The national centralized procurement form of volume-based procurement has reduced the prices of a large number of domestic generic drugs, imported original drugs, and high-value consumables through "quantity in exchange for price," allowing patients to truly enjoy the policy benefits of healthcare reform. However, the reform is neither instantaneous nor everlasting. After six years, volume-based procurement is still a work in progress.

Looking back, volume-based procurement has actually brought impact to numerous practitioners, but why do many of them still give it a thumbs up? After six years, has the implementation of volume-based procurement achieved the expected effects, and what optimization spaces are there? What is the real view of the industry on volume-based procurement, and what kind of emotional journey have they been through with the arrival of centralized procurement?

In order to report the more authentic impact of centralized procurement, reporters from the Star Daily went to the front line for investigation.

On November 5, 2020, coronary stents became the first high-value consumables to be centrally procured nationwide in Tianjin through bidding. Through competitive bidding, 10 selected products were finally chosen, with an average price reduction of up to 93%.

Nearly four years have passed since its implementation. From over 0.01 million yuan in the past to less than a thousand yuan now, how do the winning enterprises adapt to the sudden drop in pricing for coronary stents? How do they ensure the production quality of the stents with such a huge price gap?

With these questions in mind, the reporters of the Star Daily recently conducted on-site investigations with the two winning enterprises with the largest market share in the domestic coronary stent market: MicroPort (00853.HK) and Blue Sail Medical (002382.SZ).

Shanghai MicroPort: Introducing the concept of automated production.

In the coronary stent and coronary balloon product production line of Shanghai MicroPort Medical Instruments (Group) Co., Ltd. (referred to as 'Shanghai MicroPort') under MicroPort, reporters saw that workers in uniform were orderly carrying out production, and the screen at the front of the production workshop was updating the product quantity in real time...

Four years ago, when the country organized centralized volume procurement results for coronary stents, Shanghai MicroPort won bids for two types of coronary stent products, with the total intended purchase volume of the selected products ranking first among all companies. The bid-winning products complete the entire process from production and quality inspection on this production line to delivery to medical institutions.

Although the price of coronary stents has dropped significantly compared to before the centralized procurement, Shanghai MicroPort has not slackened in its quality control over products. This was the case in the past, and even more so now.

According to Zhao Yuegen, Senior Vice President of Supply Chain and Intelligent Manufacturing at Shanghai MicroPort, the company has continuously introduced new management modes and methods in the past two years, upgrading production lines and further enhancing automation capabilities, which has already shown significant results:

"We have established a complete traceability system, with each product having a unique UDI (Unique Device Identification) code. The completed stents are placed in small bottles, each with a QR code on top, which is the UDI code for that particular stent. Through this QR code, we can trace when this stent was processed, on which machine, and who the operators were..."

"Stents come in different models and specifications. How do we ensure that the products are not assembled incorrectly? This brings us to a set of technology we developed ourselves. During the production process, above the work area of the key assembly process, there is a real-time image on the screen, which is a visual system that automatically identifies the product specifications being processed. After inputting the processing work order information into the system, if the identified specifications do not match the parameters in the system, the machine will stop operation."

"Sometimes we receive feedback from hospitals. Doctors may feel that a certain stent looks like it has the wrong specifications. Using the UDI code for traceability, we provide them with photos and data of the production process to prove that the product is fine and ask the doctors to use it with confidence," said Zhao Yuegen.

He stated that through automation transformation, production control of coronary stents and coronary balloon products will be more robust, avoiding human errors during the production process. This will not only further improve the quality stability of the products but also reduce production costs.

For MicroPort in Shanghai, this is also one of the preparations for "going global." Zhao Yuegen told the reporter of "Star Market Daily" that the work of promoting MicroPort's stent products to the US market is in progress. Although they have not yet undergone an FDA on-site inspection, the company's confidence lies in the completely upgraded production line.

Cardiovascular intervention, mainly coronary stents, has always been the profit core of MicroPort Medical. However, affected by centralized procurement and factors such as the epidemic, the profitability of this part of the business has dropped significantly. It was not until 2023 that they turned losses into profits, after submitting the first annual report with losses in five years in 2020.

It is worth mentioning that in response to centralized procurement and seeking new growth points, MicroPort Medical actively explores overseas markets. After the centralized procurement, the company's overseas coronary business has maintained rapid growth. As of the first half of 2024, the revenue from coronary intervention business was 0.092 billion US dollars, a year-on-year increase of 13.5%; of which the overseas revenue was 0.025 billion US dollars, a year-on-year increase of 56%, with overseas business accounting for nearly 30%.

