The inflection point of the upside will come to the four major segments of the traditional Chinese medicine industry, waiting for the Nuggets

Against the background of accelerated population aging, changes in disease spectrum, policy support at the national level, and push for internationalization, the Chinese medicine industry has huge room for growth in the future
.
In 2022, the traditional Chinese medicine industry is expected to usher in an upward turning point with the support of policies.
The traditional Chinese medicine formula granule industry embraces market expansion and improvement of standards and quality.
The approval of innovative traditional Chinese medicine drugs for inclusion in medical insurance is accelerated, and it is time for traditional Chinese medicine to go overseas.
estimate
.
1 The industry reshuffled brand OTC of proprietary Chinese medicines ushered in an upward cycle.
The 2020 edition of the Pharmacopoeia of the People's Republic of China has comprehensively improved drug quality standards, safety and effectiveness.
Great improvement
.
Low-quality Chinese herbal medicine bases, outdated Chinese herbal decoction pieces and Chinese patent medicine manufacturers are facing elimination
.
The market share of branded Chinese patent medicine enterprises has increased.
With high-quality upstream resources and brand variety, OTC continues to optimize cost control, promote end product price increases, and continue to strengthen its leading position
.
Since 2015, the gross profit margin of the top Chinese patent medicine OTC enterprises has been steadily increasing.
It has not been significantly affected by the increase in the price of upstream Chinese medicinal materials, the control of medical insurance costs, and the improvement of drug quality standards.
Terminal premium capability
.
For upstream Chinese herbal medicines, leading Chinese medicine companies such as Buchang Pharmaceutical, Yunnan Baiyao, Baiyunshan, China Resources Sanjiu, etc.
have basically established core herbal medicine planting bases and passed the GAP certification of Chinese herbal medicines, effectively ensuring the quality and supply of Chinese herbal medicines.
And help control costs
.
In addition, the Chinese patent medicine market in the hospital is facing greater pressure under policies such as medical insurance cost control, transportation restrictions, and key monitoring of auxiliary drugs.
The quality and safety standards of superimposed drugs are continuously improved, and the production capacity of the Chinese patent medicine industry has been accelerated
.
According to the data of the National Bureau of Statistics, the output of Chinese patent medicines and the number of Chinese patent medicine manufacturers have dropped significantly since 2018.
Taking the operating income of enterprises above designated size as the statistical caliber, the concentration of the Chinese medicine industry has increased significantly after 2018, and the top five and top ten The proportion of total corporate revenue to total industry revenue will reach 9.
6% and 13.
4% respectively in 2020
.
The advantages of leading enterprises are prominent, and the industry concentration is further improved
.
Under the background of rising upstream raw material prices, branded Chinese patent medicine OTC companies have launched price increases one after another
.
Since 2021, the prices of Tongrentang’s Angong Niuhuang Pills, China Resources Sanjiu’s Angong Niuhuang Pills, Taiji Group’s Huoxiang Zhengqi Oral Liquid, Lingrui Pharmaceutical’s General Medicine Patches, and many varieties of Jiuzhitang have all increased
.
The volume of proprietary Chinese medicines in the hospital has increased and prices have fallen, and the structure has been adjusted.
The centralized procurement of Chinese patent medicines has been implemented and the price reduction is relatively mild, and the mature and large varieties mainly in the hospital market are facing the pressure of cost control
.
In December 2021, Hubei and other 19 provincial alliances announced that the centralized procurement of proprietary Chinese medicines will be announced.
The scale of this centralized procurement is nearly 10 billion yuan, and a total of 111 products are to be selected.
The average price drop of the products to be selected is 42.
27%
.
Although compared with the previous average price drop of 20% in the centralized procurement of Chinese patent medicines in Qinghai, Zhejiang Jinhua, Henan Puyang and other places, it is slightly milder than the previous results of centralized procurement of chemical drugs, and the prices of some drugs have only dropped by 10% to 30%
.
On January 29, 2022, the centralized procurement of Chinese patent medicines in the alliance of 6 provinces including Guangdong was officially launched, with a wider range of varieties and more complex rules
.
It is recommended to pay close attention to the results of centralized procurement of Chinese patent medicines in 6 provinces including Guangdong
.
Considering that there are many exclusive products of Chinese patent medicines and the quality evaluation system is difficult to unify, it is expected that the national-level procurement of Chinese patent medicines will not be launched for the time being in 2022, while the centralized procurement of inter-provincial alliances will be advanced in an all-round and rapid manner, and the re-evaluation of traditional Chinese medicine injections will also be carried out.
