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On December 30, 2021, the State Medical Security Bureau issued the guidance of the State Medical Security Bureau and the State Administration of traditional Chinese medicine on medical insurance supporting the inheritance, innovation and development of traditional Chinese medicine (hereinafter referred to as the guidance), which clearly listed the support measures of the medical insurance payment end for traditional Chinese medicine. Benefiting from the implementation of the policy, the overall valuation of the traditional Chinese medicine sector rose.
Key investment points
All the contents of the guidance point to the need for medical insurance to expand the payment coverage of TCM diagnosis and treatment. The main contents are as follows: 1. Increase the designated medical insurance in Chinese medicine hospitals, actively include TCM and other medical insurance, and increase the hospitals of traditional Chinese medicine in the hospitals directly settled in different places, and include the Internet plus Chinese medicine service in the designated Chinese medicine and medical institutions in the scope of medical insurance payment. ② Tilt the price of traditional Chinese medicine services. For the accelerated approval of traditional and new technologies of traditional Chinese medicine, the price adjustment of medical services gives priority to traditional Chinese medicine. The hospital does not provide bills for the purchase of decoction pieces, but can still increase the price by 25%. ③ Appropriate traditional Chinese medicine and traditional Chinese medicine treatment service items will be included in the medical insurance payment. All localities are encouraged to include appropriate technologies of traditional Chinese medicine with accurate curative effect and reflecting the characteristics and advantages of traditional Chinese medicine into the scope of medical insurance payment, and unreasonable restrictions shall not be set on medical insurance payment. ④ The total budget is inclined to traditional Chinese medicine, reasonably determine the total medical insurance index of traditional Chinese medicine hospitals, and increase the support for grass-roots hospitals to carry out traditional Chinese medicine services. ⑤ General TCM medical service items can continue to be paid by item. Traditional Chinese medicine medical institutions may not implement DRG payment for the time being. For areas where DRG and payment by disease score have been implemented, the coefficient and score of traditional Chinese medicine medical institutions and traditional Chinese medicine diseases shall be appropriately increased. ⑥ It is clearly encouraged to include the traditional Chinese medicine formula particles purchased by public medical institutions into the online transaction of the provincial centralized pharmaceutical procurement platform, so as to promote the openness and transparency of the transaction.
The introduction of the policy is gradually changing the market’s logical cognition of traditional Chinese medicine. In the past two years, the development of traditional Chinese medicine has become a national strategy, and heavy policies have been issued repeatedly. This document once again clearly points out the great significance of the development of traditional Chinese medicine. The document requires that medical insurance departments at all levels and competent departments of traditional Chinese medicine should effectively improve their political position, unify their thoughts and actions into the decision-making and deployment of the Party Central Committee and the State Council, and support and promote the inheritance, innovation and development of traditional Chinese medicine with greater strength and determination. It can be seen from the wording of the document that the state has placed the development of traditional Chinese medicine in a high strategic position.
In the future, the traditional Chinese medicine industry should focus on the following three main lines: first, the new market, that is, the direction of traditional Chinese medicine formula particles. At present, the market scale of traditional Chinese medicine formula granules in China is about 26 billion, with a compound growth rate of more than 20% in recent four years, while the market scale of traditional Chinese medicine decoction pieces is about 200 billion, and the market scale of Chinese patent medicine is about 700 billion. With the completion of the pilot work of traditional Chinese medicine formula particles, it means that the first is that the sales channels will be greatly increased, and the formula particles can be expanded to medical institutions below level II. Secondly, more traditional Chinese medicine enterprises will launch granular products in line with national standards in the future. As a modern traditional Chinese medicine, traditional Chinese medicine formula particles are expected to gradually replace the market share of traditional Chinese medicine and traditional Chinese patent medicine in medical institutions because of their convenience advantages compared with decoction pieces and more friendly policies compared with traditional Chinese patent medicine (traditional Chinese patent medicine has reduced prices due to centralized procurement, and traditional Chinese medicine formula particles and decoction pieces still have drug addition in medical institutions). The substitution rate of traditional Chinese medicine formula particles in Japan and South Korea for decoction pieces is about 60%. It is conservatively expected that the substitution rate of formula particles in China will be about 50% in the future, and the corresponding market scale is expected to exceed 150 billion. Core enterprises include: Chinese traditional medicine, Tianjin Chase Sun Pharmaceutical Co.Ltd(300026) , China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) , Tasly Pharmaceutical Group Co.Ltd(600535) . Second, the traditional brand of time-honored traditional Chinese medicine, with the help of time-honored traditional Chinese medicine, has the highest public awareness, and there are many expectations such as extending product categories and price increases. Such as: Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , Beijing Tongrentang Co.Ltd(600085) , Yunnan Baiyao Group Co.Ltd(000538) , Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) , Dong-E-E-Jiao Co.Ltd(000423) , etc. Third, enterprises with high equity incentive performance guidance. In 2021, 15 listed companies of traditional Chinese medicine implemented or announced equity incentive schemes. In terms of unlocking conditions, the compound growth rate of profit end or income end in the next three years will basically fall between 10-30%. Referring to the past growth rate, the growth rate will basically increase. This also includes state-owned enterprises whose incentive schemes are difficult to implement, such as: China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) , Jiangzhong Pharmaceutical Co.Ltd(600750) , Zhuzhou Qianjin Pharmaceutical Co.Ltd(600479) , Jinling Pharmaceutical Company Limited(000919) .
Investment suggestion: on the whole, we believe that the traditional Chinese medicine industry has the trend of policy encouragement, good performance and upward prosperity, which may become a good plate for the scarcity of pharmaceutical products in 2022. In the medium and long term, we are optimistic about traditional Chinese medicine enterprises with consumption attributes, pricing power and formula particle integration.
Risk factors: the policy of centralized purchase of traditional Chinese medicine pieces was accelerated, and the performance growth rate was lower than expected