"Although there is a stronger sense of crisis for enterprises after centralized procurement, the policy, in the long run, can promote healthier development of companies. Taking MicroPort Medical in Shanghai as an example, after centralized procurement, not only have we performed better in overseas markets, but the research and development of innovative products have also accelerated. Before centralized procurement, we only had one national green-channel product for coronary stents, but after centralized procurement, just in these 3 to 4 years, we have added three more." Said Yue Bin, President of MicroPort Shanghai.

Among them, Shanghai MicroPort's self-developed global first new generation of fully biodegradable absorbable cardiac stent Firesorb has been approved in July of this year, and is expected to become the company's new growth driver. Yue Bin told reporters that after the launch of Firesorb, the commercial plan is divided into three steps: based on NMPA certification, the first step will focus on the domestic, Southeast Asian, and Latin American markets; the second step will enter the European market; and finally, layout in the US market.

In addition, Shanghai MicroPort is also accelerating the research and development of active products for cardiovascular interventions to further enrich the company's product line. The rotational grinding system has submitted the NMPA registration application, and the shockwave balloon has completed clinical follow-up.

"We hope to focus on developing a complete solution for cardiovascular disease. In addition to matching biodegradable stents, we also have OCT imaging equipment, specific balloon rotablator and shockwave balloons to help with front-end processing before using biodegradable stents." Yue Bin stated.

In Yue Bin's view, MicroPort in Shanghai is an ambitious enterprise that will not be satisfied with just relying on a traditional product to seek high profits. The stents had a long sales period before centralized procurement, allowing the company's research and development efforts to cover them, thus being included in centralized procurement is an overall trend.

"But for those innovative medical products that have not been on the market for long, we hope to provide more policy space. If an innovative product is just launched and its price is reduced through centralized procurement, without certain profit support, the company's innovative research and development may be difficult to continue," he said.

Blue Sail Medical: Concentrating all efforts to ensure supply

Although starting with medical gloves, Blue Sail Medical started manufacturing coronary stents very early on. Blue Sail Medical's subsidiary, Jiwei Medical, obtained the first registration certificate for a coronary stent product in December 2005, which was a stainless steel stent.

"At that time, the domestic stent market was almost dominated by imported brands, with few domestically approved stents. So, to some extent, our entry also filled a gap in the domestic market. Especially after we obtained the certificate, the market price of stents started to decrease further, gradually becoming lower," a Blue Sail Medical spokesperson told reporters.

But until the first volume-based procurement in November 2020, the stent prices of 'average 0.013 million, imported 0.02 million' remained relatively high. Volume-based procurement then led to this price dropping to less than a thousand yuan. Blue Sail Medical's Jiwei Medical Excrossal (Xinyue) stent was awarded at the lowest price in the country - 469 yuan, a price reduction of over 96%.

In fact, for Blue Sail Medical, making this decision was not easy at the time: the company's stainless steel stents were not included in this centralized procurement, which could have led to a gradual exit from the market. This would leave only one 'lonely' stent. If it did not win the bid, it would undoubtedly mean giving up this market. So, where should the other stent products under development go?

"As a company, we can recognize that centralized procurement is an inevitable trend in the industry and an important measure for the country to deepen the reform of the medical and health system. Our speculation at that time was that, during the initial phase of centralized procurement, we might feel pressure, but in the long run, it would help improve the accessibility of products," the spokesperson said.

While squeezing price margins, centralized procurement changed the original distribution model. Therefore, during the initial implementation of stent procurement in 2021, the supply of coronary stents was not very stable. However, Blue Sail Medical, having made sufficient preparations before and after centralized procurement, was always able to ensure supply while stocking in over 2,000 hospitals nationwide.

In 2022, due to the impact of the epidemic, it was difficult to import upstream raw materials, affecting the production and supply of brackets. Blue Sail Medical's subsidiary, Pacific International in Singapore, has urgently reallocated resources to ensure the supply of raw materials and product production domestically. They have guaranteed product supply by improving and timely distributing service networks, thereby minimizing the impact of the epidemic on the use of brackets by medical institutions.

In addition, in order to better serve clinical needs and further promote the selected product usage, Blue Sail Medical will regularly provide product and operation training for clinical staff based on product characteristics and usage situations. They also cooperate with and supervise distribution companies to provide products and after-sales services on time and with good quality, addressing issues such as high channel distribution costs and declining service quality.

