According to the Zhitong Finance APP, CITIC Securities has released a research report stating that since 2025, the government has repeatedly proposed policies to optimize drug procurement and support innovative drugs. At the same time, the commercial insurance innovative drug catalog is about to be introduced, indicating a favorable pharmaceutical policy environment. The information reporting work for the 11th batch of national drug procurement has begun. CITIC Securities believes that the rules and price reduction of the 11th batch of national drug procurement are expected to be optimized, with anti-involution no longer anchored to the lowest price, strict quality control, and scientific selection of procurement varieties.
The adjustment of the national basic medical insurance catalog and the commercial health insurance innovative drug catalog will start in 2025. The biggest change in this national negotiation is the addition of a commercial insurance innovative drug catalog, forming a &#34;dual catalog&#34; parallel model with the basic catalog. The positioning of the commercial insurance innovative drug catalog is expected to become a buffer platform for high-value innovative drugs, while the payment side provides &#34;three exclusions&#34; support, which is expected to help open up commercial space for innovative drugs domestically. Regarding the basic catalog, the renewal rules will be optimized, reasonably controlling the price reduction of drugs during the agreement period, stabilizing new drug price expectations, and is expected to enhance the enthusiasm of pharmaceutical companies for new drug research and development. The basic catalog will be adjusted regularly, with &#34;tight balance&#34; rules for adding and removing drugs.
CITIC Securities continues its previous industrial views, with a strengthened certainty of the optimization trend of policies such as procurement. After the optimization of procurement, market sentiment is expected to recover, and the era of true innovation and true internationalization in pharmaceuticals will welcome returns. The layout of a self-controllable industrial chain under the background of tariffs will also see many catalysts in the second half of the year, driving the sector steadily upward. It is recommended to continue to layout around three areas: innovation-driven, internationalization + self-controllable + reform of out-of-hospital marketing models from a horizontal dimension.
CITIC Securities' main viewpoints are as follows:
Review of national organization of drug procurement and adjustment of medical insurance drug catalog:
The national organization of drug procurement has entered normalization, and the coverage of procurement continues to expand steadily. Affected by industry competition and policy changes, the price reduction in the tenth round of national drug procurement exceeded previous levels. In the first ten batches of national drug procurement, a total of 435 varieties were awarded, with a steady growth in the number of procurement varieties. The tenth batch in 2024 was the largest since the start of national drug procurement, with 62 varieties awarded. Affected by industry competition and policy changes, the price reduction in the tenth round of national drug procurement exceeded previous levels. According to the Shanghai Sunshine Pharmaceutical Procurement Network, the average price reduction of the first nine batches of national drug procurement remained stable at around 50% to 60%; however, according to industry media &#34;Yiqi Trend,&#34; the average price reduction in the tenth batch reached as high as 70%. We believe that the high price reduction in the tenth batch of national drug procurement is mainly due to industry competition and policy changes, such as the cancellation of the previous 50% price reduction mechanism for selection, and the 1.8 times circuit breaker mechanism causing quotes to bottom out.
In the 2024 adjustment of the medical insurance drug catalog, 76% of drugs successfully negotiated, with an average price reduction of 63%, consistent with previous years. More innovative drug varieties are included in medical insurance, with the proportion of domestic pharmaceutical companies continuing to rise. According to data from the National Medical Insurance Administration, the proportion of newly listed drugs within five years among the newly added drugs in the medical insurance catalog increased from 32% in 2019 to 98.9% in 2024, with 38 out of 91 newly added drugs being &#34;globally new&#34; innovative drugs. The medical insurance basket is &#34;exchanging old for new,&#34; with new products continuously increasing in the catalog, continuously reducing the burden on patients
