It rose continuously at the end of 2021 and hit a three-and-a-half-year high on the first day of 2022. The market of traditional Chinese medicine is on the stage.
On January 4, 2022, after a cumulative rise of more than 20% in recent two months, the index of traditional Chinese medicine sector rushed to 11849.75 on the first trading day of the new year, just one step away from the high before 12077.12 in mid-2018.
At present, with the gradual adjustment of the industry’s depth adjustment in the past three years, the aging population, chronic diseases, the incidence rate of cancer, the changes of disease spectrum, and the demand side factors that are brought about by the improvement of residents’ income level and the upgrading of their health have all been supporting the market of Chinese medicine.
In recent years, the continuous policies under the guidelines of traditional Chinese Medicine Inheritance and innovation have pushed the heat of the traditional Chinese medicine sector to a high point. It seems that the traditional Chinese medicine industry in 2022 is ushering in a new market.
01. Disorderly development of traditional Chinese medicine industry
once fell into growth stagnation
The traditional Chinese medicine industry chain includes five links: medicinal material planting, medicinal material circulation, traditional Chinese medicine industry, drug circulation and terminal consumption.
The traditional Chinese medicine industry includes two important components: Chinese patent medicine and traditional Chinese medicine decoction pieces. According to the data, from 2011 to 2016, the product sales revenue of Chinese patent medicine manufacturers increased from 318.6 billion yuan to 669.7 billion yuan, with an average annual compound growth rate of 16.02%.
However, its own chaotic development has led to the growth stagnation of the traditional Chinese medicine industry.
Whether it is Chinese patent medicine or traditional Chinese medicine, it takes traditional Chinese medicine as raw material, and the efficacy is greatly affected by the quality of traditional Chinese medicine. The quality of traditional Chinese medicine is restricted by many links, such as cultivation technology, ecological environment control, processing, storage and so on.
Previously, it was revealed that some enterprises used expired medicinal materials, fumigated with sulfur, shoddy and other chaos, resulting in uneven product quality. In addition, the composition of traditional Chinese medicine is complex, and the research on pharmacology, toxicology and drug interaction is not thorough. Some doctors do not master pharmacology and medical knowledge, misuse drugs, or patients abuse drugs themselves, resulting in adverse drug reaction events, which reduce the patients’ trust in traditional Chinese medicine and restrict the development of traditional Chinese medicine industry.
Since 2014, the institutional position in the traditional Chinese medicine sector has been significantly reduced. From 2017 to 2018, the total revenue of the industry shrank because some non-conforming enterprises were banned according to law and superimposed injections to control medical insurance fees. In addition, due to the long time of clinical trials of Chinese patent medicines and doubts about their efficacy, the speed of listing of new traditional Chinese medicine has also begun to decline since 2016.
However, with the consolidation of the industry and the support of favorable policies in recent years, the industry has slowly returned to the right track.
02. Implementation of favorable policies
industry development is improving again
After 2019, especially since the covid-19 epidemic, favorable policies related to traditional Chinese medicine have been introduced one after another, and the traditional Chinese medicine industry has ushered in a policy dividend period.
From the existing policies of the pharmaceutical industry, under the medical reform, the industry as a whole is under pressure, and the impact of each sub industry is different. The policies of medical insurance fee control, two ticket system, cancellation of supporting medicine with medicine, control of drug proportion, key monitoring of auxiliary drugs and restriction on the use of traditional Chinese medicine injections have a certain negative impact on the traditional Chinese medicine industry in the short term, but the short-term negative impact has been fully digested.
Among the existing policies, the continuous expansion of Chinese patent medicines in the basic medicine catalogue and medical insurance catalogue, the continuous promotion of graded diagnosis and treatment, the implementation of the filing system of traditional Chinese medicine clinics, the exemption of classic famous prescriptions from clinical practice and the development of traditional Chinese medicine formula granules have all formed favorable support for the traditional Chinese medicine industry.