For instance, Blue Sail Medical is currently the only manufacturer in the market that offers free product replacement for failed products due to severe calcification or twisting of the diseased area during the surgical procedure, as well as for expired products of models that are not commonly used. To address issues such as high distribution costs for remote medical institutions, increased SPD fees by some medical institutions affecting distribution company costs, and slow payments from certain regional medical institutions, Blue Sail Medical provides additional distribution points and supports SPD cost policies to distribution companies, along with extending credit terms to 6 months to ensure the success of centralized procurement.

It is this perseverance and dedication that has gradually earned Blue Sail Medical recognition from medical institutions and medical insurance departments. In 2021, Blue Sail Medical's centralized procurement agreement volume was 0.156 million units, with an actual annual supply volume of over 400,000 units, increasing the number of serviced hospitals from over 1,300 to over 2,000. After three years of centralized procurement, the cumulative agreement volume for Blue Sail Medical was 0.616 million units, with an actual supply volume of 1.264 million units. Following centralized procurement, Blue Sail Medical's domestic market share has significantly increased, promoting the company's strong development within the industry.

In recent years, many of Blue Sail Medical's research achievements have entered the harvest period, with over ten products obtaining registration certificates, including the Biofreedom bracket and the BiotonUminomoci coated coronary artery balloon dilatation catheter (BA9 DCB). These two exclusive original innovative products have gained high market recognition after their launch, with their sales revenue accounting for approximately 20% of the company's sales revenue in the Chinese region in 2023.

"In the first year of commercialization, the sales volume of BA9 DCB exceeded 0.02 million units. The rapid increase in sales is due to the use of centralized procurement, which has significantly boosted Blue Sail's brand awareness," the spokesperson told reporters.

After centralized procurement, the prices of brackets have decreased, significantly squeezing business profit margins. Therefore, it is necessary to respond by optimizing production processes, reducing costs, and improving efficiency. Blue Sail Medical emphasized to reporters that cost control will always be carried out while ensuring quality.

"Throughout our production process, we have over twenty steps, with fourteen critical steps undergoing 100% inspection. Additionally, we conduct data analysis on the quality system's operation status monthly, taking preventive measures against abnormal trends, continuously improving the quality system, and employing a mode of 'routine monthly checks, quarterly self-checks, semi-annual external checks, annual comprehensive checks, and random simulated spot checks' for internal inspections. Internal checks include quality inspections of daily company operations, quarterly internal system self-checks, at least two external audits annually by bodies such as TUV and BSI, as well as comprehensive review or spot checks by external agencies or personnel at least once a year," the spokesperson stated.

In addition, the drug regulatory authority has included all selected products in the group purchase as key regulatory targets, achieving full coverage in terms of enterprise supervision inspections, product sampling inspections, and monitoring of adverse events. For example, conducting a comprehensive quality management system audit for companies every quarter; conducting surprise on-site inspections of companies; regularly holding risk consultations with companies; conducting surveys and guidance on quality management issues of companies; and conducting product sampling inspections multiple times throughout the year.

Taking Jiwei Medical as an example, after participating in the group purchase, it has undergone 1 national drug regulatory authority on-site inspection, 14 provincial drug regulatory authority supervisory inspections, 5 new product system assessments, 3 TUV ISO13485 audits, 1 BSI CE MDR certification audit, 3 third-party system audits, 4 national product sampling inspections, and multiple provincial and municipal sampling inspections, all of which have passed and been deemed qualified.

Due to the price reduction in the group purchase, Blue Sail Medical's coronary business was once under pressure, but fortunately, the most difficult time has passed. Two years later, in the end of 2022 during the continuation of stent procurement, the prices of two successful bid products of Blue Sail Medical have adjusted back to a reasonable level, thereby driving the recovery of the company's bracket business. Currently, Blue Sail Medical's entire cardiovascular product line still maintains a relatively good growth momentum.

Comparing the two group purchases, Blue Sail Medical has also seen continuous optimization and improvement of the group procurement rules through the joint efforts of government departments, industry experts, and relevant companies.

"We hope to further optimize the implementation process, reduce the workload on medical institutions, handling agencies, and relevant companies in reporting and execution; at the same time, enhance the transparency of winning bid product data, publicly disclose to the selected producers in the group purchase the list of agreement medical institutions, current agreement quantities, and transaction data such as the selected product purchase orders, so that companies can more reasonably allocate distribution resources and ensure the supply."

"In addition, it is recommended that each province open face-to-face communication channels with companies, answering questions and facilitating communication through various forms such as regular open days," said a Blue Sail Medical spokesperson.