Well-known pharmaceutical companies have made efforts to high-end generic drugs, new drugs, high gross profit will continue.

A movie "I am not a drug god" adapted from the real purchasing of life-saving drugs brought the word "generic drugs" into people's vision. The so-called generic drugs, that is, after the end of the patent protection period of patented drugs, do not have the patent of the pharmaceutical companies imitation of alternative drugs. Generic drugs have the same therapeutic effect as the original drugs. At the same time, due to the relatively low price, generic drugs have become the choice for patients to reduce the burden of medicine.

On October 9, the National Health Commission issued the "Notice on Printing and Distributing the First Batch of Encourage Generic Drug Catalogue". The catalog includes 33 drugs including anti-cancer drugs, rare disease drugs and immune system treatment drugs.

Almost at the same time, pharmaceutical companies have begun to adjust the layout of generic drug products. Sun Piaoyang, chairman of Hengrui Pharmaceuticals, said publicly that Hengrui Pharmaceuticals has stopped a number of generic drug development projects based on the measurement of input and output. In addition, a number of pharmaceutical companies such as Simcere, Kelun Pharmaceuticals, Stone Pharmaceutical Group, Zhengda Tianqing have also started the transformation, completely abandoned low-end generic drugs, and began to embark on the road of combining high-tech barriers generic drugs and innovative drug research and development.

In an interview with reporters, Shi Lichen, an expert in pharmaceutical strategic planning, believed that with the nationwide expansion of the negotiation of purchase price with volume, low-end ordinary generic drugs have entered the era of meager profits, and new generic drugs with high technical barriers and innovative drugs have become the strategic direction of pharmaceutical companies.

Pharmaceutical companies "abandon the pawn to protect the handsome" transformation of research and development products

Hengrui Pharmaceuticals started with generic drugs and occupied the leading position in the industry. So far, the revenue of generic drugs still accounts for a considerable proportion of the total revenue of Hengrui Pharmaceuticals. Financial report data show that the annual sales volume of Hengrui Pharmaceutical's 1.1 innovative drug Eitan (apatinib mesylate tablets) reached 1.7 billion billion yuan, but it has not exceeded the sales data of the company's generic drugs. In 2018, generics contributed 86% of Hengrui Pharmaceuticals's revenue, while innovative drugs accounted for 14%.

According to the data, the early Hengrui Medicine mainly imitated broad-spectrum anti-cancer drugs and surgical drugs. As of 2014, Hengrui Medicine has approved more than 100 generic drugs for clinical and production, covering tumors, angiography, anesthesia, diabetes and Cardiovascular and other medical fields.

Since 2018, Hengrui Pharmaceuticals has increased its research and development efforts in innovative drugs. The 2018 annual report shows that in 2018, the company has invested a total of 2.67 billion yuan in research and development, accounting for 15.33 of its sales revenue that year; in 2019, the investment in research and development will exceed 3 billion yuan. At present, there are dozens of innovative drugs in the pipeline, and five innovative drugs have been approved.

Since September this year, with the "4+7" volume procurement pilot nationwide expansion, the price of selected generic drugs has dropped significantly. For example, Qilu Pharmaceutical's blood lipid regulating drug Atorvastatin has the largest drop, reducing the price by 78.18 on the basis of last year's bid price of 0.55 yuan/tablet.

The 33 drugs in the first batch of encouraged generic drugs released by the National Health Commission are all clinically necessary, effective and in short supply. In fact, the state has always been encouraging the supply of generic drugs, and has issued corresponding policy support, giving priority to the review and approval of generic drugs included in the list of encouraged generic drugs.

Hengrui Pharmaceuticals is not the only generic pharmaceutical companies seeking transformation under multiple pressures. Zhengda Tianqing 2019 new project products in 70% are innovative drugs, generic head enterprise Shiyao Group also began to new targets macromolecular biologics, small molecule new drugs, original chemical drugs 3 types of new drugs, etc., generic drug research and development has also shifted to high-end generic drugs with high technology content.

In Shi Lichen's view, "Hengrui is one of the few pharmaceutical companies with very strong research and development capabilities at the top of the tower. It is completely possible to make new generic drugs with high technology and high profits instead of generic chemical products." More importantly, he believes that after the implementation of volume procurement nationwide, it is very obvious that the price negotiation at the national level is getting stronger and stronger, especially for most ordinary generic drugs, and even if the price of new generic drugs developed is not as high as in the past, it cannot enter the era of low profit.

