comeSource | Cyberblue (unauthorized reprinting is prohibited)

engage by special arrangementWritten by | Dong Zecheng

Enterprises are an important part of China’s pharmaceutical industry. Like other members of the pharmaceutical industry, imitation pharmaceutical companies have made great contributions to the development of China’s health cause in the past 30 years.

In recent years, generic pharmaceutical companies are facing difficulties. The fundamental reason is that the domestic economic development has entered a new era of pursuing high quality, high efficiency and fairness, and all walks of life, including the pharmaceutical industry, have to change their development ideas and models.

At present, only by carrying out consistency evaluation, doing a good job in the research and development of generic drugs, and actively participating in all kinds of centralized procurement, can generic pharmaceutical companies get through the current predicament.

Specifically, the difficulties faced by generic pharmaceutical companies have the following specific reasons:

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Five reasons why generic pharmaceutical companies are facing difficulties

The first is the adjustment of generic drug prices.The quantity procurement implemented in 2018 has gradually reduced the price of domestic generic drugs to the level of international standards. The correction of generic drug prices is the direct reason why generic drug companies are facing profit pressure.

The second is the strengthening of industry supervision.In the early days of pharmaceutical marketization, the supervision of all links in the generic drug ecological chain, including R&D, access, quality, production and sales, was relatively loose, and everyone’s life was relatively better. In the era of high-quality development, the supervision of the above links has been significantly strengthened, and some debts owed in the past high-speed development period are gradually being made up.

The third is the pain caused by the reform of the medical supply side.The supply-side reform of medicine is the only way for the high-quality development of medicine. The result of removing excess capacity will inevitably affect generic pharmaceutical companies.

The fourth is the international environmental impact.The international pressure that China will inevitably face after its peaceful rise, and the rising oil price caused by the conflict between Russia and Ukraine, all put pressure on the operation of generic pharmaceutical companies at this stage.

Fifth, the COVID-19 epidemic.The impact of the COVID-19 epidemic on pharmaceutical companies is mainly limited in all aspects. Since 2022, the epidemic has continued to have a great impact on the pharmaceutical industry.

Since March, two megacities, Shanghai and Beijing, have been under blockade and regional control, and the epidemic situation in other parts of the country has had a great impact on pharmaceutical companies. The main impacts include limited medical institutions’ diagnosis and treatment, limited patients’ seeing a doctor, limited movement of medical practitioners, limited sales of related products such as colds, and the year-on-year decline in the incidence of some diseases.

The COVID-19 epidemic and the conflict between Russia and Ukraine not only brought troubles to the production and operation of pharmaceutical companies, but also had a great impact on the psychological level of medical people.

Since the medical reform entered the real deep water area in 2015, many people of insight in the industry have realized the arrival of the crisis. Some pharmaceutical companies have seized the time to transform successfully, and some pharmaceutical companies are still in the state of boiling frogs in warm water.

Looking back at the current time node, some original predictions are gradually becoming a reality. For example, many years ago, someone predicted the future ecological circle pattern of domestic pharmaceutical industry.

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Future domestic pharmaceutical industry pattern

What is the ecological circle pattern of domestic pharmaceutical industry in the future?

Many generic pharmaceutical companies will inevitably withdraw from the historical stage in the wave of supply-side reform in the era of high-quality development. The future pharmaceutical industry ecology may be like this:

First, 3-5 head pharmaceutical companies with sales or market value exceeding 100 billion.This should include generic drug predators, giant central enterprises, innovative drugs upstarts and senior traditional and established pharmaceutical companies. TOP1 pharmaceutical companies may exceed 200 billion sales or market value.

The second is about 30 waist pharmaceutical companies with sales or market value of 10-50 billion yuan.There are mainly traditional established pharmaceutical companies (generic drugs+innovative drugs), innovative pharmaceutical companies and central enterprises, and there are almost no pure imitation pharmaceutical companies.

The rest are about 300-500 small and beautiful companies.Sales or market value is not large, mainly concentrated in a certain field such as rare diseases, anti-infection, tumors, mental nerves and so on. A company that has developed a single product but caters to the needs of the development of Chinese disease spectrum may be a small and beautiful pharmaceutical company. Many of these companies have developed from Biotech, and there will be no traces of imitation pharmaceutical companies at all.

The research and development of innovative drugs itself is characterized by long cycle, high risk and large investment. Some private enterprises are not strong in financial strength, and state-owned enterprises have always been less enthusiastic about investing in innovative drugs because of mechanism reasons.Therefore, it is probably the fate of many generic pharmaceutical companies to continue to cultivate generic drugs.

If so, the future competition seems very realistic and cruel. But this is the future after all. How can the current generic pharmaceutical companies tide over the difficulties and achieve transformation? How to live with time for space in the transition period?

