CITIC SEC: Major adjustment on drug pricing mechanism, intensive period of policy reform in medical and health industry.

CITIC SEC has released a research report stating that the General Office of the State Council issued the "Several Opinions on Improving the Drug Pricing Mechanism," which clearly emphasizes market orientation in drug pricing, improves drug pricing, promotes price discovery, and supports both innovation and basic livelihood. Especially in terms of supporting innovation, the state strongly supports the development of innovative drugs and medical devices, and policies will provide price first listing and protection mechanisms for high-level innovative drugs, fully utilize the multi-level medical insurance system, promote diverse payments for innovative drugs, and launch the Chinese Drug Price Registration System to encourage and support the global development of innovative drugs. In terms of basic livelihood, the country will also optimize the rules for adjustment of the medical insurance catalog, optimize the rules for centralized volume procurement, improve the management of online listed prices, and encourage fair and reasonable drug pricing through public comparison and the Wuxi Online Offline Communication Information Technology Co., Ltd. comparison. The policy reform of the medical and health industry has entered an intensive period, and it is recommended to continue paying attention to investment opportunities in the medical and health industry driven by policies. CITIC SEC's main points are as follows: Event: On April 14th, the General Office of the State Council issued the "Several Opinions on Improving the Drug Pricing Mechanism" (referred to as the Opinions), and on the 15th, the State Council Policy Regular Press Conference introduced relevant information on improving the full-cycle and full-channel drug pricing mechanism (referred to as the Press Conference). To further promote the rational formation of drug prices, strengthen drug price governance, and support the innovative development of the pharmaceutical industry, the state has put forward a series of reform measures from the perspectives of the full cycle, full channel, and full field. Full cycle: Improve the full-cycle drug pricing policy, distinguish between high-level innovative drugs, improved new drugs, and generic drugs, and provide policy support and guidance for each. Newly launched drugs: According to the Opinions and the Press Conference, the National Medical Insurance Administration is studying the formulation of relevant policies on drug first listing price mechanism, exploring the implementation of self-assessment of clinical value and innovation level by enterprises, supporting high-level innovative drugs with high innovation level and clinical value to set prices in the early stages of listing that match their high investment and high risk, and maintaining price stability for a certain period of time (according to the National Medical Insurance Administration's "Notice on Establishing a First-Listing Chemical Drug Price Formation Mechanism to Encourage High-quality Innovation (Draft for Soliciting Opinions)," providing a stable period of 1-5 years for first-listing prices). Medical insurance catalog-stage drugs: Guide price formation by medical insurance payment standards, taking into account patient benefits and encouraging innovation, optimize the rules for adjusting the medical insurance catalog, negotiate with pharmaceutical companies on a payment standard that matches the level of economic and social development and market size and reasonably reflects the clinical value of drugs. Volume procurement-stage drugs: Optimize the rules for centralized volume procurement based on the characteristics of different types of drugs. Conventional drugs: Improve the management of online listed prices and the system for dynamically adjusting online listed prices. Full channel: Promote the role of all channels in drug price discovery. Public medical institutions: According to the Opinions and the Press Conference, all drugs should be purchased through provincial-level medical procurement platforms and sold at zero mark-up (excluding traditional Chinese medicinal herbs), with a zero mark-up policy for Chinese medicine formula granules. Pharmacies: Retail pharmacy drug prices are determined by operators autonomously through market competition. Promote public comparison of medical insurance designated pharmacies for medical insurance drugs, guide medical insurance drug prices to be more reasonable, and encourage medical insurance designated pharmacies to participate in centralized drug procurement. Online pharmacies: Regularly conduct comparisons through Wuxi Online Offline Communication Information Technology Co., Ltd., assess abnormal prices, promote fair and reasonable pricing for drugs through different channels. Full field: Guide drug prices in all fields to remain at a reasonable level. In terms of supporting innovation: The state clearly supports the development of innovative drugs and medical devices. Policies will provide pricing first listing and protection mechanisms for high-level innovative drugs, fully utilize commercial health insurance and other multi-level medical insurance systems, promote diverse payments for innovative drugs, launch and operate the Chinese Drug Price Registration System, encourage and support the global development of innovative drugs, and build a global and diversified pricing system. In terms of ensuring basic livelihood: The country will optimize the rules for adjusting the medical insurance catalog, optimize the rules for centralized volume procurement, improve the management of online listed prices and the system for dynamically adjusting online listed prices, compare prices through public comparison and Wuxi Online Offline Communication Information Technology Co., Ltd., promote fair and reasonable drug pricing to ensure the supply and price stability of essential drugs for clinical patients. For offline pharmacies/internet platforms, drug prices sold in physical pharmacies and online pharmacies are mainly determined by operators autonomously, and price fluctuations and differences are normal. The prices of designated pharmacy drugs should not be significantly higher than other channels, and encourage LBX Pharmacy Chain Joint Stock to use the public price comparison mini program to compare prices. Risk factors: Intensification of geopolitical risks; Risk of stricter regulations; Risk of volume procurement; Risk of decreasing financing heat for bio-pharmaceutical companies in the primary market; Risk of clinical research and development failure for innovative drugs and medical devices; Risk of medical accidents; Risk of unexpected changes in industry policies; Risk of slower progress in the commercial health insurance industry, etc.