Rectification of high-value medical consumables in progress

Rectification of high-value Medical consumables in progress

Recently, 55 tertiary public hospitals and related enterprises in Jiangsu Province sat at the negotiation table to negotiate prices for vascular interventional stents and dual-chamber pacemakers. In the end, the prices of the selected stents dropped by an average of 51.01%, with the maximum drop of 66.07%; The average price reduction of the selected varieties of pacemakers was 15.86%, with the maximum price reduction of 38.13%. Among them, the winning bid price of Lepu Medical (300003.SZ)'s stents priced below 10,000 yuan was only around 3,000 yuan.
The General Office of the State Council recently issued the "Reform Plan for the Control of High-Value Medical Consumables" (hereinafter referred to as the "Plan"), proposing that in order to address problems such as excessive prices and overuse, the markup on Medical devices in public medical institutions will be abolished and will be implemented by the end of 2019. All medical consumables in public medical institutions are sold with "zero margin". At the same time, we will explore classified and centralized procurement of high-value medical consumables in accordance with the principles of volume-based procurement, linking volume and price, and promoting market competition.
This also means that after the implementation of "4+7" bulk procurement of drugs, the rectification of high-value medical consumables, including cardiac stents, has begun.
High margins and overuse
High-value medical consumables refer to medical consumables that directly act on the human body, have strict safety requirements, are used in large quantities in clinical applications, are relatively expensive, and bear a heavy cost burden on the public, including coronary intervention, blood purification, orthopedics, etc. 12 Medical consumables, such as heart stents, ureteral stent, Foley catheter, orthopedic steel plates, Endotracheal Tube, Laryngeal mask airway etc.
Jiao Yahui, head of the Medical Administration Bureau of the National Health Commission, said that the range of high-value consumables is very wide, and the categories are not like medicines, and there is no very systematic classification now. The National Health Commission is studying and selecting some categories that have a large number of clinical applications, are very expensive, and occupy a lot of resources as the focus of governance.
Compared with ordinary consumables such as medical gauze, the high-value medical consumables industry has technical barriers, and therefore the industry's gross profit is high. Take Zhenghai Biotechnology (300653.SZ), which focuses on the field of regenerative medicine, as an example. Its 2018 financial report shows that the company’s gross profit margin last year was 93.08%, of which the gross profit margin of biofilm products was 94.20% and the gross profit margin of oral repair film products was 93.29%. , exceeding Kweichow Moutai’s gross profit margin of 91.14% in 2018.
Although the gross profits of some other high-value consumables companies do not exceed Moutai, they are still at a high level. Dabo Medical (002901.SZ) had an overall gross profit margin of 80.40% last year, and the gross profit margin of its spinal products reached 85.42%; Lepu Medical is one of the earliest companies in China to develop and manufacture cardiac interventional medical device products. The company produces its own devices Products include stent systems, occlusion devices, pacemakers, in vitro diagnostic products, Surgical instruments and other products. According to the company's annual report last year, the gross profit margin of the stent system was 79.28%.
Calculation data from the Medical Device Research Institute shows that China’s medical device market size in 2018 was approximately 530.4 billion yuan. Among them, the high-value medical consumables market has a scale of approximately 104.6 billion yuan, accounting for 19.72%.
Shi Lichen believes that the introduction of the "Plan" will have an impact on the entire supply side of the high-value consumables industry chain, including the production and circulation links, and prices will be reduced. However, in order to reduce medical insurance costs and patient medical expenditures, in addition to supply-side reforms, great efforts should also be made at the use supervision level. "To truly reduce medical insurance costs, if the supply side accounts for 30%, use supervision accounts for 70%. The role of reform purely from the supply side level is lower than the use level. Whether consumables can be used reasonably and effectively depends on supervision. It is not a price negotiation on the upper-end supply side. For example, there must be clear and detailed regulations on the circumstances under which heart stents should be used and how many should be used." "From the country to the provinces and cities, every key medical treatment must be controlled through quality control. Strengthen standardized monitoring of technology and medical practices, including cardiovascular intervention and orthopedics that use high-value medical consumables. These are areas where high-value consumables are widely used." Jiao Yahui said that the Health Commission will increase the intensity of accusations and clarify Medical institutions manage the entire process from procurement, selection to use and monitoring to ensure that high-value medical consumables can be traced forward and traced backward within the medical institution.
Procurement in volume is forcing domestic companies
Jiang Deyuan, Drug Inspection Commissioner of the Medical Device Registration Management Department of the National Medical Products Administration, said at a regular briefing on State Council policies governing high-value medical consumables: "In clinical practice, a considerable number of mid-to-high-end medical devices have been domestically produced and gradually replaced them. Imported products. And from the clinical product quality point of view, they are generally recognized by patients, and the price has some advantages over imported products. Transcatheter interventional valves, coronary drug-eluting stents, and orthopedic implants have basically replaced imported products. product."
Since the State Food and Drug Administration implemented the special approval process for innovative medical devices in 2014, as of the end of June this year, a total of 222 products have applied to enter this channel, and currently 65 products have been approved for marketing. Among them, 64 are domestically produced products, including high-value medical consumables such as branched aortic stent grafts and interventional artificial biological heart valves.
However, the domestic high-value consumables market is still dominated by imported products. Shi Lichen told reporters that in the domestic high-value medical consumables market, imported products account for 70-80% of the market, while domestic products only account for 20 to 30%.
In the field of cardiac surgery, imported products have obvious advantages over domestic products. A cardiac and great vascular surgeon at a tertiary hospital who wished to remain anonymous told a reporter from the Economic Observer that as far as artificial valves are concerned, “international mainstream products can also be produced domestically, but there are indeed gaps in terms of quality control. Artificial valve surgery It is an open surgery, and it is difficult for patients to accept the things put in after thoracotomy because the quality is not up to standard and there will be subsequent problems." The "Plan" points out that for patients with large clinical dosage, high purchase amount, mature clinical use, and many For high-value medical consumables produced by several enterprises, we will explore centralized procurement by category, encourage medical institutions to jointly carry out volume-based negotiation procurement, and actively explore cross-provincial alliance procurement.
Some provinces have taken the lead. On July 30, Anhui Province successfully completed the volume negotiation and price negotiation. The domestic products of orthopedic spine materials have an average price reduction of 55.9%, the imported products have an average price reduction of 40.5%, and the overall average price reduction is 53.4%; intraocular lens domestic products have an average price reduction of 55.9%. The average price reduction is 18.1%, the average price reduction of imported categories is 20.9%, and the overall average price reduction is 20.5%. Calculated based on the province’s online purchase volume of orthopedic spine and intraocular lens products in the first half of 2019, it is estimated that after price negotiation, the annual savings for the two types of products will be 370 million yuan and 29 million yuan respectively.

Highly customized surgical instruments, consumables and implants require a large amount of scientific and technological investment. Shi Lichen said that in the high-value medical consumables industry chain, domestic companies have weaknesses in their R&D capabilities and production capabilities. The centralized procurement model will force domestic companies to strengthen R&D and production. "A fundamental basis for centralized procurement is that there are many competing products. If you want to reduce the price of high-value consumables significantly, you must expand the scope of procurement and use whichever quality is better."

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