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The way out for generic pharmaceutical companies

The first is to protect the existing approvals.The domestic pharmaceutical market is gradually returning to the era of "product is king" from "marketing is king" and "market is king". Drug approval is the most important asset of pharmaceutical companies. For generic drugs, consistency evaluation must be done as much as possible, and the evaluation should be exhausted. copyThe consistency evaluation of drugs is changing from the previous product life and death symbol to the amulet of future generic drugs.

The product assets of future generic pharmaceutical companies are mainly reflected in the number of products that have passed the consistency evaluation. Even if you now have 500 generic drug approval numbers, but only ten have passed the conformity evaluation, then the future assets are these ten, plus the products that cannot be evaluated in conformity. Because the policy is getting tighter and tighter, medical institutions will stop selling products that have not been evaluated after the implementation of national procurement.Please note that medical institutions stopped selling, not the internal standard market..　

Many of the generic drugs mentioned just now that cannot be evaluated for consistency are because there is no reference preparation. Why is there no reference preparation? This may be related to the China characteristics of new drug development in previous years. This kind of products are similar to many exclusive products of Chinese patent medicines. At present, there is no clear statement on how to manage them in the future, but the author is not optimistic about this kind of products (many of them are so-called exclusive products, exclusive dosage forms and exclusive specifications).

The second is to seize the time window to do the research and development of imitation new drugs, and exchange time for space.

Consistency evaluation+centralized procurement has reshaped the domestic drug business logic, which has given birth to many opportunities, including products that have been adopted in China. Some enterprises have achieved overtaking in corners because of winning the bid; Some pharmaceutical companies cater to the policy trend and quickly develop suitable products to fight for national adoption, and they have also done a good job.

Crisis crisis has always been the coexistence of "danger" and "opportunity". Imitation pharmaceutical companies should make research and development projects of generic drugs with optimistic attitude, keen insight, professional judgment and moderately advanced investment awareness.

In this round of centralized procurement, pharmaceutical companies in Shandong, Sichuan, Hebei and Zhejiang have actively participated in the national procurement because of their unfocused consistency evaluation, and have basically established the market position of future head imitation pharmaceutical companies. This fact should arouse the profound reflection of other generic pharmaceutical companies, and reflect on their own sensitivity in understanding national policies and their gains and losses in the company’s development strategy.

The reality is that due to policy changes, the valuation of generic drugs has dropped by 1/2 to 4/5, and the development of generic drugs is becoming more and more difficult. It is a job of catching mice in porcelain shops and embroidering needles. But there is still a chance,It is to seize the development and fight for the country.

Since 2022, the author has cooperated with the company’s R&D department to intensively investigate more than 100 projects for the establishment of generic new drugs. Most of them are worthless, but some projects still have good business prospects. Even in the face of various policy changes in the future, the deduction results of our sales scenarios are optimistic, and we feel that the risks are relatively controllable. Specifically, the current research and development of generic drugs needs to pay special attention to the following dimensions.

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Five dimensions of generic drug research and development project

First, the stock market should be large enough.The biggest charm of national mining lies in the quantity and the reshuffle of the stock market. Therefore, the stock market is an important dimension. If the stock exceeds 1 billion, about 500 million will be valuable, and the market of 100 million will depend on listed manufacturers, consistency evaluation and the number of R&D companies. Those below 100 million should pay attention to risks.

Second, there are as few listed manufacturers as possible.This is the same as the previous generic drug research and development project, "first imitation as much as possible."

Third, there are as few manufacturers under research as possible.This is the same as before.

Fourth, the bid price is competitive without national mining or centralized mining.Because the purpose of development is to fight for national adoption, it is easy to understand that there is no national adoption. However, the reality is that it has been almost four years since the national drug collection was carried out. Under the background of "all drugs should be collected", I am afraid that most commonly used clinical drugs will be collected in the future. It doesn’t matter, there is also gold in the products that have been collected. Because of the introduction of the national mining renewal rules, sometimes it has unique value, which requires our discerning eyes to gain insight and consider various scenarios at the same time when establishing the project.

The fifth is to investigate the market access attributes of products such as medical insurance and basic drugs.Judging from the previous batches of national procurement, the probability of national procurement of non-medical insurance products is small, and the basic drugs are all medical insurance products, while the policy orientation is that the attributes such as medical insurance basic drugs are becoming more and more important in the standard market. Are these lines particularly wrapped around? No way, the project of generic drugs is to fully consider the various possible combinations of each generic drug label and deduce various possible scenarios in the future.

The supply-side reform of medicine cannot be achieved overnight, and it will take a long time to establish the era of high-quality development of medicine. The reshaping of the pharmaceutical industry ecosystem mentioned above may come when the strategy of "Healthy China 2030" is reached.

Therefore, it is the only way for generic pharmaceutical companies to break through the current difficult period by seizing the time to do a good job in the consistency evaluation of generic drugs, research and development projects, and trading time for space.