The national procurement of orthopaedic spine consumables is advancing in an orderly manner.
Recently, a notice on filling in the historical procurement data of orthopedic spine medical consumables (hereinafter referred to as the notice) issued by the joint procurement office of high-value medical consumables organized by the state has been circulated in the industry.
According to the notice, the purpose of this data filling is to do a good job in the centralized procurement of orthopedic spine medical consumables and find out the actual use. Medical institutions (including military medical institutions) that use orthopedic spine medical consumables nationwide need to participate and fill in the use of their own units in 2020 and 2021. The data reporting system will be open from April 22 to May 10.
Up to now, the national organization for centralized belt procurement of high-value medical consumables (also known as “national belt procurement of high-value consumables”) has completed belt procurement of two varieties, namely coronary stents and orthopaedic artificial joint products.
From the previous experience, before the official launch of “national mining” (usually marked by the official release of official documents), the use of medical institutions will be investigated first, which also provides a certain basis and reference for the later procurement demand.
Taking artificial joints as an example, on March 11, 2021, the national medical insurance administration first issued a notice to local medical insurance bureaus and centralized procurement institutions of drugs and medical consumables, requiring all localities to start the reporting of hospital procurement data of orthopaedic consumables (including artificial joints, spine and trauma). Then, after a series of research and other preparatory work, the official national procurement document of joint products was released on June 21 of that year.
National centralized procurement process of coronary stents:
In July 2020, the price collection center of the National Medical Security Bureau issued a document to entrust three associations to solicit opinions from enterprises on the centralized belt procurement scheme of coronary stents (Draft for comments);
On October 16, 2020, the joint procurement office of high-value medical consumables organized by the state officially issued the procurement document of centralized belt volume of coronary stents organized by the state;
On November 5, 2020, the national centralized procurement of coronary stents completed the bidding in Tianjin.
In fact, the national medical insurance department has long been brewing the national centralized purchase of orthopedic spine consumables. In February this year, Chen Jinfu, deputy director of the National Medical Insurance Bureau, once introduced at the regular policy briefing of the State Council that this year’s national procurement plan for high-value medical consumables will be further extended to spinal consumables, and strive to have a preliminary plan in the first half of the year. When the conditions are ripe, the bid opening can be carried out smoothly this year.
Market: there is still room for domestic substitution
Public information shows that orthopedic implant consumables mainly include spine, trauma and joints. In 2018, joint products accounted for 37% of the main market share of orthopedics in all segments of global orthopedic medical devices; Spine accounted for 18%, trauma accounted for 14%; Sports medicine accounted for 11%.
Unlike joint products, which account for the largest market share of the global orthopaedic implant device market, in recent years, the largest category of China’s orthopaedic implant medical device segment is trauma, which is mainly because China’s orthopaedic implant medical device market started late and has not been developed as a whole. However, with the improvement of Chinese residents’ willingness to pay for medical treatment, consumption ability and acceptance of high-end orthopedic implant products, spine and joint products are also gradually narrowing the market share gap with trauma products.
By 2019, the market share of orthopaedic implant medical devices in trauma, spine and joint in China was 29.80%, 28.23% and 27.77% respectively. The market share of each segment was relatively close, and the total market share accounted for more than 85%.
Spinal implant medical devices are mainly the internal fixation system of cervical spine, thoracolumbar spine (mainly in the form of nail rod or nail sector) and interbody fusion cage, which are used for the treatment of spinal degenerative diseases, spinal fractures, spinal deformities, tumors, infections and other spinal diseases. Among them, the posterior spinal internal fixation system using pedicle screws and rods is the most used internal fixation system in spinal surgery, accounting for about 70% of spinal surgery in China.
At present, the overall market of orthopaedic implant medical devices in China is mainly dominated by foreign giants. Johnson & Johnson and Medtronic together account for more than 50% of the market share of China’s spine products market, and together with Stryker, the total share is close to 60%. Among the top five local enterprises, the market shares of Shandong Weigao Orthopaedic Device Co.Ltd(688161) ( Shandong Weigao Orthopaedic Device Co.Ltd(688161) . SH) and Shanghai Sanyou Medical Co.Ltd(688085) ( Shanghai Sanyou Medical Co.Ltd(688085) . SH) are about 8% and 4% respectively.
Specific to individual enterprises, according to the annual report of Shandong Weigao Orthopaedic Device Co.Ltd(688161) 2021, the proportion of spine, trauma and joint of the company’s main products in the main business income during the reporting period was 47.41%, 28.30% and 21.78% respectively.