In 2020, the number of clinical trials of new traditional Chinese medicine ind will reach 37 and the number of new traditional Chinese medicine NDA will reach 8, which is significantly increased compared with 17 clinical trials of new traditional Chinese medicine ind and 3 new traditional Chinese medicine NDA in 2019. Among the number of Chinese patent medicines in China’s medical insurance catalogue, there were 246 class a Chinese patent medicines in 2021, an increase of 54 (an increase of 28.13%) compared with 2017
data source: State Council and food and Drug Administration
At the end of 2021, the heavy policy was implemented again, and the cornerstone of industry development was further consolidated.
On December 30, 2021, the State Medical Insurance Bureau and the State Administration of traditional Chinese Medicine issued the guiding opinions on medical insurance supporting the inheritance, innovation and development of traditional Chinese medicine, which stipulated the scope, price and payment method of medical insurance reimbursement of traditional Chinese medicine.
Among them, basically all institutions that meet the requirements and provide traditional Chinese medicine services are included in the fixed-point management of medical insurance; The Internet plus Chinese medicine service has been included in the scope of medical insurance payment after the signing of the supplementary agreement with the medical insurance agency of the whole area. General TCM medical service items can continue to be paid by item; Traditional Chinese medicine institutions may not implement DRG payment temporarily; Decoction pieces of traditional Chinese medicine can continue to add no more than 25%.
At present, it seems that some pieces of traditional Chinese medicine, Chinese patent medicine and traditional Chinese medicine preparations of medical institutions are included in the medical insurance catalogue, the pricing mechanism is clarified, and the fixed-point scope of medical insurance for traditional Chinese medicine is further defined, which is expected to significantly expand the dosage of traditional Chinese medicine from the clinical and demand side.
At the same time, it is clearly stipulated that public medical institutions purchase Chinese herbal pieces from formal channels and sell them in strict accordance with the actual purchase price plus no more than 25%. Non decoction pieces of traditional Chinese medicine are sold in strict accordance with the “zero difference” of the actual purchase price. The Chinese herbal pieces and preparations prepared by medical institutions are priced independently, which is conducive to the healthy development of the market.
In addition, timely bring the qualified TCM medical institutions and TCM retail pharmacies into the fixed-point agreement management of medical insurance, and timely bring the qualified fixed-point TCM medical institutions into the fixed-point scope of remote medical treatment and direct settlement, which also facilitates the TCM medication of patients and is conducive to the further expansion of the market.
The guidance is favorable to the traditional Chinese medicine industry in many aspects, such as the inclusion of designated medical insurance into the scope of medical insurance payment, medical insurance payment policy and service price.
At the same time of policy support, short-term opportunities are also pushing up the heat of the industry.
03. Three short-term catalysts
plate heat increased significantly
Short term catalysis followed, and the development of traditional Chinese medicine consumer goods ushered in an increase in popularity.
The first is the price increase of upstream Chinese herbal medicines, which brings certain expectations to the price increase of downstream products. Since 2021, on the one hand, the epidemic has led to an increase in the demand for Chinese herbal medicines and a relatively limited growth in the supply of animal derived herbal medicines. On the other hand, the increase of abnormal weather has a great impact on Chinese herbal medicine products, resulting in an imbalance between the supply and demand of Chinese herbal medicines. The prices of precious Chinese herbal medicines natural bezoar, natural musk and Panax notoginseng have been raised to varying degrees.
According to the website of Kangmei traditional Chinese medicine, the market price of natural bezoar, a valuable traditional Chinese medicine, reached 480 yuan / g in April 2021, with a year-on-year increase of 20%. Downstream products, such as Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , Beijing Tongrentang Co.Ltd(600085) , Chongqing Taiji Industry (Group) Co.Ltd(600129) , Jianmin Pharmaceutical Group Co.Ltd(600976) , Inner Mongolia Furui Medical Science Co.Ltd(300049) and other core varieties of the company, are driven by cost side pressure and begin to increase prices to varying degrees
price index chart of various medicinal materials / Ministry of Commerce
Secondly, the current channel inventory clearing has also come to an end.