According to data from the National Healthcare Security Administration, as of October 2024, the cumulative benefit of negotiated drugs during the agreement period has reached 830 million people, reducing the burden on patients by over 880 billion yuan. The National Healthcare Security Administration estimates that the new national medical insurance catalog in 2025 will reduce the burden on patients by over 50 billion yuan.
Overview of National Drug Procurement and Medical Insurance Drug Catalog Adjustments in 2025:
Policy Changes: Optimize drug procurement, the introduction of commercial insurance innovative drug catalog is imminent, and support for innovative drug development. In 2025, the government has repeatedly proposed policies to optimize drug procurement and support innovative drugs: 1) The government work report at the 2025 Two Sessions pointed out the need to improve the drug pricing mechanism, formulate an innovative drug catalog, and support the development of innovative drugs. 2) The government work report at the 2025 Two Sessions emphasized optimizing drug procurement policies, strengthening quality assessment and supervision, and ensuring that the public can use medications with more confidence. 3) The &#34;Opinions on Further Ensuring and Improving People's Livelihoods and Focusing on Solving Urgent Problems for the Public,&#34; issued by the General Office of the CPC Central Committee and the General Office of the State Council on June 9, focuses on two key areas: &#34;Strengthening Basic Projects&#34; and &#34;Basic Medical Insurance + Commercial Insurance.&#34; 4) Premier Li Qiang presided over a State Council executive meeting on June 13 to study measures for optimizing drug and consumable procurement. 5) On June 27, 2025, the 16th meeting of the Standing Committee of the 14th National People's Congress reviewed the &#34;Draft Medical Security Law of the People's Republic of China.&#34; We believe the most important point of this draft is that the scope of medical insurance fund payments will comprehensively consider opinions from multiple departments, and the trend of optimizing procurement may continue, with future procurement pricing expected to be more market-oriented. 6) On June 30, the National Healthcare Security Administration and the National Health Commission jointly issued &#34;Several Measures to Support the High-Quality Development of Innovative Drugs,&#34; which is beneficial for further improving support for the high-quality development of innovative drugs. 7) On July 10, the National Healthcare Security Administration announced the &#34;Work Plan for Adjusting the 2025 National Basic Medical Insurance, Maternity Insurance, and Work Injury Insurance Drug Catalogs and the Commercial Health Insurance Innovative Drug Catalog,&#34; among other related documents. 8) The National Drug Procurement Office has launched the information reporting work for the 11th batch of national organized drug centralized procurement and announced the selection situation of the 11th batch of procurement varieties. Following the principles of &#34;stabilizing clinical use, ensuring quality, preventing collusion, and avoiding internal competition,&#34; the work of reporting quantities by medical institutions will soon commence.
Changes in National Procurement: Avoiding internal competition without anchoring to the lowest price, strictly controlling quality, and scientifically selecting procurement varieties. The information reporting work for the 11th batch of national drug procurement will begin on July 16. According to reports from Shanghai Sunshine Pharmaceutical Procurement Network, Xinhua News Agency, Yicai, and Health News, we believe that the rules and price reductions for the 11th batch of national drug procurement are expected to be optimized. Key points include: 1) Scientific selection, &#34;procurement does not include new drugs, and new drugs are not procured,&#34; which is linked to negotiations for the medical insurance catalog. 2) Strict quality control, raising the threshold for bidding qualifications, increasing production quality inspection requirements, and targeted inspections for low-priced selected drugs. 3) Optimizing quantity reporting and volume-based rules, respecting clinical medication choices and allowing reporting by brand. 4) Optimizing bidding rules to avoid internal competition, no longer simply anchoring to the lowest bid and implementing a low-price declaration system. The 11th batch of national drug procurement involves 55 varieties, with a total terminal sales amount of nearly 44 billion yuan for public medical institutions, including Beite Pharmaceutical, KELUN PHARMA, FOSUN PHARMA, Shijiazhuang Four Pharmaceutical, Zhengda Tianqing, and Fuan Pharmaceutical
The number of approved varieties from companies such as Stone Pharmaceutical Group, Qilu Pharmaceutical, and New Hope is greater than or equal to 10.