Over the same period, Shanghai Sanyou Medical Co.Ltd(688085) main product spinal implant consumables achieved an operating revenue of 516 million yuan, accounting for 87% of the total operating revenue Double Medical Technology Inc(002901) trauma products and spine products accounted for 56.54% and 28.35% of operating revenue respectively.
winner, where are the flowers
As soon as the starting gun of centralized procurement rings, no matter in the market or the industry, what is the most concerned about is the impact of centralized procurement on the whole industry and related enterprises? After the centralized purchase of spinal consumables, what kind of enterprise can be invincible?
In this regard, some analysts believe that, combined with the overall mild trend of the current centralized procurement policy and the low degree of localization of the orthopedic spine market, it is expected that spine consumables enterprises will face relatively small pressure on centralized procurement and price reduction.
Taking the bid winning results of artificial joint centralized procurement completed last year as an example, among the 48 Enterprises Participating in centralized procurement, 44 were finally selected, with a success rate of 92%. Although the price has decreased, it is mostly within the affordable range, and the price reduction is “moderate” as a whole. Among them, the average price of the selected hip joint decreased from 35000 yuan to about 7000 yuan, and the average price of the knee joint decreased from 32000 yuan to about 5000 yuan, with an average price reduction of 82%.
At the same time, according to the previous experience of centralized purchase of chemical generic drugs and local or alliance centralized purchase of some high-value consumables, two types of enterprises are most likely to benefit from centralized purchase. One is “barefoot”, that is, enterprises with low market share before, but centralized purchase can help the company quickly improve sales and expand market share.
Some profit-making enterprises mainly focus on the varieties with low degree of localization. For example, the intraocular lens enterprise Eyebright Medical Technology(Beijing) Co.Ltd(688050) ( Eyebright Medical Technology(Beijing) Co.Ltd(688050) . SH) has promoted the continuous increase in the number of end customers and sales through centralized purchase. In terms of performance, in 2021, the company’s revenue of “pronomin” and other series of intraocular lenses increased by 36.37% year-on-year to 305 million yuan, accounting for 70.32% of the annual revenue.
After centralized purchase, for the purpose of cost control, leading enterprises with diversified product lines are also considered to have more competitive advantages. They can not only improve the market share through centralized purchase, but also bring the company stronger ability to resist risks.
Taking Shandong Weigao Orthopaedic Device Co.Ltd(688161) as an example, the company has been implementing multi brand strategy for many years Shandong Weigao Orthopaedic Device Co.Ltd(688161) spine ( Shandong Weigao Orthopaedic Device Co.Ltd(688161) , Viagra Yahua, Viagra starfish), trauma ( Shandong Weigao Orthopaedic Device Co.Ltd(688161) , Jianli bond, Viagra starfish) and joints (Viagra starfish, Viagra Yahua) have many brands. Therefore, the company adopts multi brand bidding strategy in bidding strategy to maintain high bid winning rate and price.
Previously, in the procurement of trauma alliance composed of 12 provinces (cities and districts) including Henan, Shanxi, Jiangxi and Hubei, Shandong Weigao Orthopaedic Device Co.Ltd(688161) a and B won the bid. In addition, the company’s Jianli bond and starfish trauma brands won the bid at the highest price in this centralized purchase, making up for the serious disadvantage of price reduction of group a products.
In addition, it is worth mentioning that centralized purchase competition and price reduction are not terrible. For enterprises, whether the bid winning price will significantly break through the original “ex factory price” is the key to affecting profits.
Shandong Weigao Orthopaedic Device Co.Ltd(688161) prospectus shows that in the centralized procurement of spine products in Anhui Province in June 2019, the company won the bid for several products, and the price reduction range is between 38% – 75% compared with the online price before winning the bid (that is, the price formed by adding other costs such as circulation links on the basis of ex factory price).
However, through the calculation of the ex factory price, it can be seen that the average sales unit price of the company’s spine products in Anhui from September to December 2019 decreased by only 8.12% compared with January to August 2019.
In this regard, Shandong Weigao Orthopaedic Device Co.Ltd(688161) believes that the terminal price will decline sharply after centralized spine mining, but the impact on the ex factory price is relatively limited. Combined with the current situation that the overall gross profit margin of the company’s spine products is more than 80%, it is expected that there is still some room for the affordable ex factory price decline.