As for whether this adjustment of pharmaceutical companies will bring about price fluctuations in the generic drug market, there are no more than ten companies like Hengrui in the country. The level of research and development capabilities of most domestic pharmaceutical companies is not enough. As long as there is a market for ordinary generic drugs, they will Continue to produce, so the strategic adjustments of large pharmaceutical companies have little impact on the market prices of generic drugs.

It is too early to reshuffle the generic drug market

At present, more than 4700 domestic pharmaceutical companies are basically developing generic drugs, a small part of which are generic drugs plus innovative drugs. API drug companies and production drug companies related to the list of encouragement by the Health and Health Commission will usher in a new wave of dividends, and from 2020 onwards, a catalogue of drugs that encourage imitation will be released before the end of each year. At the same time, the knockout competition in the generic drug market is intensifying.

Consistency evaluation is a "hurdle" in the purchase of generic drugs, which refers to the quality consistency evaluation of generic drugs that have been approved for marketing according to the principle of consistency with the quality and efficacy of the original drugs, so that the quality and efficacy of generic drugs can reach the level consistent with the original drugs.

Liaoning Drug Collection Center issued a notice on October 14, saying that for 177 unevaluated drugs that have been purchased online in Liaoning Province, the qualification for online procurement will be suspended. Unevaluated drugs that have not been purchased online in Liaoning Province will not be included in the scope of centralized drug procurement in the province for the time being. At least 12 provinces and cities, including Jiangxi, Zhejiang, Guangxi, Shaanxi, Gansu, Fujian, Jilin, Hebei, Tianjin, Hunan and Heilongjiang, have implemented this policy. Those drugs that have not been evaluated under the same general name will soon face the fate of suspending the Internet.

Public information shows that more than half of the varieties that have disclosed consistency evaluation R & D costs are more than 5 million yuan. Therefore, the pharmaceutical companies with a large number of generic drug consistency evaluation applications are relatively strong in pharmaceutical R & D strength, a large number of varieties, and a relatively rich product line in my country, such as Qilu Pharmaceutical, Yangzijiang, China Biopharmaceuticals, Hengrui Pharmaceutical and other companies.

Shi Lichen believes that the generic drug market will be strong and weak. Enterprises with strong research and development capabilities and strong resource projects will occupy most of the market, while the weak may even be short of funds for consistency evaluation and can only rely on the existing chemical drug market to survive.

"There are less than 300 pharmaceutical companies with research and development resources and talent team platform capabilities. It is too early to say that the generic drug industry is reshuffling. At present, products purchased with large quantities still account for a small number of products in the entire pharmaceutical market, and a large number of chemical generic drugs still have market demand." Shi Lichen believes that when the number of products purchased by the state reaches more than 500, then the large-scale reshuffle of the industry will begin.

In its 2019 white paper on China's health industry, Yikai Capital pointed out that "4+7" volume procurement directly touched the most sensitive nerves in the field of generic drugs, which led to the collapse of the original price system and the reshaping of business logic. Taking statins as an example, after the 68% price reduction of atorvastatin, other statins cannot maintain the original price, and may even make a larger price reduction in order to compete for market share. In the future, even if generic pharmaceutical companies complete the adjustment of sales model, performance recovery, profit and growth rate to recover, valuation premium is difficult to return to historical highs.

Nowadays, under the trend of pharmaceutical market reform, the era of profiteering of new generic drugs is basically over. In Shi Lichen's view, "the purchase of the first imitation drug with quantity will not be too hard at the beginning. For example, it is normal to sell 20,001 boxes of the original research drug and 18,000 boxes of the first imitation drug. When two or three imitation drugs come out, the purchase price will be negotiated." However, this requires a certain time process, so the era of high gross profit of new generic drugs will continue for a long time.

"Many pharmaceutical companies have piles of products, even hundreds of thousands, but there are fewer and fewer competitive products." Shi Lichen believes that the current pharmaceutical companies should first sort out their product strategies and capture what they can from existing policies and opportunities, such as making children's drugs or making tumor drugs. Enterprises without research and development capabilities should simply purchase projects and participate in the new generic drug market through acquisition cooperation. Focusing on the main business and highlighting competitive advantages is also a trend for international pharmaceutical companies.

More information

Beginning of winter | Frost Dyes Everything, Beginning of Winter

Join Nanjing API Exhibition to Talk about the Future of Medicine | Hubei GeDian Humanwell Pharmaceutical Attends 89th API China Exhibition

Exhibition Invitation | Hubei Gedian Humanwell Pharmaceutical Auxiliary Invites You to Attend the 89th China Pharmaceutical API/Intermediate/Packaging/Equipment Fair (API China)

Mid-Autumn Festival X National Day | For the Prosperity of Universal Celebration, and Haoyue classmate