Citigroup: The 11th batch of national centralized drug procurement officially supports industry innovation and rational competition, expecting a moderate decrease in drug prices.

Citigroup's report stated that the National Medical Insurance Administration announced the launch of the 11th round of national drug centralized procurement this Tuesday (the 15th), involving 55 drugs. Hospitals are required to report their procurement quantities between July 16th and July 31st. The Medical Insurance Administration emphasized that this round of centralized procurement is only for generic drugs, not including innovative drugs, and prioritizes quality over price. The bank believes that the optimized centralized procurement rules show the government's support for industry innovation and rational competition. The bank predicts that the price reduction will be relatively moderate. Overall, the bank forecasts a limited impact on major pharmaceutical companies (<3%). The report mentioned that to protect industry innovation, the following drugs are explicitly excluded from the policy: 1) Drugs that have recently entered the medical insurance through negotiation and are still within the agreement period; 2) Drugs with a market size less than 100 million RMB based on sales data from provincial procurement platforms in 2024. In order to better match clinical needs and avoid excessive competition, the bidding rules have been optimized: 1) Mainland hospitals can report procurement quantities based on drug brand rather than generic name; 2) Hospitals are usually required to report at least 80% of actual usage, but this percentage can be lowered based on clinical needs; 3) 60-80% of the reported procurement quantity will be considered as the commitment procurement quantity, with special circumstances allowing for a lower percentage to provide greater clinical flexibility in drug selection; 4) By improving calculation methods to control price differences between companies and prevent individual low-price bidding, the lowest bidder must prove the reasonableness of the bid price and commit to not bidding below the cost price. Citigroup pointed out that for the main large pharmaceutical companies participating in the 11th round of centralized procurement, Jiangsu Hengrui Pharmaceuticals' Adalatudine under Ganbox is expected to account for less than 0.5% of the estimated sales in 2024; HANSOH PHARMA's Agomelatine, Fosapretan, Dapagliflozin, and Nintedanib are expected to account for approximately 3% of the estimated sales in 2024; CSPC PHARMA's 13 drugs including Dapagliflozin, Afubroplap, and Losolofen patches are expected to account for about 1% of the estimated sales in 2024; SINO BIOPHARM's 11 drugs including Omapanib, Dapagliflozin, and Cefuroxime are expected to account for about 1% of the estimated sales in 2024; SSY GROUP's 11 drugs are expected to account for approximately 1.5% of the estimated sales in 2024; and Shanghai Fosun Pharmaceutical's 10 drugs including Afubroplap are expected to account for about 2% of the estimated sales in 2024.