Pharmaceutical Industry: From "Sale Competition" to "Brand Competition"

The pursuit of the value of the hospital determines the value output of pharmaceutical companies. In our country, the hospital is the largest drug procurement unit and is called the first terminal. At the same time, in the “environment-to-medicine” environment, drug income has become an important source of income for hospitals. Therefore, the pursuit of hospital value is the most important factor affecting the pharmaceutical market. Drug companies, as supply providers, are relatively weak in dialogues with hospitals. Therefore, the pursuit of the value of the hospital determines the game between the two sides.

The policy of medical reform, especially the change of payment methods for medical insurance, will fundamentally change the way the hospital pursues value. Medical insurance drugs occupy a major position in the drugs sold in hospitals, so the medical insurance payment method has a profound impact on the hospital's procurement strategy. Under the existing payment methods, the hospital procurement strategy pursues the maximization of revenue and pricing, and this strategy is an important reason for the current “expensiveness”. If the payment method takes a fixed fee, the hospital's optimal strategy will become the lowest cost.

The pursuit of a value that minimizes the cost of hospitals will shift the competition of pharmaceutical companies from "sales competition" to "brand competition." The maximization of revenue and the maximum pricing determine that the competition strategy of pharmaceutical companies is “high pricing and high rebate”. The competition among enterprises is mainly reflected in sales competition, especially kickback competition. If the hospital's strategy is changed to the lowest cost, drug companies can only be provided with "good and cheap" drugs in the market will not be eliminated, this time, the company's core competition is "brand competition."

Brand competition will benefit companies with therapeutic drugs. In the process of brand competition, the treatment effect is exact, and the proportion of drugs with lower prices will increase. Chemicals with stable efficacy and low prices will be favored by doctors, so companies with therapeutic drugs will benefit the most. The use of higher-priced auxiliary medications will be relatively reduced, and some of the auxiliary herbal medicines for pain relief and heat dissipation will be more affected.

More market-oriented payment methods have a positive impact on pharmaceutical distribution and consumable medical device companies. In the process of medical reform, the functions undertaken by pharmaceutical circulation enterprises are gradually being stripped, and along with the separation of functions, the profitability of circulation enterprises has also gradually declined. In particular, after the implementation of unified procurement, the characteristics of the logistics of pharmaceutical distribution companies are even more pronounced. With market-based payment methods, circulation companies will once again assume the functions of information exchange and payment settlement, and their profit margins are expected to increase. At the same time, consumable medical device companies will also benefit from the reform due to the same “high quality and low price” features.