According to wind data, the proportion of inventories of Listed Companies in total assets has increased from 2010 to a peak of 20% in 2018-2019, and then the traditional Chinese medicine industry began the cycle of clearing inventories again. In the first half of 2021, the proportion of inventory in total assets decreased significantly. The proportion of inventory in total assets was 14.8%, and the inventory was cleared to the level of 2010.
Among them, Dong-E-E-Jiao Co.Ltd(000423) channel inventory clearance has led to a significant decline in inventory and accounts receivable, and Chongqing Taiji Industry (Group) Co.Ltd(600129) Huoxiang Zhengqi oral liquid is also at the lowest level in inventory history.
In addition, the mixed reform of state-owned enterprises and changes at the shareholder level in the traditional Chinese medicine industry have accelerated in the past year. Companies such as Yunnan Baiyao Group Co.Ltd(000538) , Chongqing Taiji Industry (Group) Co.Ltd(600129) , Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) , Tianjin Zhongxin Pharmaceutical Group Corporation Limited(600329) will release employees’ enthusiasm to a large extent after the mixed reform of state-owned enterprises. In the first half of 2021, Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) , Chongqing Taiji Industry (Group) Co.Ltd(600129) , Tianjin Zhongxin Pharmaceutical Group Corporation Limited(600329) realized the change of actual controller. Some traditional Chinese medicine enterprises completed the general election of directors, supervisors and senior managers, and implemented the equity incentive plan. The equity incentive target of Yunnan Baiyao Group Co.Ltd(000538) mixed reform will improve the enthusiasm of employees, and Beijing Tongrentang Co.Ltd(600085) mixed reform is also gradually promoted.
In addition to short-term catalysis, from a long-term perspective, the demand fundamentals of the traditional Chinese medicine industry are also improving.
04. Great health extension attribute
driving the upward demand for traditional Chinese medicine
The first is the trend of population aging, which drives the increase of market demand for traditional Chinese medicine.
According to the statistics of the National Bureau of statistics, from 2010 to 2020, the proportion of young and middle-aged people in China decreased from 70.14% to 63.35%, and the proportion of people over 60 increased from 13.26% to 18.70%. The problem of population aging in China is becoming more and more serious. Meanwhile, from 2014 to 2020, the per capita disposable income and per capita consumption expenditure of Chinese residents increased rapidly. The proportion of per capita medical consumption expenditure in total consumption expenditure increased from 7.20% to 8.69%. Residents’ health care awareness and willingness to pay improved.
At the same time, the traditional Chinese medicine industry also has the foundation for a healthy extension.
Big health industry refers to a series of industries related to maintaining health, repairing health and promoting health, such as health production and operation, service provision and information dissemination. In terms of prevention, health care and health preservation, traditional Chinese medicine has significant advantages in the treatment of chronic complex multifactorial diseases. With this feature, the demand for traditional Chinese medicine has been expanding from “treatment” to “prevention and health care”. Different from the “passive treatment” of Western medicine, traditional Chinese medicine can cover “passive treatment + active health management”, which also means that the industrial chain of traditional Chinese medicine can be extended to great health and traditional Chinese medicine consumer goods, and the consumption attribute of traditional Chinese medicine is becoming more and more obvious.
Scale and growth chart of China’s traditional Chinese medicine health market / China Information Network
Data show that from 2014 to 2020, the scale of China’s big health market increased year by year, from 2.5 trillion yuan to 7.4 trillion yuan, with an annual compound growth rate of about 19.8%. It is expected to exceed 8 trillion yuan in 2021.
Among them, the great health market of traditional Chinese medicine has increased from 1029 billion yuan in 2014 to 3024 billion yuan in 2020, with a compound annual growth rate of 19.7%. It is expected to be 3.8 trillion yuan in 2021. According to the average annual growth rate of 15% – 20%, the scale of the great health market of traditional Chinese medicine is expected to exceed 7.5 trillion yuan by 2025.
In this context, short-term opportunity catalysis and long-term demand growth combined with favorable policies may really usher in a different year for the traditional Chinese medicine industry in 2022.
