Summary of the Conference Call on the 11th National Drug Procurement Industry Overview - The conference call discusses the 11th batch of National Drug Procurement in China, focusing on the pharmaceutical industry and its regulatory environment. Key Points and Arguments Core Objectives of the 11th Batch Procurement - The primary goal remains "stabilizing clinical use" by ensuring continuity of essential medications and minimizing drug substitutions, with a reported actual reporting rate of around 50% for drugs not reported by brand name [1][8] Changes in Procurement Rules - Introduction of brand-name reporting and quantity distribution mechanisms aims to reduce competition and ensure drug quality, but may limit new entrants, particularly those with innovative formulations [1][6] - The requirement for at least two years of formulation production experience and GMP compliance documentation is expected to impact around 50 product approvals, potentially excluding new entrants [1][5][19] Competitive Landscape - The average number of competing companies per product has increased to 16, indicating intensified competition compared to 13 in the previous batch [5][15] - The new pricing anchor mechanism (average price at 50% and minimum price at 1.8 times) has limited effectiveness, as most bids remain below the average price [1][16] Marketing and Sales Strategies - Companies are encouraged to invest in marketing to drive hospital reporting from the product launch phase, rather than waiting for procurement results [1][17] Price Reduction Expectations - The anticipated price reduction in this batch is expected to be more severe than in the previous batch, with some products facing competition from over 16 companies [15] - The overall average price reduction is unlikely to be milder than in the 10th batch, with significant downward pressure on prices due to intense competition [15] Regulatory Stability and Future Outlook - Future procurement rules are expected to stabilize, with the National Healthcare Security Administration favoring large enterprises to optimize the industry [2][24] - The continuation of the "one product, dual regulation" policy may affect the execution of brand-name reporting, potentially leading to adjustments in the future [21] Major Drug Categories in the 11th Batch - Key drugs in this procurement include Dapagliflozin (7.5 billion), Cefazolin (4 billion), and Oseltamivir granules (2.5 billion), with significant discrepancies between actual sales prices and set limits [23] Implications of New Regulations - The two-year production experience requirement has raised concerns about its relevance to product quality and may lead to insufficient competition in certain categories [20] Other Important Considerations - The cancellation of the minimum price preference and the introduction of a revival mechanism for non-selected companies are designed to enhance market participation but may not significantly alter competitive dynamics [8][11] - The overall sentiment indicates that while the rules aim to stabilize the market, the competitive pressure remains high, making price increases unlikely [10][24]

Core Viewpoint - The National Healthcare Security Administration has released the 11th batch of centralized drug procurement documents, emphasizing principles of stabilizing clinical needs, ensuring quality, preventing collusion, and countering excessive competition. Group 1: Stabilizing Clinical Needs - The primary goal of the procurement is to ensure clinical medication needs, with optimized reporting methods for medical institutions allowing for both generic and brand-specific reporting [4] - Approximately 46,000 medical institutions participated in this procurement, with 77% of the reported quantities specified by brand [4] - The procurement volume is set at 60% to 80% of the reported quantities, allowing institutions to choose brands for the remaining portion [4] - New selection rules encourage major companies to participate by offering opportunities to those whose products meet clinical demand but did not initially qualify [4] - Special attention is given to ensuring the supply of pediatric medications, with adjusted pricing rules for small specifications to encourage supply [4] Group 2: Ensuring Quality - The procurement process has incorporated higher quality control standards based on feedback from regulatory bodies [2] - Bidders must have at least two years of production experience for similar formulations, and their production lines must pass GMP compliance checks [4] - The assessment of production quality has been expanded to include the production line's compliance history [4] - Preference will be given to companies with stable quality and clinical recognition when bids are equal [4] Group 3: Preventing Collusion - Measures to prevent collusion have been enhanced, including treating closely related companies as a single entity during bidding [4] - A "first to report leniency" mechanism has been introduced to encourage reporting of collusion [4] - Stricter penalties will be applied to companies found to be colluding, including being placed on a violation list [4] Group 4: Countering Excessive Competition - The procurement will implement a "weak elimination" rule to prevent extreme price increases, with the highest valid bid being a critical measure [5] - Adjustments to price control mechanisms will ensure fairness and prevent excessively low bids from disrupting the market [5] - Companies are required to commit to not bidding below their costs, with explanations needed for any bids below the established price anchor [5] - The procurement process will strengthen the execution of selected results, holding companies accountable for timely delivery and medical institutions for adhering to procurement agreements [5]

