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Our reporter Yang Yan (chinatimes.net.cn) reports from Beijing

A series of data sends clear signals that the slowdown in the growth of the pharmaceutical industry has become an indisputable fact.

The latest data from the National Bureau of Statistics shows that in the first half of 2024, the year-on-year growth rate of industrial added value of pharmaceutical manufacturing enterprises above designated size was only 2%, a significant slowdown. Affected by this, various CXO companies are experiencing multiple downward pressures on revenue, profits and market value. The forecast of Zhongkang Industry Research Institute is even more severe, with the full-terminal growth rate of pharmaceuticals expected to drop to 4.9% throughout the year. The operating environment of physical pharmacies is becoming increasingly severe, with the full-year growth rate of pharmaceuticals expected to be only 2.9%, and the growth rate of the B2C market has also narrowed to 6%, and all categories, including non-pharmaceuticals, have basically stopped growing.

At the 2024 SIP Conference held recently, Wu Han, Chairman of Zhongkang Technology, as the chairman of the conference, made a profound analysis of the current status of the pharmaceutical industry. He pointed out that the ceiling of the stock market that mainly relies on medical insurance payment to meet basic medical and drug needs is already clearly visible, the market is shifting to the low-price zone, price competition has become the basic means, the degree of internal circulation continues to deepen, and the operating pressure of enterprises continues to increase.

Wu Han believes that the overall upward trend of China's medical and health market will not change. Under the pressure of homogeneous competition and strong supervision, the industry has entered a transition period and entered the elimination stage. It is imperative for the industry to grasp the iterative health needs and enhance value creation through innovation.

Behind the sluggish growth

In the past thirty years of development, the medical and health industry has been on the rise as an important force in safeguarding people's livelihood. The medical industry has made great progress in technology research and development, clinical applications, and market expansion, and the industry's productivity and innovation are obvious to all.

Amid the booming development trend, we cannot ignore the unprecedented challenges that the domestic pharmaceutical and health industry is facing.

Li Junguo, vice president of Zhongkang Technology, told a reporter from the China Times that as my country's development enters a new stage, people's demand for health has reached a historical high, but at the same time, the improvement of the medical and health industry is sluggish. The reason behind this lies in the supply problem of medical and health.

Although the health industry is experiencing the ceiling of the stock market, it must be clearly seen that behind the sluggish growth of the industry is a massive unmet health demand. The emergence of this cold and hot phenomenon indicates that the health industry is undergoing a profound transformation.

As the industry enters the elimination stage, facing the pressure and challenges of the existing market, innovation has become a key force in promoting industrial transformation and upgrading.

In the serious medical field, the market still maintains a strong demand for innovative drugs; in the field of big health, with the deepening of aging, there is a significant supply gap in the elderly health care market; anti-aging demand is becoming increasingly strong and tends to be younger and more personalized, but the current supply is obviously insufficient, and part of the demand has flowed out to overseas markets; professional service areas including chronic disease services lack comprehensive solutions, and the driving effect of services on products needs to be improved urgently.

Technological innovation leads the industry upgrade, and technological reform with artificial intelligence as the core is an important way for the health industry to achieve "break and build". Whether in R&D, production, or in the application of service and business model innovation, it not only improves the efficiency of the industry, but also provides the infrastructure for building a new model of medical and health services centered on the C-end, laying a solid foundation for service-driven products and linkage inside and outside the hospital, thus bringing new incremental space to the industry.

Service innovation is also indispensable. With the continued increase in the incidence of chronic diseases and comorbidity rates, and the gradual chronic disease development of cancer patients, the demand for new services has become increasingly strong. Wu Han pointed out that currently patients receive more basic medical and drug services from hospitals, and the supply of comprehensive solution services is basically blank. As an important part of outpatient services, pharmacies have great potential to meet patients' needs by integrating resources and innovating service models. This transformation will be a new driving force for promoting medical and health services to a higher level and promoting market growth.

On the basis of effectively meeting the needs, controlling the excessive growth of the total social health cost is actually a global medical reform problem, and it is more difficult to reduce costs and increase efficiency in the pharmaceutical and health industry than in other industries. For example, in developed countries such as the United States and Japan, the focus of medical reform is to expand the accessibility of medical services, control medical costs, and improve medical efficiency. my country's medical policy focuses on protecting the basics, strengthening the grassroots, and building mechanisms, but it still faces challenges such as uneven distribution of medical resources, difficulty and high cost of seeing a doctor, insufficient commercial insurance coverage, and uneven quality of medical services.

Li Junguo emphasized that my country's "three medical linkages" have been continuously promoted for several years. Although the reform progress of various sectors is still uneven, the impact on the pharmaceutical and health industry has been clearly reflected in the performance of all market participants.

The iteration of health needs will become a key driving force

"R&D innovation is undoubtedly the core driving force for the development of the pharmaceutical industry and commerce." Wu Han said that with the rapid expansion of medical insurance funds' payments for innovative drugs, the market access and patient accessibility of innovative drugs have significantly improved, bringing new growth points for pharmaceutical companies.

In 2016, the policy “Opinions on Conducting the Evaluation of the Quality and Efficacy Consistency of Generic Drugs” was released. With the start of the consistency evaluation, my country’s medical reform has also promoted the “emptying the cage and replacing the bird”, reducing costs and increasing efficiency in the pharmaceutical field.

On the one hand, the quality of domestically produced generic drugs has improved and they are replacing original research drugs at an accelerated pace, reducing medical costs, which represents the "cost reduction" of medical reform. Combining consistency evaluation with the centralized drug procurement policy will enable the winning brands to achieve rapid sales growth in hospital channels, while greatly improving procurement efficiency, which means "efficiency increase."

However, Li Junguo pointed out that after the consistency evaluation is linked to centralized drug procurement, the actual advantages it can bring to medical insurance prices remain to be seen.

It is worth mentioning that the deepening of medical reform has also promoted the rapid improvement of innovative drug research and development standards. By strongly driving substantive innovation through policies, the high-level duplication bubble in the pharmaceutical and health industry has been squeezed.

From the actual results, the retail market of innovative drugs has grown by more than 20% and has become the category with the largest share. China's innovative drug sector has entered a harvest period, with many new drugs approved for marketing, which has not only promoted the development of pharmaceutical companies, but also brought growth momentum to commercial channels.

Compared with developed countries, China's total health expenditure accounts for a relatively low proportion of GDP, only 7.1%. Against the backdrop of technological innovation and national development transformation, China's health industry still has huge potential and space.

At this important turning point in the development of the industry, it is even more necessary to actively create a favorable policy environment to promote the development of new quality productivity. In the dual context of expanding domestic demand and building a healthy China, we should actively promote national policies to support the expansion of health consumption, actively promote policies to support the development of commercial health insurance, and increase the proportion of commercial insurance in medical payments.

Li Junguo emphasized that under the strong drive of relevant supporting policies, innovative results in innovative drug research and development have begun to emerge, but there is still a long way to go to build an innovative drug ecosystem.

Trainee Editor: Deng Zhouyu Editor-in-Chief: Chen Yanpeng