CITIC Securities released a research report stating that nine departments including the Ministry of Commerce issued the "Opinions on Promoting the High-Quality Development of the Pharmaceutical Retail Industry," proposing to enhance pharmaceutical service capabilities, promote prescription circulation, optimize outpatient统筹 at designated pharmacies, build a commercial insurance payment guarantee system, improve health services, enrich pharmaceutical retail formats, and support mergers and acquisitions of retail pharmacies. CITIC Securities believes the implementation of outpatient统筹 in pharmacies is expected to accelerate, mergers and acquisitions will benefit leading players in increasing market share, and commercial insurance opens up new payment avenues. Furthermore, coinciding with the start of the "15th Five-Year Plan" period, policies are accelerating the "Four Modernizations" of pharmaceutical retail, which is conducive to healthcare reform processes such as policy-driven tiered healthcare and the separation of prescribing and dispensing. The main views of CITIC Securities are as follows:
The event involves the recent issuance of the "Opinions on Promoting the High-Quality Development of the Pharmaceutical Retail Industry" by nine departments including the Ministry of Commerce. The document proposes actively optimizing the policy environment, cultivating and strengthening business entities, and promoting the specialized, intensive, digitalized, and standardized development of the pharmaceutical retail industry. It outlines requirements to enhance pharmaceutical service capabilities, promote prescription circulation, optimize outpatient统筹 at designated pharmacies, build a commercial insurance payment guarantee system, improve health services, enrich pharmaceutical retail formats, and support mergers and acquisitions of retail pharmacies.
The implementation of outpatient统筹 is expected to accelerate, mergers and acquisitions are favorable for leading companies to increase market share, and commercial insurance opens up new payment space. Firstly, the document encourages eligible physical medical institutions and internet hospitals that meet regulatory requirements to conduct prescription circulation with pharmaceutical retail enterprises via electronic prescription circulation platforms. Designated pharmacies can enjoy the same medical insurance benefits as primary medical institutions, including the same deductible standards, reimbursement ratios, and maximum payment limits as those applied to primary institutions in the same统筹 region. This push for medical institutions to strengthen external prescription services aligns with China's healthcare reform trends, indicating an imminent acceleration in prescription circulation and a clear trend towards further implementation of outpatient统筹 in pharmacies. Secondly, the document encourages local authorities to optimize the business environment. For chain or independent pharmacies being integrated, it suggests optimizing the application and issuance process for the "Drug Operating License" and allowing the continuation and use of the original medical insurance qualifications. Chain pharmacies are expected to leverage their financing advantages in the capital market to rapidly increase market share during this industry consolidation period, thereby aiding the industry's transformation and compliance processes. Thirdly, the document encourages the integration of commercial insurance with pharmacies and the development of insurance products suitable for pharmacy scenarios. It also proposes creating health stations and encourages services like chronic disease management, medication guidance, and health consultations, enabling companies to better expand into the broader health business. Chain pharmacies are poised to ride the tailwind of developing commercial insurance and a multi-level medical payment system to meet higher-level medical and health demands.
The acceleration of the "Four Modernizations" in pharmaceutical retail benefits policy-driven tiered healthcare and the separation of prescribing and dispensing. With the intensive release of "15th Five-Year Plan" drafts by various local and national departments recently, China's healthcare reform direction warrants attention. Based on suggestions from the "15th Five-Year Plan" draft, the National Health Work Conference, and the National Healthcare Security Work Conference, frequent mentions of coordinated efforts among the three medical areas (medical care, medicine, healthcare security), health priority, a multi-level healthcare security system, encouraging the development of commercial health insurance, and measures like strengthening primary care, stabilizing secondary care, and controlling tertiary care suggest healthcare reform will enter a new stage during the "15th Five-Year Plan" period. Referring to the development paths of overseas healthcare systems, strong primary care and a vast out-of-hospital market are common features. Rationally assessing China's healthcare reform progress, fragmented pharmaceutical retail enterprises have been a constraint, as their lack of specialization, intensification, and compliance makes it difficult to meet the demands of prescription outflow and tiered healthcare. The current push by nine departments to encourage increased industry concentration is expected to provide infrastructure support for the separation of prescribing and dispensing and tiered healthcare, thereby facilitating the advancement of healthcare reform.
Risk factors include mergers and acquisitions integration falling short of expectations; excessive competition leading to gross margin decline; slower-than-expected progress in prescription outflow; the impact of personal medical insurance account reforms exceeding expectations; store expansion pace being slower than anticipated; and the effects of price comparisons in promoting drug price balance and rationality being less than expected.
Regarding investment strategy, considering the enhanced requirements for industry compliance supervision and service capabilities, the continuous promotion of outpatient统筹 policies, and policy encouragement for industry mergers and acquisitions, leading chain pharmacies that are resuming expansion are expected to see an inflection point in their performance, with a clear trend of increasing concentration in the pharmacy industry.