Core Points - The 11th batch of national organized drug procurement documents has been officially released, involving 55 varieties, with eligible companies allowed to apply [1] - The new procurement rules emphasize a "reference price" system rather than simply selecting the lowest bid, allowing medical institutions to report quantities based on both generic names and specific brands [2] - The procurement process aims to ensure clinical demand and quality assurance, with 46,359 medical institutions participating in the reporting process [3] Group 1: Procurement Rules - The new procurement rules include a focus on children's medication supply, with adjustments made to pricing rules for small specifications suitable for children [3] - The 11th batch introduces stricter qualification requirements for bidding companies, including production experience and compliance with Good Manufacturing Practices (GMP) [4][5] - The "reference price" mechanism allows for a more flexible pricing strategy, potentially alleviating issues with previously rejected products being favored in clinical settings [6][8] Group 2: Market Dynamics - The procurement cycle for the 11th batch will run until December 31, 2028, with the opening of bids scheduled for October 21 [2] - The introduction of a "first report leniency" mechanism aims to combat collusion among bidding companies, encouraging transparency and fair competition [9] - The overall goal of the procurement initiative is to create a balanced market where quality and clinical needs are prioritized, moving away from a purely cost-driven approach [7][8]

Core Points - The National Healthcare Security Administration has released the 11th batch of centralized drug procurement documents, emphasizing principles of "stabilizing clinical needs, ensuring quality, preventing collusion, and countering excessive competition" Group 1: Stabilizing Clinical Needs - The primary goal of the procurement is to ensure clinical medication needs, with a focus on optimizing procurement measures [2] - Medical institutions can report quantities based on either generic names or specific brands, with 77% of the reported quantities specified by brand [2] - The procurement volume is set at 60%-80% of the reported quantities, allowing institutions to choose the remaining portion independently [2] - New selection rules encourage major companies to participate by allowing them to match the prices of winning bids if their initial bids were not selected [2] - Special attention is given to ensuring the supply of pediatric medications, with adjusted pricing rules for small specifications [2] Group 2: Ensuring Quality - The procurement process incorporates higher quality control standards based on feedback from regulatory bodies [3] - Bidding companies must have at least two years of production experience for similar dosage forms and must pass GMP compliance checks [3] - The quality assessment now extends to the production line of the bidding drugs, requiring no GMP violations in the past two years [3] - Preference is given to companies with stable quality and clinical recognition when bids are equal [3] Group 3: Preventing Collusion - Measures to prevent collusion have been enhanced, including treating closely related companies as a single entity during bidding [4] - A "first to report leniency" mechanism is introduced to encourage reporting of collusion [4] - Stricter penalties are imposed on companies found to be colluding, including being placed on a "violation list" and facing maximum penalties under pricing and procurement credit evaluation systems [4] Group 4: Countering Excessive Competition - The procurement process promotes transparency and fair competition, with voluntary participation and self-quoted prices [5] - The rules for determining the highest effective bid have been optimized to prevent extreme price increases [5] - A new price control anchor is established, ensuring that if the lowest bid is below 50% of the average winning bid, the anchor will be set at 50% of the average [5] - Companies are required to commit to not quoting below their costs and must justify any low bids [6] - Selected companies are held responsible for supply guarantees and must fulfill orders promptly [6]