AI Summary Recently, the National Healthcare Security Administration released the 11th batch of drug volume-based procurement documents, proposing "anti-involution" for the first time. It mentioned preventing companies from submitting abnormally low prices that could impact other companies' normal pricing, leading to excessively low winning prices for entire drug categories. This round of procurement optimization no longer simply selects the lowest bid.
Investors who have been investing in A-share pharmaceutical stocks during this market cycle may have felt somewhat frustrated: despite both being pharmaceutical stocks, Hong Kong-listed innovative drug companies have clearly outperformed A-share innovative drug companies. Why is this?
Why do Hong Kong pharmaceutical stocks feast while A-share pharmaceutical stocks get scraps? The key lies in growth potential. Overseas markets represent incremental opportunities, so BD overseas expansion and CXO services have attracted capital from various sources, with enormous future growth potential driving strong market performance. Meanwhile, domestic markets show limited incremental growth, and past volume-based procurement created an involution scenario, making the investment logic relatively weaker.
You can see that volume-based procurement hangs like a sword of Damocles over A-share pharmaceutical companies. The direction of procurement policies indicates the government's supportive policies and regulatory attitude toward the industry, which also influences the pharmaceutical market's trajectory.
Recently, the National Healthcare Security Administration released the 11th batch of drug volume-based procurement documents, proposing "anti-involution" for the first time. It mentioned: to prevent companies from submitting abnormally low prices that could impact other companies' normal pricing, leading to excessively low winning prices for entire drug categories. This procurement round optimized the selection of price difference control "anchor points." It no longer simply uses the lowest bid. When the lowest price is below 50% of the average qualifying price, 50% of the average qualifying price will be used as the price difference control point.
Data Source: National Healthcare Security Administration
Additionally, "companies are required not to bid below cost," and if bidding below the "anchor price," they must provide statements explaining the reasonableness of their pricing and cost structure.
Therefore, this batch of procurement focuses on improving the bidding mechanism to ensure winning companies can profit. Particularly for large leading companies with superior cost control, there is greater profit margin.
So let's summarize the three types of companies that will benefit most from this round of anti-involution procurement: 1. Leading pharmaceutical companies whose main business focuses on the domestic market 2. Medical device and vaccine companies previously significantly affected by volume-based procurement 3. Innovative drug companies primarily focused on innovative drugs and CXO services can further capture domestic market share
Which of the Five Types of Pharmaceutical Themed Funds Will Benefit?
Let's examine which of the current five types of pharmaceutical ETFs in the market will benefit using these criteria.
Innovative Drug ETFs The market currently shows stronger clustering around certainty and growth prospects. This positive development represents a catch-up opportunity, initially showing short-term sentiment effects. If certainty further improves, we can expect larger-scale clustering trends.
Although for CXO and innovative drug companies with overseas expansion logic, short-term direct benefits are limited and valuations are high, from a medium to long-term perspective, improved pharmaceutical company profits may continue to increase innovative drug investment.
From a data perspective, the CSI Innovative Drug Industry Index has lagged the CSI Hong Kong Stock Connect Innovative Drug Index by nearly double. Even if the industry faces short-term highs, A-share innovative drugs driven by volume-based procurement have a high probability of valuation recovery in the future.
Data Source: Wind As of: 2025.09.22
Finally, leading pharmaceutical companies like WuXi AppTec, Hengrui, and BeiGene in the CSI Innovative Drug Industry's weighted stocks have deployed in both A and H shares. Whether considering growth potential or anti-involution benefits from volume-based procurement, they can capture almost all opportunities. Therefore, such indices remain worth anticipating overall. In terms of products, E Fund CSI Innovative Drug Industry ETF (159992) has significant scale advantages, which investors concerned about liquidity can consider.
CSI Innovative Drug Industry Weighted Stock Distribution
Data Source: Wind As of: 2025.09.22
Biomedical ETFs Biomedicine is actually a relatively broad field, including CXO, innovative drugs, medical devices, medical aesthetics, vaccines, etc., selecting 30 leading biomedical companies from Shanghai and Shenzhen A-shares and red-chip depositary receipts. The advantage is that it can capture dividends from almost any positive development; the obvious disadvantage is overly average industry distribution, though its leading company characteristics are prominent with relatively stable performance.
For the anti-involution benefits from this round of volume-based procurement, most fields can enjoy the aforementioned dividends. Additionally, all 30 constituent stocks are leading companies, which aligns well with the characteristics of beneficiary companies described in our first point. Even if the recovery magnitude isn't as intense as innovative drugs, the steady characteristics are suitable for conservative investors.