It is expected to land as soon as possible
.
On the whole, the current in-hospital Chinese patent medicine market will face a new round of structural adjustment, and it is expected that the mature and large varieties with the in-hospital market as the main position will face the pressure of cost control
.
Under the situation of medical insurance support policies and medical institutions strengthening the use of basic medicines, the market for Chinese patent medicine, Chinese medicine decoction pieces (including Chinese medicine formula granules), in-hospital preparations and Chinese medicine diagnosis and treatment technology projects is expected to expand, and the in-hospital market is differentiated.
Traditional Chinese medicine OTC enterprises will further strengthen the variety and Brand advantage
.
2 The policy encourages the accelerated listing of new Chinese medicines and is expected to be preferentially included in medical insurance The new registration classification standard specifies the research and development path of new Chinese medicines, and the number of new Chinese medicines applications will increase rapidly in 2021
.
With the adjustment of the medical insurance catalogue, new Chinese medicines are expected to be included and used more clinically
.
The registration classification and the "three-in-one" review system indicate the research and development review path.
In September 2020, the State Food and Drug Administration issued the "Chinese Medicine Registration Classification and Application Data Requirements", which classified the registration of Chinese medicines according to innovative Chinese medicines, improved new Chinese medicines, and ancient classics.
The traditional Chinese medicine compound preparations with the same name and the same name are classified, and the requirements for application materials are refined.
The first three categories belong to new traditional Chinese medicines
.
The new registration classification fully reflects the research and development of traditional Chinese medicine, and dilutes the content requirements of "active ingredients" and "effective parts" in the original registration classification management.
Clinical practice experience to evaluate the effectiveness of traditional Chinese medicine can better play the characteristics and advantages of traditional Chinese medicine to meet clinical needs
.
In 2020, the number of applications for new Chinese medicines began to pick up.
In 2021, the number of applications for new Chinese medicines accepted by the Center for Drug Evaluation (CDE) of the State Food and Drug Administration hit a new high of 62 in the past six years
.
In 2021, 12 new Chinese medicines will be approved for marketing, hitting a new high in the past five years
.
The "three-in-one" registration review evidence system is in line with the action mode of traditional Chinese medicine, which is beneficial to the preparations and experience prescriptions in the hospital, and the speed of new drug review and listing is accelerated
.
On January 5, 2022, CDE issued a public consultation on the "Technical Guidelines for Communication and Exchange Based on the "Three Combinations" Registration Review Evidence System (Draft for Comment), aiming to build a new Chinese medicine review system that conforms to the characteristics of traditional Chinese medicine.
It emphasizes the combination of traditional Chinese medicine theory, human experience and clinical trials, and further optimizes the technical requirements for new traditional Chinese medicine evaluation based on ancient classic prescriptions, famous old traditional Chinese medicine prescriptions, medical institution preparations, etc.
with human experience
.
Encourage innovation, and innovative Chinese medicines are expected to be preferentially included in medical insurance With the deepening of China's medical and health system reform, the adjustment of medical insurance catalogues has become normal
.
In December 2021, the National Medical Insurance Administration issued the "Guiding Opinions on Medical Insurance Supporting the Inheritance, Innovation and Development of Traditional Chinese Medicine"
.
The guidelines require that qualified Chinese herbal decoction pieces, proprietary Chinese medicines, and TCM preparations in medical institutions be included in the medical insurance drug catalog; the preparation and use of proprietary Chinese medicines that have been negotiated by the state and included in the medical insurance catalog are included in monitoring and evaluation; make full use of "dual-channel" drug management Mechanism to expand the channels for insured patients to use drugs to designated retail pharmacies, so as to better meet the needs of the insured people for drugs
.
Innovative traditional Chinese medicine drugs are expected to benefit from the state's policy of encouraging innovation, and priority to be included in medical insurance to achieve market volume
.
3 The market of traditional Chinese medicine formula granules will be expanded and upgraded after the pilot ends in 2021.
After the end of the pilot program in 2021, the coverage of traditional Chinese medicine formula granules in medical institutions and medical insurance will expand, and the industry will usher in high growth
.
"Market Expansion + Product Price Increase" Accelerates Market Volume The "Announcement on Ending the Pilot Work of TCM Formula Granules" issued in February 2021 clarifies that from November 2021, the quality supervision of TCM formula granules will be included in the management of TCM decoction pieces.
