CMSC: Class C directory will be released within the year + innovation drug payment increase provided by commercial health insurance. Further improvements will be made in centralized procurement and medical insurance advance payment.

CMSA released a research report stating that the National Medical Security Administration recently held a press conference, covering various aspects such as the operation of the national medical insurance fund in 2024, exploration of diversified payment mechanisms, promotion of DRG/DIP implementation, data interoperability, medical insurance prepayment mechanism, improvement of maternity support policies, etc., demonstrating the direction of the medical insurance department to "truly support innovation, support true innovation, support differentiated innovation", and supporting the healthy development of the pharmaceutical industry from multiple perspectives. The main points of the CMSA are as follows: Stable growth in medical insurance fund income, with enhanced coordination between expenditure growth and income growth The press conference introduced the operation of the national medical insurance fund in 2024. In terms of fund income, the total income of the national medical insurance fund is 3.48 trillion yuan, a year-on-year increase of 4.4%. Among them, the income of the employee medical insurance fund is 2.37 trillion yuan, and the income of the resident medical insurance fund is 1.11 trillion yuan. In terms of fund expenditure, the total expenditure of the national medical insurance fund is 2.97 trillion yuan, a year-on-year increase of 5.5%. The trend of excessive expenditure growth has been restrained, and the coordination between expenditure growth and income growth has been enhanced. In terms of fund balance, the current balance of the national medical insurance fund is 0.47 trillion yuan. Among them, the balance of the employee medical insurance is 416.4 billion yuan, the balance of the resident medical insurance is 51.9 billion yuan, the cumulative balance of the unified fund is 3.87 trillion yuan, with 3.05 trillion yuan for employee medical insurance and 0.82 trillion yuan for resident medical insurance. The quality of medical insurance management continues to improve. Class B Catalog + commercial health insurance support medical new quality productivity, the Class B Catalog is planned to be released in the first version this year, synchronized with the annual adjustment of the medical insurance catalog, contributing to the increase in the payment end of innovative drugs. In the past seven years, the medical insurance drug catalog has accumulated 835 new and good drugs, with 38 "globally new" innovative drugs added last year, reaching a record high. The direction of the medical insurance department to "truly support innovation, support true innovation, support differentiated innovation" is further highlighted. The exploration of the establishment of Class B drug catalog proposed at the National Medical Security Work Conference has been highlighted in this press conference, pointing out that the Class B drug catalog is conducive to meeting the diverse medical security needs of patients, improving the level of medical security, and reducing the economic burden of disease treatment. In terms of drug scope, the Class B catalog, as an effective supplement to the basic medical insurance drug catalog, mainly focuses on high innovation, large clinical value, significant benefits to patients, but the drugs that temporarily cannot be included in the basic medical insurance catalog because they exceed the "basic care" positioning. In terms of payment scope, various incentive measures are taken to actively guide and support commercial health insurance to include Class B catalog drugs in the coverage. In terms of support for landing applications, Class B catalog drugs may not be included in the insured person's out-of-pocket rate index and the monitoring scope of selected alternative products under centralized procurement. Cases that meet the conditions may not be included in the payment range by disease, and payments are made by project. In addition, since the Class B catalog needs to be connected to commercial health insurance, it is necessary to leave some time for the precise calculation of product design. Therefore, starting from 2025, the time cycle for adjusting the medical insurance drug catalog is expected to start from April 1st each year, with the goal of completing the entire catalog adjustment by September. The connection of the Class B catalog with commercial health insurance will become an increase in the payment end of innovative drugs, which will promote the development of new quality medical production. Centralized procurement: In the past, 80% of the savings were used for innovation, and it is recommended to avoid excessive competition. Plans to conduct the 11th batch of drug centralized procurement in the first half of the year, and the 6th batch of high-value medical consumable centralized procurement in the second half of the year, empowering pharmaceutical companies to go global. 1) The press conference pointed out that most of the previously inflated drug prices were obtained by agents, while the production companies did not receive corresponding income. The concentration and volume of centralized procurement can bypass the agent link, and companies can enter a large number of national or regional hospitals and large-scale sales with one successful bid in a single centralized procurement. At the same time, from the perspective of medical insurance, it is hoped that the intensity of competition will be kept within a reasonable range, and the industry needs to actively avoid excessive competition, "we hope that production capacity and demand will be basically matched, and we do not want to see 37 or even 50 companies producing the same drug at the same time." 2) Centralized procurement also saves medical insurance funds and frees up space for innovative drug payments. At the same time, centralized procurement empowers direct settlement by medical insurance, saving costs for pharmaceutical companies. According to statistics from the Medical Insurance Bureau, since 2018, the national organization of centralized and large-scale procurement of drugs has saved a total of 440 billion yuan, of which 360 billion yuan has been used for negotiating drugs and innovative drugs to enter the medical insurance catalog. 