Finance Association, Feb. 29 (Reporter Zhang Liangde) “The biggest highlight of the pharmaceutical industry this year is the expansion of the new version of the basic drug catalogue.” A few days ago, a chief analyst of the brokerage pharmaceutical industry told the Financial Federation reporter at the 20th International Complications Medicine Conference.

However, the expected biggest beneficiaries in the new version of the basic drug catalogue are traditional Chinese medicine companies and pediatric drug manufacturers. Professor Fang Yu of the School of Pharmacy of Southwest Jiaotong University believes that there may be four new adjustments to the basic drug catalogue, including expert updates, method innovation, variety refinement, and integrity innovation. Among them, the important point of maintaining integrity is supporting the development of traditional Chinese medicine and variety refinement for the first time.

The list of basic medicines may strengthen support for the development of traditional Chinese medicine

Companies and industry experts have expressed high expectations for the publication of the new version of the basic drug catalogue. Shen Yong, chairman of the China Medical Health Development Promotion Expert Committee and chairman of Beijing Shengshi Kanglai Traditional Chinese Medicine Marketing Planning Company, told the Financial Federation reporter: “The industry has always been looking forward to it. There was news in the second half of last year (2023) that a new version of the basic drug catalogue would be published. It is expected that this year (2024), it should be promulgated.”

Entering the new version of the basic drug catalogue is beneficial for this drug to enter the hospital market for sale. At the same time, since drugs that meet the essential drug catalogue are prioritized for inclusion in the medical insurance catalogue, it is also a stepping stone for the product to enter the medical insurance catalogue.

Since the establishment of the National Essential Medicines Catalogue in 2009, it has been adjusted twice in 2012 and 2018. This is the third time. The latest 2018 edition of the catalogue of basic medicines has a total of 685, including 268 types of proprietary Chinese medicines (including ethnic medicines) and 417 types of Western medicines. The proportion of traditional Chinese medicines is low.

Fang Yu believes that in this new version of the basic drug catalogue adjustment, it may be imperative to moderately expand the range of basic drugs. On the one hand, a large number of superior varieties have been accumulated over the past three years, and at the same time, some varieties will also be adjusted. In drug selection, equal emphasis is placed on Chinese and Western medicines. Among them, proprietary Chinese medicines may tend to focus on traditional Chinese medicines that have accumulated a lot of evidence and high clinical value in clinical application.

A staff member of a pharmaceutical manufacturing company said that the basic drug catalogue is different from the medical insurance catalogue. The basic drug catalogue does not require the company's own declaration; it is selected by experts.

At the 20th International Conference on Complications, Professor Shi Luwen, head of the Department of Pharmacy Management and Clinical Pharmacy at Peking University School of Pharmacy and director of the Peking University International Research Center for Pharmaceutical Management, said that companies don't need to worry too much about when the new version of the basic drug catalogue will be published, because on a legal basis, the basic drug catalogue has already been introduced into law and is an important part of the national drug system. Because doctors choose how to issue prescriptions based on drug evidence, companies only need to prepare drug evidence for their own drugs.

This may be good news for some listed Chinese medicine companies. Since the traditional Chinese medicine industry has strengthened the evidence base of drugs and the emphasis placed on clinical work in the past two years, the pillar products and exclusive products of these pharmaceutical companies are worth focusing on. In particular, for traditional Chinese medicine manufacturers with exclusive products, once the products enter the basic drug catalogue, they can take advantage of policy dividends such as “1+X” and “986,” as well as advantages such as speeding up the Internet, not setting up drug proportions, and priority clinical use.

Panlong Seven Tablets, the main variety owned by Panlong Pharmaceutical (002864.SZ), is the company's exclusive variety. It is a medical insurance drug, but it has not entered the basic drug list. The company has indicated that Panlong Seven tablets have reached a high level of evidence-based medicine and have the conditions to enter the basic drug catalogue.

Guilin Sanjin (002275.SZ) said in an investigation last year that the company has been watching the adjustment of the basic drug catalogue and strives for two to three varieties to enter the new catalogue, which will positively drive the company's overall sales throughout the year. Currently, Guilin Sanjin's core varieties, Sanjin tablets and clam anti-asthma capsules, have all entered the 2018 edition of the basic drug catalogue. However, exclusive varieties such as Guilin Watermelon Cream, Neomatai capsules, and Sanqi Ximuning capsules have yet to enter the basic drug catalogue. Guilin Sanjin Pharmaceutical invests heavily in evidence-based medicine research and development, and its drug evidence is sufficient. According to the criteria for considering the new version of the basic drug catalogue mentioned above, there is a high probability that its products will enter the catalogue.

