"With medicine leading the way, the reform of medical consumables is moving faster." "The ultimate goal of the consumables policy is very clear," an entrepreneur who has worked on the consumables supply side for many years told Arterial Network. "The purpose of each stage is somewhat vague, like building blocks, where different sub-modules are put together to create something completely new."

The reasons for the policy's focus on consumables can be roughly divided into three parts. First, it is a very large market, with a market size of over 170 billion in 2018. The daily consumption of doctors is huge, so it needs to ensure the reliability of quality and reasonable price. Second, spending in this area is closely related to health care. To control health care, we need to control high-value consumables. Third, due to the high gross profit of consumables industry, there are many employees here, especially dealers. According to the data of 2015, the total number of drug device dealers in that year reached 2.8 million, while the number of doctors in the same year was only 3 million. The excessive number of drug device dealers raised the price of drug device, but did not generate actual value.

Among the consumables, the high-value consumables, which account for 62.50% and have a market size of about 106 billion yuan (2018 data), are the focus of the policy. Such consumables cover a wider range of contents, emerge in an endless number of innovations, and are often related to precise surgery, so they need to be strictly supervised.

Then, in the wave of reform, what will happen to the whole supply chain of high-value consumables? Where do the participants go from here? To this end, Arterial Network interviewed a number of consumables suppliers and dealers, trying to sort out the reform situation of high-value consumables in various provinces and cities in recent years, and find out the future development direction of this market.

Opening: Two-vote system to the whole country

In early 2017, the Medical Reform Office of the State Council jointly issued a notice with the National Health and Family Planning Commission and other 8 departments, requiring medical institutions to take the lead in implementing the "two-ticket system" for drug procurement, pledging to reduce the artificially high prices of drugs and reduce the burden of drug use on the public.

This policy was questioned when it was introduced. In fact, it is just what skeptics think: the loss of revenue caused by the two-vote system can be easily avoided by the pharmaceutical companies and hospitals through the means of high opening and cooperation between enterprises and hospitals.

Xiangzhuang sword, intended to Pei - Gong.

Subsequently, in this policy, the most affected or dealers, especially at the national level, no terminal hospital contact dealers, quickly out of the adjustment of this policy.

The expansion path of high-value consumables policy is similar to that of medicine. After seeing the rich achievements of medicine, the promotion of high-value consumables is like the autumn wind sweeping the fallen leaves. In this wave, people are in danger. Before the middle of 2020, many new policies have flowed out.

By October 2019, a total of 25 provinces and municipalities have implemented the "two-ticket system" for consumables. Among them, 12 provinces including Inner Mongolia, Liaoning, Shaanxi, Anhui, Hubei, Jiangxi, Guizhou, Guangdong, Fujian, Hainan, Qinghai and Xizang have fully implemented the two-note system for consumables; Six provinces, including Heilongjiang, Hebei, Shanxi, Henan and Jiangsu, implemented a two-ticket system for consumables in some pilot cities. Seven provinces, including Hunan, Guangxi, Zhejiang, Sichuan, Gansu, Ningxia and Shandong, released relevant documents. Only six provinces and municipalities, including Beijing, Shanghai, Chongqing, Shandong, Jilin and Xinjiang, did not implement the two-ticket system.

For pharmaceutical equipment circulation enterprises, their income generally comes from the product price difference and the manufacturer's rebate. Under the two-ticket system, distributors in the middle of the chain can neither obtain the product price difference nor enjoy the enterprise's rebate. However, the distributors with the resources of hospitals and doctors were not affected much, and the change was only that the upstream distributors became the pharmaceutical equipment companies.

A market reset means more opportunities. In order to seize more resources and improve their competitiveness, the end dealers began to try to expand their circulation added value. A Sichuan distributor of TAVR products in the southwest told Arterial Network that they are trying to optimize the distribution network, reduce logistics costs, develop a range of sales professionals with professional knowledge, help doctors in hospitals train related products and undertake some equipment maintenance work.

These dealers for a rainy day makes sense, in circulation problems used to be diluted in the distribution chain is long, but the two votes for chain control, leading to these problems all backlog, in the hands of YaoXie and hospitals, in this case, can solve more problems for YaoXie and hospital distributor, there was more to live.

In general, the two-ticket system does not solve the price problem of high-value consumables, nor can it eliminate various promotion behaviors and bribery behaviors. But there is no doubt that it eliminates the grey area of distribution and makes the whole distribution chain of consumables more clear.

Pilot area of purchasing with quantity

On July 16, 2019, Anhui Provincial Medical Insurance Bureau, Health Commission, Finance Department and Food and Drug Administration jointly issued the "Anhui Provincial Public Medical Institutions high value medical Supplies Centralized belt Purchase Negotiation (Pilot) Implementation Plan", which kicked off the prelude of high value medical supplies belt purchase. In the initial procurement, only orthopedic implants (spine) and ophthalmology (intraocular lens) are included, which are required to account for 70% and 90% of the high-value medical supplies purchased by provincial public medical institutions in 2018, respectively.

Subsequently, Liaoning, Jiangsu, Shanxi, Gansu and other provinces and cities began to purchase consumables by belt in many cities, while Sanming city and its cooperation regions, Beijing-Tianjin-Hebei region, Heilongjiang-Shandong Region, etc. formed an alliance mode to purchase consumables at the same price to avoid price difference between different regions. More regions and more consumables are added to the radiation range of belt purchase.

