yunhe seriously considered whether he should try to change jobs to innovative pharmaceutical enterprises.
Unlike large generic pharmaceutical manufacturers that have to abolish their sales teams due to centralized purchase, innovative pharmaceutical enterprises that hold innovative products but have not established a mature marketing team are a good place for many managers to give priority. Yin min, the outgoing AstraZeneca executive, has confirmed that he will join Baiji in January next year as the chief business officer of Greater China. Previously, Du HaoChen, another senior executive of AstraZeneca, former vice president and head of county business department, is serving as the broad market head of Baiji Shenzhou.
However, Zhang Yunhe believes that the anti risk ability of innovative pharmaceutical enterprises is relatively weak. From the perspective of professional managers, the risk return of innovative pharmaceutical enterprises is relatively general, “it’s better to go out and do some small business.”
The more important reason Zhang Yunhe left behind is that in his opinion, centralized mining is not a dead end. As long as we change our thinking, we can still offset the impact of centralized mining. “There are many products whose profit margin is much higher than that of other industrial products after centralized purchase. Enterprises should actively embrace centralized purchase and take this transformation, which is the direction encouraged by the state. The era of high gross profit in the pharmaceutical industry has passed. If enterprises continue to indulge in the past, they will naturally fall into a passive situation.”
In fact, there are not a few pharmaceutical enterprises that enjoy the dividend of centralized purchase. On October 26, Sichuan Sichuan Huiyu Pharmaceutical Co.Ltd(688553) successfully went public. In the words of chairman Ding Zhao, this is a company that “participated in the purchase with quantity from the first bottle of medicine”. On the day of “4 + 7” quotation in 2018, Sichuan Huiyu Pharmaceutical Co.Ltd(688553) pemetrexed disodium won the exclusive bid, which squeezed out large Chinese and foreign enterprises such as hausen, Qilu and Lilly from this market. The considerable profits brought by centralized procurement also sent Sichuan Huiyu Pharmaceutical Co.Ltd(688553) to the door of Shanghai Stock Exchange.
Temporary “safe haven” under centralized mining storm
When drugs and medical consumables were turned upside down by centralized procurement, Zhao Yuan was a little glad that his original employment choice allowed him to temporarily avoid the impact of the centralized procurement storm.
Zhao Yuan is an agent of imported brand endoscope. Endoscope is a complex testing instrument integrating traditional optics, ergonomics, precision machinery, modern electronics, mathematics and software. So far, endoscope has not been included in the scope of centralized purchase.
Generally speaking, centralized purchase products have many common characteristics, such as high capital occupied by medical insurance, high terminal price, large number of competitive manufacturers and high import substitution rate, but the market share of domestic endoscopes is still very low. Frost Sullivan’s analysis report shows that in 2020, China’s endoscope sales will reach 25.4 billion yuan, and by 2024, China’s endoscope market will reach 42.3 billion yuan. However, due to the late start, the market share of domestic products is very low. Imported brands such as Olympus occupy most of the Chinese endoscope market, and the share of domestic brands is only about 5%.
Zhao Yuan told times finance that at present, his work pressure is mainly affected by the epidemic. After the epidemic, the use of hospital endoscopes has decreased. As for the competition of domestic brands, he has not caused much trouble, because there is a large gap between imported brands and domestic brands in terms of price and product effect. “The price difference between imported brands and domestic brands may more than double. Some core components of the endoscope have not been localized and rely on external purchase.”
However, Zhao Yuan also understands that large medical equipment will not be a “safe zone” forever.
On March 2, Guangdong Provincial Health Commission issued the publicity on the list of imported products of provincial health institutions in 2021. In addition to the 46 kinds of medical equipment on the list, provincial public hospitals need to give priority to purchasing domestic equipment in government procurement. Although the endoscopic surgical instrument control system is still on the product list, compared with the list of imported products in 2019, the number of products has dropped sharply from 132 to 46, which means that the import substitution of domestic equipment is accelerating.
Zhao Yuan admitted that the market share of domestic brands is indeed growing slowly. “In fact, we believe that the policy of giving priority to localization of large equipment will appear sooner or later, because for the country, the road of localization must go on all the time, just a matter of time.”
Is there an end to “soul bargaining”? Where will centralized purchase eventually push the industry? No one knows the answer.
However, Zhang Yunhe believes that the prospect of centralized mining is not as pessimistic as many people think. “In fact, the market space of many centralized purchase products has not been fully excavated. As long as enterprises continue to cultivate the market, the positioning of products will be more accurate and large-scale can be realized.”
(times Finance)
