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Economic Observer reporter Zhang Ying On July 16, Laobaixing (603883.SH), a leading chain drugstore company, announced that based on its confidence in the company's future development prospects and recognition of its value, its controlling shareholder proposed to implement an interim dividend for 2024. The day before, another leading chain drugstore company, Yifeng Pharmacy (603939.SH), also issued an announcement on its proposed interim dividend.

This is the first interim dividend for the two companies since they went public. In terms of the dividend amount, Laobaixing plans to pay out 50% of its net profit attributable to its parent company in the first half of 2024, and Yifeng Pharmacy plans to pay a cash dividend of 2.5 yuan per 10 shares to all shareholders.

Since the National Medical Insurance Administration issued a notice of interview with Yixintang (002727.SZ) in early June, the share prices of several major chain drugstore companies, including Yixintang, Laobaixing, Yifeng Pharmacy, Dasanlin (603233.SH), and Jianzhijia (605266.SH), have been falling, with an average drop of more than 30% so far. Yifeng Pharmacy, which has the highest market value, has seen its total market value drop from 45.5 billion yuan to the current 27.7 billion yuan.

The National Medical Insurance Administration pointed out in the above announcement that some designated chain stores under Yixintang had problems such as replacing drugs, over-prescribing drugs, making medical insurance settlements on behalf of designated retail stores that had suspended medical insurance settlements, mismatched drug purchase and sales records, and irregular sales of prescription drugs, causing losses to medical insurance funds. The local medical insurance departments have imposed penalties such as suspension of payment or recovery of medical insurance funds, imposition of liquidated damages or administrative fines, and termination of medical insurance service agreements on the relevant stores.

An owner of a small and medium-sized chain drugstore told Economic Observer that the problems mentioned in the National Medical Insurance Administration's announcement, such as drug substitution, are widespread in the pharmaceutical retail industry. Such behavior is even more prevalent in single drugstores. Its prevalence has even made it difficult for drugstores that operate in compliance to do business. Therefore, stricter medical insurance supervision will lead to a decline in drugstore profit margins. However, due to the scale advantage, the sales of large chain drugstores will still be able to grow in the future.

"From the perspective of drug quality management and medical insurance compliance, large chain pharmacies are generally more standardized than single pharmacies and small and medium-sized chain pharmacies. If the medical insurance department implements the same level of supervision on the entire industry, it may make it difficult for many single pharmacies and small and medium-sized chain pharmacies to continue operating in the future. From this perspective, it is a good thing for large chains." He also said that over the years, pharmacies have often had close interactions with local regulatory agencies, and the actual situation in various places in the future remains to be seen.

In addition, the National Healthcare Security Administration sent a letter at the end of May requesting all localities to launch a special campaign of "going online to shop, checking drug prices, comparing data, and enforcing governance." Healthcare Security Administrations in Inner Mongolia, Shaanxi, Shenzhen and other places have successively launched the "drug price comparison" system to manage the prices of drugs in designated retail pharmacies for medical insurance. This is also seen by the market as a negative policy for chain drug stores.

The above-mentioned drugstore owner said that, at present, the price comparison policy has actually led to an increase in the online prices of some drugs, and some drug manufacturers have asked pharmacies to increase the prices of online drugs.

In his opinion, the recent sharp drop in the share prices of listed drugstore chains is mainly due to the destruction of the wealth myth created before. "Some listed companies used to promote their performance to investors by relying on strong marketing capabilities, but now investors have discovered that it may be mainly through illegal medical insurance swiping, and the window paper of the industry has been exposed."

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Zhang Ying, Director of Economic Observer

Director of Big Health News Department
Focus on reporting on leading companies in the field of big health, record industry changes, and pay long-term attention to major public issues such as medical reform and aging.
Marquez once said that journalism is the best profession in the world.
WeChat: zhangy_1919; Email: [email protected]