Used in all medical institutions
.
The liberalization of medical terminals will bring about market expansion
.
In the past, most provinces and cities were limited to using traditional Chinese medicine granules in TCM hospitals at level two and above.
According to the China Health and Health Statistical Yearbook, there will be 2,461 TCM hospitals above level two in China in 2020, and the total number of hospitals and primary medical and health institutions will exceed 1 million
.
In addition, the above announcement also proposes that "if the varieties of Chinese herbal decoction pieces have been included in the scope of medical insurance payment, each provincial medical insurance department may comprehensively consider factors such as clinical needs, fund payment ability and price, and after expert review, the Chinese medicine formula granules corresponding to the Chinese herbal medicine decoction pieces will be included in the scope of payment.
Payment scope, and refer to Category B management"
.
Some provinces have issued a new version of the medical insurance catalog to continue to expand the coverage of medical insurance for Chinese herbal decoction pieces (including Chinese herbal formula granules)
.
It is expected that with the gradual expansion of hospital sales scope and medical insurance coverage, and more popular clinical use, the proportion of TCM formula granules in the TCM decoction pieces market is expected to increase from about 10% at present to 20% to 30%.

.
The implementation of national standards superimposes the price increase of upstream Chinese medicinal materials, and the price increase of products is imminent.
In 2021, the State Food and Drug Administration announced the first batch and the second batch of 196 national standards for traditional Chinese medicine formula granules, which put forward requirements for the quality control of traditional Chinese medicine and the management of the whole production process.
, Manufacturers need to verify production process standards, purchase authentic traceable medicinal materials, upgrade and improve equipment,
etc.
The implementation of national standards will drive production costs to rise sharply.
At the same time, with the continuous price increase of upstream Chinese medicinal materials, it is expected that the product price increase will be implemented in 2022, with an estimated price increase of 10% to 30%
.
Due to the short market development cycle of traditional Chinese medicine formula granules and the small increase in hospital use, the incremental market is mainly in the grassroots pharmaceutical market, and product price increases are superimposed on market expansion.
The proportion of formula granules used in TCM decoction pieces is expected to increase from about 10% at present to 20% to 30%
.
Without considering centralized procurement, and assuming that the market size of Chinese herbal decoction pieces remains stable, it is expected that the overall market size of Chinese herbal formula granules will reach 44 billion to 78 billion yuan in 2025, with room for more than 1 to 2 times of growth compared to 2020
.
"Scale production + channel development power" to build an industry moat Although the pilot project is over, the barriers to the traditional Chinese medicine formula granules industry are still high, mainly reflected in the following points: First, product research and development capabilities
.
The products produced by the enterprise need to meet the national or provincial standards.
For the 196 national standards that have been implemented, the original 6 pilot enterprises have not yet reached all the standards.
It is expected that it will take 1-2 years for other enterprises to catch up with the national standards in R&D
.
The second is the variety coverage
.
Terminal medical institutions generally do not mix prescriptions, and at most 2 to 3 suppliers are used.
Therefore, enterprises need to cover a wide range of products, and at least 400 kinds of unilateral prescriptions are required
.
The third is channel capacity
.
The incremental market of traditional Chinese medicine formula granules is mainly in the grassroots pharmaceutical market, which requires enterprises to have rapid sales expansion capabilities and professional channel service capabilities
.
Fourth, the ability of the whole industry chain
.
Manufacturers should have the complete production capacity of traditional Chinese medicine processing, extraction, separation, concentration, drying, granulation, etc.
, and need to process traditional Chinese medicine decoction pieces for the production of traditional Chinese medicine formula granules, and the whole process must meet GMP requirements
.
The fifth is the scale effect
.
Under the modernized and standardized industrial system, the production investment is relatively large, and the scale advantage can reduce the procurement cost and production cost
.
The sixth is quality control ability
.
Production enterprises should implement the whole process of production management, establish a traceability system, and strengthen risk management and quality control.
The concept of "standard decoction" is introduced in the technical requirements, and the application of feature maps is specified
.
On the whole, the overall threshold of the traditional Chinese medicine formula granule industry has increased, and the advantages of leading enterprises have become prominent
.
It is expected that there will be no drastic changes in the industry competition pattern in the short term.
In the long run, there will be many national manufacturers and some local advantageous enterprises, and the competition will be relatively orderly
.
The national centralized procurement conditions are not yet mature, and the industry will usher in a golden development period in the short term.
