The plan by the State Council to cut high-value medical consumables prices deals a heavy blow.
China’s healthcare industry should brace for a slowdown in revenue growth for the next few years, as the State Council plans to cut prices on high-value medical supplies in a reform program, according to an analyst report from UOB Kay Hian.
The key elements of the programme included establishing a price monitoring and centralised procurement platform, creating High-Value Consumable Medical Insurance Catalogues that will implement adjustment mechanisms and price negotiations, and abolishing sales mark-up on consumables in all public hospitals by the end of this year.
Scheduled for likely implementation sometime in the second half of the year, the procurement programme is likely to heap price pressure on medical consumable companies like Shandong Weigao Group Medical Polymer Company Ltd. and MicroPort Scientific Corporation.
The first catalogue of high-value medical consumables will be completed by the end of the same year, and might include orthopaedics, drug eluting stents, and pacemakers which are likely to face significant price pressure, according to the report.
Anhui Province has already begun centralised procurement, cutting spin product prices by around 55.9% and Jiangsu has requested cutting down the price of drug eluting stents by 30%.
“Learning from regional practices, the central government is likely to implement a cross provincial/city procurement programme on high-value consumables in 2H19, which may bring about considerable price pressure for medical consumable companies, such as Shandong Weigao Group Medical Polymer Company Limited (Weigao, 1066HK) and MicroPort Scientific Corporation (MicroPort ,853HK),” the report added.
Other key elements of the programme include promoting competition and encouraging group procurement negotiations among medical institutions and cross-provincial alliance procurement with the goal of improving centralised procurements scemes, as well as setting up medical insurance payment standards for high-value consumables.
Additionally, policies like the expansion of the Group Purchasing Organisation programme and drug monitoring list may also further margin pressures and slower revenue growth in the next few years.
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