National Dialogue Changes: Establishment of a Commercial Insurance Innovative Drug Catalog, Payment Side &#34;Three Exclusions&#34; Support for Innovative Drugs, Optimization of Basic Catalog Renewal Rules. The adjustment process for the 2025 National Basic Medical Insurance Catalog (hereinafter referred to as &#34;Basic Catalog&#34;) and the Commercial Health Insurance Innovative Drug Catalog (hereinafter referred to as &#34;Commercial Insurance Innovative Drug Catalog&#34;) has been initiated. The biggest change in this National Dialogue is the establishment of the Commercial Insurance Innovative Drug Catalog, forming a &#34;dual catalog&#34; parallel model with the Basic Catalog. The positioning of the Commercial Insurance Innovative Drug Catalog is expected to become a buffer platform for high-value innovative drugs, while the payment side provides &#34;three exclusions&#34; support, which is expected to help open up commercialization space for innovative drugs in China. Key points for the Commercial Insurance Innovative Drug Catalog include: 1) Selection Scope: New generic names or exclusive drugs for rare diseases approved for marketing within 5 years can be declared. 2) Usage Scope: The Commercial Insurance Innovative Drug Catalog recommends reference use for commercial health insurance and other multi-level medical security systems. 3) Formulation Procedure: The Commercial Insurance Innovative Drug Catalog is organized and formulated by the National Medical Insurance Administration, conducted simultaneously with the adjustment of the Basic Catalog. Commercial insurance experts have significant decision-making power regarding whether drugs enter the Commercial Insurance Innovative Drug Catalog and price negotiations. During the declaration phase, companies are allowed to choose to declare separately for the Basic Catalog or the Commercial Insurance Innovative Drug Catalog, or to declare both simultaneously. 4) Support for Accessibility of Commercial Insurance Innovative Drugs: Drugs within the Commercial Insurance Innovative Drug Catalog are not included in the self-payment rate indicators of the Basic Medical Insurance and the monitoring scope of alternative varieties selected in centralized procurement. Cases of innovative drug applications within the coverage of eligible commercial health insurance are not included in the disease-based payment scope. Regarding the Basic Catalog, renewal rules are optimized to reasonably control the price reduction of drugs during the agreement period, stabilizing new drug price expectations, which is expected to enhance the enthusiasm of pharmaceutical companies for new drug research and development. The Basic Catalog will undergo regular adjustments, with &#34;tight balance&#34; rules for adding and removing drugs.
Risk Factors:
Risks of intensified geopolitical friction; risks of macroeconomic recovery falling short of expectations; risks of volume-based procurement; risks of declining financing enthusiasm for first-tier market biopharmaceutical companies; risks of greater-than-expected price reductions and procurement progress for high-value consumables; risks of clinical research failures for innovative drugs; risks of medical service insurance policy changes; risks of medical accidents; risks of industrial policy changes falling short of expectations; risks of medical AI development falling short of expectations; risks of commercial insurance progress falling short of expectations, etc.
Investment Strategy:
We continue to uphold our previous industrial viewpoint, with the certainty of policy optimization trends such as centralized procurement strengthening. We believe that after the optimization of centralized procurement, market sentiment will recover, and the era of true innovation and internationalization in medicine will bring returns. The layout of self-controlled industrial chains under the tariff background will welcome many catalysts in the second half of the year, thereby driving the sector steadily upward. It is recommended to continue to focus on three areas: innovation-driven, internationalization + self-control + reform of out-of-hospital marketing models

600196

02196

002422

300194

CITIC Securities released a research report indicating that the trend of policy optimization such as centralized procurement is strengthening, and it is expected that the pharmaceutical sector will steadily rise in the second half of the year. Since 2025, the government has repeatedly proposed policies to optimize drug centralized procurement and support innovative drugs, and the commercial insurance catalog for innovative drugs is about to be released, creating a favorable pharmaceutical policy environment. It is recommended to pay attention to layouts in areas such as innovation-driven, internationalization, self-control, and reforms in out-of-hospital marketing models

Zhitong

FOSUN PHARMA

KELUN PHARMA

Fuan Pharmaceutical

CITIC Securities: The trend of policy optimization such as centralized procurement is strengthening in certainty, and the pharmaceutical sector is expected to steadily rise in the second half of the year