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21st Century Business Herald reporters Ji Yuanyuan and Han Liming report from Shanghai

As the global healthcare landscape continues to evolve, the pharmaceutical industry must adapt to changing market dynamics.

Taking centralized procurement as an example, according to IQVIA analysis, by the end of 2023, my country has carried out 4 national-level volume-based procurements for medical devices, 58 provincial alliance centralized procurements, and 72 provincial, municipal alliance and municipal centralized procurements. Among them, there were 24 provincial alliance centralized procurements in 2023, involving more than 40 varieties in 16 major categories, exceeding the total in the past. Over the past five years, the rules for centralized procurement have become increasingly mild and transparent, but grouping, implementation rules and execution management are still the key points of corporate bargaining. In 2024, the expansion of coverage and included categories will remain the focus of centralized procurement. Anhui, Guangdong, Hebei and other provinces will accelerate the process in the form of provincial alliances, and interventional, in vitro diagnostic reagents and surgical consumables will be the focus. As the new normal under medical reform, centralized procurement will continue to have a profound impact on the development of the industry.

Under this situation, multinational pharmaceutical companies also need to adjust their strategic layout in China. In an interview with a reporter from 21st Century Business Herald, Ogallon said that China is now a global highland for pharmaceutical innovation and cooperation. In recent years, it has made remarkable innovative achievements in various fields including cancer treatment, gene therapy and digital health. These innovations have changed the lives of millions of people in China and around the world, and have also cultivated a large number of high-level innovative talents.

"China's series of measures to continuously optimize the business environment are constantly boosting the confidence of multinational pharmaceutical companies to take root in China. In terms of empowering women's health, China is also committed to gradually building a good ecology for sustainable development from the policy level to social awareness. Regarding the health of women and their families, Ogallon has seen that there are still many unmet health needs in China. Even some major issues such as the aging of the population and the declining birth rate are posing challenges to the sustainable development of China's medical care and even society." Ogallon said.

Based on a deep understanding of patient needs and market changes, multinational pharmaceutical companies need to continuously optimize their business cooperation models, including increasing investment in social hospitals, over-the-counter drugs and pharmaceutical retail. In addition, they need to sign cooperation agreements with multiple local pharmaceutical partners to find solutions to the health challenges facing the current market.

Improving access to treatment

China's pharmaceutical market has developed rapidly in recent years, with both opportunities and challenges. Ogallon told the 21st Century Business Herald reporter that as centralized procurement continues to improve in quality and expand in scope, competition among companies is becoming increasingly fierce, and it is becoming more difficult for original drug manufacturers to be selected, which has put forward higher requirements for the Chinese business model of many multinational companies.

On the one hand, Ogallon actively participates in centralized procurement. In 2023, Ogallon participated in the national drug centralized procurement for the first time as an independent company, and successfully won the selection of depression product treatment. Although this selection only covers a few provinces, under rounds of volume-based procurement, Ogallon can still stay in the market based on the advantages of volume-based procurement and provide treatment options for doctors and patients.

On the other hand, Ogalon also has many original research products that continue to serve a large number of Chinese patients after failing to be selected in the centralized procurement. Ogalon is committed to continuously improving the accessibility and affordability of its products and ensuring the sustainable supply of its products through continuous innovation in its business model to adapt to the market structure in the post-centralized procurement era.

"At the same time, we see that there are still a large number of unmet patient needs in the Chinese market, but it is far from enough to just have innovative product supply. Enterprises and all parties need to work together to create a more complete ecosystem and continuously improve the accessibility and affordability of treatment." Ogallon said, taking assisted reproduction, a treatment area focused on by Ogallon, as an example. In 2020, the incidence of infertility in China has reached 18%, and assisted reproductive technology is globally recognized as one of the most effective methods for treating infertility and promoting population health development. However, the penetration rate of assisted technology in China in 2021 was 8.2%, while the penetration rates in the United States and Europe exceeded 30% during the same period.

"The gap is caused by social stereotypes, as well as various factors such as the lack of unified diagnostic and treatment standards and high costs," said Ogallon.

The "Research Report on the Current Status of Infertility in China" shows that the infertility rate in my country will be about 18.2% in 2023. Among them, the population suitable for assisted reproductive technology accounts for about 20% of the total infertile population ("2018 Assisted Reproductive Industry Research Report"), and therapeutic assisted reproductive technology (commonly known as in vitro fertilization treatment) has brought hope to infertile families.