Data Source: Wind As of: 2025.09.22
In terms of products, on-exchange funds include: Tianhong CSI Biomedical ETF (159859), and off-exchange funds include: China Merchants CSI Biomedical Index LOF A (161726). These two products occupy nearly 80% of the index scale, with obvious recent capital inflows.
Medical Device ETFs This sector has high technical requirements and deep barriers. However, domestic substitution potential is enormous, and long-term growth prospects should be promising.
Notably, medical devices were previously a "disaster area" for volume-based procurement, more significantly affected by procurement policies and mainly serving domestic markets. Therefore, post-reform recovery expectations appear stronger on paper.
However, high elasticity often implies high risk. While pharmaceutical subsector ETFs offer greater elasticity, they also carry higher risks. You need deep understanding of specific sectors and accurate timing of rotations.
Data Source: Wind As of: 2025.09.22
In terms of products, HuaBao CSI Healthcare ETF (512170) stands as a flagship among products tracking this index and is also the largest pharmaceutical and healthcare ETF in the entire market, with scale exceeding 25 billion yuan. Average daily trading volume over the past year has exceeded 600 million yuan, indicating strong capital recognition of this fund.
Pharmaceutical Theme ETFs The representative index in this category is the CSI 300 Healthcare, which compared to the biomedical index mentioned earlier, features more concentrated leading stock characteristics with higher weights, 26 constituent stocks, larger average market capitalization, and includes traditional Chinese medicine components. Overall trends are actually quite similar to biomedicine, just more stable for pharmaceuticals.
Top ten weighted stocks account for over 70%, all familiar names: Hengrui Medicine, WuXi AppTec, Mindray Medical, etc. Chemical drugs account for nearly 40%, biological drugs around 28%, and also cover pharmaceutical services, medical devices, traditional Chinese medicine, etc. Similar to the CSI Innovative Drug Industry, the index relies on mature product lines, lacking explosive growth points.
Moreover, compared to the growth potential of innovative drugs, CSI 300 Healthcare is more conservative. The advantage is sufficient stability, with currently low valuation and volatility compared to peers.
In terms of products, E Fund CSI 300 Healthcare ETF (512010) is currently the only tracking product, with scale approaching 20 billion yuan, truly a behemoth!
Traditional Chinese Medicine ETF From an anti-involution volume-based procurement perspective, procurement now includes traditional Chinese medicine decoction pieces, though consumer-grade products like Pien Tze Huang and donkey-hide gelatin are excluded. Therefore, overall traditional Chinese medicine shows weak correlation, with opportunities possibly in decoction piece-related companies like Tongrentang.
In terms of sector valuation, the traditional Chinese medicine sector's dynamic P/E ratio remains at lows since 2021. As of September 22, 2025, the CSI Traditional Chinese Medicine Index P/E TTM was 25.07x, still at lows since 2021.
Additionally, traditional Chinese medicine material price indices have declined, potentially relieving gross margin pressure. Prices of commonly used traditional Chinese medicine materials like forsythia, angelica, and peony bark have also shown declining trends, while ophiopogon and codonopsis prices remain relatively stable. Traditional Chinese medicine companies' gross margin pressure is expected to ease with declining traditional Chinese medicine material prices in 2025.
Therefore, understanding traditional Chinese medicine shows volume-based procurement plays a limited role, with more influence from industry raw material price fluctuations. Combined with extremely low valuation appeal, conservative investors can actually consider it as one of their core allocation assets.
Data Source: Wind As of: 2025.09.22
In terms of products, China Universal CSI Traditional Chinese Medicine ETF (560080) stands out among ETF funds tracking traditional Chinese medicine indices. Its dual characteristics of domestic consumption and pharmaceuticals make it an indispensable part of today's pharmaceutical market.
From short-term recovery potential perspective, domestic pure pharmaceutical companies may have greater short-term upside. However, markets favor clustering around growth sectors, and capital can easily associate with broader industry chains, with Hong Kong innovative drugs, CXO, devices, traditional Chinese medicine all potentially resonating together.
As the Healthcare Security Administration's anti-involution measures for volume-based procurement gradually improve, pharmaceutical companies' drug price competition is expected to gradually return to healthy levels. Under new rules, with stabilized drug prices, pharmaceutical companies' profitability may gradually improve.
MACD golden cross signals forming, these stocks show good upward momentum!