JP Morgan: The eleventh round of national centralized drug procurement has higher transparency, and the impact on pharmaceutical companies is gradually weakening.

J.P. Morgan released a research report stating that Shanghai Sun Pharmaceutical Procurement Platform recently issued a notice on carrying out the information filing work for the 11th batch of national centralized drug procurement. The data submission process for 55 drugs has been initiated, and these drugs will be included in the 11th batch of national centralized procurement (VBP). In the previous ten rounds of nationwide VBP, the price reduction rate usually ranged from 50% to 60%, with the 10th round of VBP reaching a new high of 70%. However, the bank mentioned that recent policies, including the first inclusion of drug and consumable procurement optimization in the government work report and the circulated draft plan on further optimizing drug procurement policy, indicate that price reduction is no longer the sole focus of future VBP. The report pointed out that the screening criteria clearly require that candidate drugs must have at least 7 manufacturers pass consistency evaluation or their products be selected as reference preparations; in further screening, only drugs with annual procurement amounts exceeding 100 million RMB will be retained. It is worth noting that the "Notice" for the first time attached a list of 68 products that meet the evaluation criteria but were not included in the 11th batch of VBP, and specifically explained the reasons for their exclusion. In view of recent policy discussions aimed at preventing overcompetition and optimizing the "lowest price bidding" model, and the relatively small number of "big drugs" in this VBP, the bank expects the price reduction rate of the 11th batch of VBP to be relatively moderate, and the impact on large pharmaceutical companies in China will gradually weaken. According to EMED data, the estimated market size of the 55 selected varieties in 2024 is 50 billion RMB. J.P. Morgan pointed out that the "Notice" attached a list of 68 products that were "evaluated but not included," the reasons for which include unresolved patent disputes, insufficient clinical safety assessment, and supply stability issues, indicating that the 11th batch of VBP emphasizes intellectual property rights and clinical value. The bank believes that this openly exclusionary standard practice is unprecedented transparency in the national drug procurement process, which will help improve the predictability and transparency of future national centralized procurement and benefit manufacturers' decision-making.