According to data from the National Health Commission, my country's assisted reproductive technology has developed rapidly in recent years, with the total number of technical service cycles exceeding 1 million and the number of babies born exceeding 300,000 each year.

Since 2023, the national medical insurance has actively promoted the reimbursement of assisted reproductive technology in various provinces to improve the accessibility of technology. Official information shows that since 2023, four provinces including Beijing, Guangxi, Gansu and Inner Mongolia have included assisted reproductive technology in medical insurance reimbursement. Since then, medical insurance departments in many provinces have actively followed up. As of July 15, 11 provinces including Shanghai, Zhejiang, Jiangxi, Shandong, Qinghai, Hainan, Hebei, Jiangsu, Anhui, Xinjiang and Xinjiang Production and Construction Corps have successively included this technology in the scope of medical insurance reimbursement.

"Ogallon is also working with the country's leading assisted reproductive centers to explore the use of medical alliances + digitalization to strengthen disease knowledge dissemination, promote early screening and early detection in primary medical institutions, and assist in timely referral and treatment of patients. In the future, we will continue to work together with all parties to achieve win-win results, promote wider access to high-quality drugs or medical services, and provide valuable treatment options for the general public." Ogallon said.

Strengthen cooperation with local agents

In 2021, Ogalon was spun off from Merck and has been focusing on its two core businesses of women's health and classic brands in China.

Public information shows that Ogalon's main product areas in China include providing solutions in eight disease areas, including gynecology and fertility regulation, reproduction, respiratory, cardiovascular, men's health, pain, and bone health. At the market level, it focuses on promoting the wide accessibility of medical care from tertiary hospitals, community hospitals, social hospitals to offline pharmacies, online pharmacies, and online and offline integrated pharmacy platforms.

Ogallon said that China is the second largest market for Ogallon in the world and a vital part of its global strategic blueprint. China accounts for more than 14% of its global business each year, making it one of the companies with the highest share of Chinese business among multinational pharmaceutical companies.

"Since our establishment, we have achieved rapid development in China and our business has grown steadily. We are also one of the first multinational pharmaceutical companies in the industry to set up a dedicated prescription drug retail team. We are actively exploring new scenarios for disease management, while focusing on pharmacists, a key group in the professional development of the retail industry, and providing them with customized educational resources to achieve a 'win-win' business with our partners," said Ogallon.

While setting up a sales team, Ogallon is also working with local agents to achieve win-win results. It is reported that the company will have more cooperation in the near future. "We are actively seeking and establishing cooperation with more agent partners to allow more time-tested, classic and high-quality drugs to remain in China's vast medical market and improve health outcomes." Ogallon said.

This is also due to the fact that the operating model of multinational pharmaceutical companies in the Chinese market has changed. IQVIA believes that at present, multinational pharmaceutical companies need to face four practical problems in the Chinese market:

First, as the Chinese market continues to expand and mature, multinational pharmaceutical companies are faced with the challenge of how to more effectively penetrate this vast market. Due to the large number of hospitals in China's first-, second-, and third-tier cities, and the fact that coverage and penetration of each hospital requires a lot of resources and time, choosing distributors as a cooperative model for sales and market expansion has become particularly important.

Secondly, the impact of cost control policies on the pharmaceutical market. In China, the government’s cost control policy for medical insurance is very strict, which poses a major challenge to multinational pharmaceutical companies’ product pricing and market strategies. In order to adapt to this environment, pharmaceutical companies need to adjust their business models to comply with the government’s medical insurance negotiation and price control requirements.

In addition, compliance issues are important. In a market environment like China where regulation is increasingly stringent, multinational pharmaceutical companies need to ensure that all their operations comply with local laws and regulations. This includes working with compliance teams with local experience and learning from the experience of foreign companies in the European and American markets to help them meet compliance standards in the Chinese market.

Finally, cooperation is necessary. Faced with the complexity and huge potential of the Chinese market, it is difficult for a single company to cope with all the challenges alone. Therefore, establishing partnerships and utilizing external resources and channels will be one of the key strategies for the success of multinational pharmaceutical companies.