Referencing the quality and efficacy consistency evaluation of generic drugs is the premise of the centralized procurement of chemical drugs.
Chinese medicine formula granules are expected to be preferentially included in the centralized procurement after the standard system is improved
.
The state has issued policies to encourage the inclusion of traditional Chinese medicine formula granules purchased by public medical institutions into provincial centralized pharmaceutical procurement platforms for online transactions to promote open and transparent transactions
.
The centralized procurement of traditional Chinese medicine formula granules is the general trend, but it is expected that the short-term national centralized procurement conditions are not yet mature.
The reason is that there are currently 196 varieties of national standards that are not enough to formulate prescriptions, and the medical dispensing machine generally cannot be mixed.
There are more than 400 The variety has not yet reached the national standard; at present, the number of production enterprises that can reach the national standard is small, and the competition is insufficient
.
In addition, the market has not yet fully increased the volume, the occupation of medical insurance funds is controllable, and the price reduction of the provincial alliance centralized procurement will be relatively mild
.
4 Participating in the prevention and control of the new crown pneumonia epidemic of traditional Chinese medicine is at the time.
The internationalization of traditional Chinese medicine has achieved initial results.
It is expected that the export value of traditional Chinese medicine will maintain a rapid growth in 2022.

.
Policies promote the integration of traditional Chinese medicine into the international trade system According to information released by the State Administration of Traditional Chinese Medicine, the number of countries and regions where traditional Chinese medicine is spread has increased from 183 in 2015 to 196 in 2020, and more than 40 overseas Chinese medicine centers have been built
.
The progress of international trade of traditional Chinese medicine is still lagging behind
.
According to the statistics of the China Chamber of Commerce for Import and Export of Medicines and Health Products, in 2019, the export structure of traditional Chinese medicine products is dominated by plant extracts, Chinese herbal medicines and decoction pieces, accounting for 59% and 28% respectively; Chinese patent medicines are strictly restricted as medicines , accounting for only 6.
5%
.
Since 2020, traditional Chinese medicine has played a huge role in the prevention and control of the new crown pneumonia epidemic in the world, and the international recognition has been significantly improved.
It is expected that China's export of traditional Chinese medicine will maintain a rapid growth
.
The clinical efficacy of traditional Chinese medicine in the treatment of new coronary pneumonia is remarkable.
In this new coronary pneumonia epidemic, traditional Chinese medicine has been deeply involved in the prevention and control of the epidemic, and has formed a traditional Chinese medicine diagnosis and treatment covering the medical observation period, mild, common, severe, critical, and recovery period.
Specifications and technical solutions will be fully promoted and used nationwide
.
A batch of prescriptions led by "three medicines and three prescriptions" has proven its clinical effectiveness in anti-epidemic practice
.
Traditional Chinese medicines represented by Jinhua Qinggan Granules and Lianhua Qingwen Capsules have been registered and sold in Thailand, Russia, Pakistan, Singapore and other countries one after another, playing a role in the world's anti-epidemic battlefield
.
On January 19, 2022, Huang Luqi, deputy director of the State Administration of Traditional Chinese Medicine, formally submitted the "Research Report on Evidence-Based Evaluation of Traditional Chinese Medicine in the Treatment of COVID-19" to the World Health Organization.
To ensure safety and security, traditional Chinese medicine will be further integrated into the global anti-epidemic work
.
According to the ISO official website data, as of February 15, 2022, ISO/TC249 has released 77 international standards for traditional Chinese medicine and 35 standards under research.
Traditional Chinese medicine is rapidly integrating into the international medical system and enhancing its international influence.

.
Leading enterprises accelerate their overseas layouts Driven by the "Belt and Road" initiative, traditional Chinese medicine has continued to deepen inter-governmental cooperation and exchanges in the international market, actively promoted the connection of strategies and technical standards, and joined more mainstream health systems in more countries and regions.
The recognition of traditional Chinese medicine has also gradually increased
.
Leading Chinese medicine enterprises have accelerated overseas deployment, expanded market access, and strengthened intellectual property protection
.
From 2017 to 2021, the number of PCT (Patent Cooperation Treaty) patent applications in the traditional Chinese medicine industry has increased significantly
.
Some companies benefited from the prevention and control of the epidemic of traditional Chinese medicine, and their revenue share in overseas markets increased significantly
.
(Author: Everbright Securities, this article does not constitute investment advice)