80% of the savings from centralized procurement have been used for innovative drugs. By releasing birds from cages, opening up payment space encourages innovation. 3) External empowerment mentioned market expansion, the National Medical Security Administration is very clear on the idea of "buy globally, sell globally", starting with drug and consumable trades, the China-ASEAN regional medicine procurement platform serves Southeast Asia with the functions of "bringing in" and "going out", assisting pharmaceutical companies in expanding overseas development space. 4) In terms of the arrangement for 2025, the 11th batch of drug centralized procurement will be carried out in the first half of the year, the 6th batch of high-value medical consumable centralized procurement will be carried out in the second half of the year, and new batch drug centralized procurement will be launched in a timely manner. At the local level, around 20 professional alliance purchases will be carried out, including Chinese patent medicines, Chinese medicine pieces, and high-value consumables, and it is expected that the varieties of drug centralized procurement organized by the state and alliances in 2025 will reach 700. DRG/DIP has basically achieved comprehensive coverage in the unified area, improving the efficiency of fund utilization The press conference pointed out that DRG/DIP payment has basically achieved comprehensive coverage in the unified area, improving the efficiency of medical services. The medical insurance department explicitly requires the establishment of five supporting mechanisms including special case panels, prepayment, opinion collection, negotiation and consultation, and data working groups. The reform of medical insurance payment methods can improve the efficiency of fund utilization, while supporting measures such as special case panels can ensure the quality of clinical services and empower high-quality development of medical institutions. Promoting the interoperability of drug price data and building a national online drug price list The press conference pointed out that with the construction of a unified national medical insurance information system, the National Medical Security Administration has implemented a nationwide online drug product joint review and approval system, where companies can apply for online approval through a unified platform, "submit once, reviewed by one province, and shared nationwide". If completed, it is expected to improve the efficiency of drug product online approval, achieve interoperability and sharing of online approval information. Currently, the goal of "price governance for the same drugs" has been basically achieved, alleviating the burden of medical expenses for the people. At the same time, the Medical Security Administration is building a national online drug price list, which will comprehensively display the online drug prices in various regions.Breath.At the national level, the unified and improved prepayment system of medical insurance funds is aimed to achieve immediate settlement in about 80% of the centrally coordinated regions by 2025, and nationwide immediate settlement in all centrally coordinated regions by 2026. In 2024, the National Medical Insurance Administration, together with the Ministry of Finance, issued a notice to unify and improve the prepayment system of medical insurance funds at the national level. A press conference reported that 72% of the centrally coordinated regions nationwide have allocated a total of 94.3 billion yuan in advance payments, accelerating the achievement of immediate settlement, significantly reducing the settlement period, and striving to increase the frequency and efficiency of fund allocation in the entire medical insurance system. For example, more than 2,000 designated medical institutions in Xiamen, Fujian have already accessed the immediate settlement system, with medical insurance funds disbursed the day after reconciliation of medical expenses. This move can alleviate the operating pressure of medical institutions and is expected to further benefit distribution enterprises. Improve the policy system for maternity support and actively promote the construction of a maternity-friendly society The press conference pointed out that the Medical Insurance Administration is studying further policy measures to improve the maternity insurance system and enhance its protection function. Firstly, to consolidate and expand the coverage of maternity insurance, secondly, to strengthen the protection of maternity medical expenses, and optimize the management and services of maternity insurance. At the same time, the medical insurance department is actively promoting the joint processing of "birth as one event" for newborns. Currently, 31 provinces and autonomous regions have included assisted reproduction in medical insurance, benefiting over 1 million people in 2024, focusing on the development of assisted reproduction and other industries related to newborns. Investment recommendation: The Medical Insurance Administration clearly explores diverse payment mechanisms to promote the development of innovative pharmaceutical companies. Recommended innovative drug targets include: BEIGENE (06160,688235.SH), Jiangsu Hengrui Pharmaceuticals (600276.SH), SKB BIO-B (06990), Shanghai Allist Pharmaceuticals Co., Ltd. (688578.SH), Xiamen Amoytop Biotech (688278.SH), INNOVENT BIO (01801), LUYE PHARMA (02186), KEYMED BIO-B (02162), etc. At the same time, multiple measures should be taken to improve the turnover rate of the medical insurance system from various angles. Recommended stocks to focus on from the perspective of improving the turnover rate of the medical insurance system include: China National Medicines Corporation (600511.SH), Shanghai Pharmaceuticals Holding (02607,601607.SH), Jointown Pharmaceutical Group (600998.SH), HYGEIA HEALTH (06078), Xi'An International Medical Investment (000516.SZ), etc. Group procurement is helpful for integrated companies in the raw material drug formulation industry: Zhejiang Huahai Pharmaceutical (600521.SH), Apeloa Pharmaceutical (000739.SZ), Zhejiang Tianyu Pharmaceutical (300702.SZ), Zhejiang Anglikang Pharmaceutical (002940.SZ), etc. From the perspective of improving the policy system for maternity support, recommended stocks include: JXR(01951), etc. Risk Disclosure: Risks of policy changes, intensified competition, R&D innovation falling short of expectations, changes in payment environment, and policy implementation falling short of expectations, etc.