Separate classification of pediatric drugs highlights market opportunities

Fang Yu said that since the September 2021 “Outline for Child Development in China (2021-2030)” stated that it was necessary to explore the formulation of a national children's essential drug catalogue, and the “Administrative Measures on the National Essential Drug Catalogue (Revision Draft)” of the same year proposed that separate medications for children would be listed, there is a high probability that the current basic drug catalogue will list a separate pediatric drug catalogue.

In the past two years, the growth rate of traditional Chinese medicine pediatric medication has been significantly faster than the overall growth rate of the industry. Shen Yong told the Financial Federation reporter, “The market size of all traditional Chinese medicine pediatric medicine terminals is about 30 billion yuan, including 12 billion yuan in the hospital market and 18 billion in the out-of-hospital market. Judging from the growth rate, the pediatric traditional Chinese medicine market is growing significantly faster than the development rate of drugs for other diseases in the traditional Chinese medicine industry. Compared with 2023 and 2022, its growth rate is about 21%. If pediatric drugs are listed separately in the new version of the basic drug catalogue, it is expected that the growth rate of this market will accelerate.”

Fang Yu expects that drugs suitable for children will be given priority consideration in documents and regulations such as China's clinical practice guidelines, the “China National Prescription Collection”, and medical insurance catalogue.

Regarding the key development categories of traditional Chinese medicine pediatric medicine, Shen Yong said, “From a medical point of view, there are more than 200 pediatric diseases, but physicians have about 20 of the most common pediatric diseases. According to my team's statistics in market research, these are the 2 diseases that rank highest among pediatric diseases and have the highest incidence rate in children: one is cold and fever, and the other is abdominal pain and diarrhea. These two diseases probably account for more than 80% of all common childhood diseases. It can be seen from this that drugs to treat respiratory diseases in children and drugs to treat digestive diseases in children are key markets in the field of pediatric pharmaceuticals.”

In addition to favorable industry policies in the new version of the basic drug catalogue, the country is also stepping up efforts to build pediatric departments in traditional Chinese medicine hospitals. In November 2023, the State Administration of Traditional Chinese Medicine issued the “Notice on Further Strengthening the Pediatric Construction of Traditional Chinese Medicine Hospitals”. It is expected that by 2025, the country will have full coverage of pediatric settings in third-level traditional Chinese medicine hospitals and integrated traditional Chinese and Western medicine hospitals, more than 80% of second-level traditional Chinese medicine hospitals and traditional Chinese and Western medicine hospitals will have pediatric departments, and ethnic minority medical hospitals will set up pediatric departments in line with actual practice.

Currently, domestic companies with pediatric pharmaceuticals as their main development direction include Yabao Pharmaceutical (600351.SH), Sunflower Pharmaceutical (002737.SZ), and Huluwa (605199.SH). According to Sunflower Pharmaceutical's investor interaction, overall pediatric pharmaceuticals currently account for about 43% of the company's sales.

With the clear development prospects of the market, a number of listed traditional Chinese medicine companies have increased their layout in the field of pediatric medicine.

Tailong Pharmaceutical (600222.SH) indicates that Shuanghuanglian Oral Liquid (children's type) is the company's exclusive product. At the same time, the company also has pediatric medicines such as pediatric fever and cough relief oral liquid, pediatric antipyretic oral liquid, and the exclusive product Pediatric Compound Chicken Neijin chewable tablets. The holding subsidiary of the company, Xinleading and Huluwa Pharmaceutical Group jointly funded the establishment of Hangzhou Kangleading Pharmaceutical Technology Co., Ltd. in Hangzhou to lay out the field of high-end pediatric drug research and development and promote research and development of pediatric drugs.

Enwei Pharmaceutical (301331.SZ) completed the acquisition of Henan Confidence Pharmaceutical in 2023. A company management source told the Financial Federation reporter that Confidence Pharmaceutical has 125 proprietary Chinese medicine products approved by the state. The company values some of its pediatric and respiratory products. Among them, the exclusive product “Health Pills” is the company's core product.

In an investor interaction, the company's director also expressed the importance he attached to the traditional Chinese medicine pediatric medicine market: “Pediatric medication is one of the core tracks of the company's key layout. The company has always been optimistic about its future development prospects, and will continue to invest more resources in this segment and continue to expand its market share.”

In the out-of-hospital market, with regard to the special characteristics of the pediatric drug market, Shen Yong said, “Since children have delicate organs, many organs are still growing and developing, so parents pay more attention to the safety of drugs in addition to efficacy when using medicines for children. Because traditional Chinese medicine products have the characteristics of 'few side effects and high safety'. Therefore, when it comes to choosing products for pediatric use, clinicians and parents of children are more willing to use some big brands, established drugs, and long-established traditional Chinese medicine brands, while parents are relatively less willing to try some new drug types and new brands.”