The role of purchasing with quantity is very obvious. In order to compete for the near-monopoly of selling right, many enterprises have to exchange quantity at price, which ultimately leads to the price of unit consumables being compressed to a very low range.

Take orthopedic spine materials purchased in Anhui province as an example, the average price of domestic category is reduced by 55.9%, the average price of imported category is reduced by 40.5%, and the maximum price of a single component is reduced by 95%. In nantong city, Jiangsu Province, the decrease of hemostatic materials was 47.21% on average, and the maximum decrease of single product was 70.35%. The decrease of hemostatic materials was 45.26% on average and 79.37% on a single product

In addition to high value consumables suppliers are forced to bid at low prices, circulation enterprises living space is further compressed. Large medical device circulation enterprises have more survival advantages in a more competitive environment.

A good example is the Announcement of winning the bid for the Medical consumables Supply Chain Extension Service [SPD] Project of the Fourth People's Hospital of Jinan in October 2019. In the bidding for centralized distribution and SPD project, the bid-winning companies are subsidiaries of large medical distribution enterprises such as China Medical Devices, National Pharmaceutical Devices, Weigao, Shouhang, Shanghai Pharmaceutical and Ruikang respectively.

After all, the Fourth People's Hospital of Jinan has put forward a very high requirement for the warehouse hardware facilities of circulation enterprises. Specifically, the hospital requires 3 points for warehouses with a total area of more than 10,000 square meters, and 3 points for cold warehouses with an area of more than 750 square meters. In addition, the full marks for "varieties of consumables" can only be obtained if the number of consumables of bidding enterprises is more than 4,000.

In addition, the announcement also revealed the winning companies over the years, they have won the right to centralized distribution of supplies to a number of second-tier and third-tier hospitals, the service cycle of five years, distribution scale of hundreds of millions of yuan.

It has become a trend to take large circulation enterprises as service providers. Under the condition of purchasing with quantity, the word "distribution" no longer exists, and hospitals only focus on the supply chain capability of circulation enterprises. In this case, small and medium-sized dealers are more difficult to survive.

The ultimate target of volume procurement is still the drug manufacturer. Under the policy, the total market value of high-value consumables rapidly shrinks, and most enterprises without successful bidding will lose almost the entire regional business, and the industry concentration will increase. In addition, when the two-vote system, companies can also avoid the policy by driving higher prices, now these measures are also ineffective - consumables prices have come down after all.

Episode: One-vote system and "Three-rate System"

In addition to the changes mentioned above, some new modes have been derived during the implementation of consumable tape purchase policy. "One vote" is one of them.

Due to the price reduction after the negotiation is too large, some products have no rebate space, so most circulation enterprises refused to do loss sales, giving up the distribution right. At the same time, many enterprises and pharmaceutical enterprises have already chosen to self-distribution. This means that there is actually only one vote of the product in circulation.

The state supports the promotion of the one-vote system and has issued corresponding policies to support the one-vote system. Today, 11 provinces and cities, including Fujian, Zhejiang, Hubei, Shanxi, Shaanxi, Tianjin and Shandong, have explicitly encouraged the one-vote system.

But the one-vote system also brings many problems. As the amount of money needed to be delivered becomes larger and larger after purchase, hospitals often delay payment for months or even a year, which is a great loss for device manufacturers.

In 2019, with the amount of supporting policies to follow procurement, in the promotion of the most far-reaching in jiangsu province, the general office of the CPC commission for discipline inspection of jiangsu province, jiangsu province committee general office, the health bureau of jiangsu province and jiangsu province health committee issued by the "about promoting the province's high value medical consumables procurement sunshine notice, the medical and health institutions loan payment time limit and require hospital in complete within 30 days after acceptance of delivery, loan must be paid to the settlement account. In the same year, Liaoning province also established the advance working capital system of medical insurance fund. In principle, the prepaid working capital of medical insurance shall not be less than 30% of the purchase amount, and shall be allocated in advance before the execution of the purchase results of medical consumables and testing reagents.

At the same time, the document of Jiangsu Province also requires that all procurement expenses of public medical institutions in the province should be settled through the provincial platform, so as to guide and promote online procurement through unified settlement and realize the integration of business flow, information flow and capital flow of the provincial platform, abbreviated as "integration of three streams".

Through the new procurement platform of "integration of three streams and one Stream", consumables manufacturers can directly receive payment for goods from medical institutions and then pay logistics fees to commercial companies. In this way, the function of "service bidding and procurement" is transformed from "service bidding and procurement", and the mode of sending and payment for consumables purchase orders is also facilitated. However, the function of commercial companies in this process will be greatly reduced, and the profit space will be further compressed.

Platform procurement means price linkage. According to the national unified classification and code of medical medical consumables for medical insurance, it is one of the important functions of the platform to establish the mechanism of sharing the price information of high-value medical consumables among departments and provinces, promote the linkage of purchase price information, and realize the medical institutions to purchase high-value medical consumables at a relatively reasonable low price.

Up to this point, the policy role of the purchase with volume is almost complete. The medical insurance directly connects to the price fixing of high-value consumables in the procurement link, and the hospital is kicked out in the settlement link, and the medical insurance department directly settles the payment for goods from suppliers. All the information about the transactions has been put under the control of the Health insurance Bureau, and the whole sale of medical devices has been made more open and transparent.

So, in addition to lowering the price of medical devices, the newly established health insurance bureau also has the power of "recruitment, payment and supervision" through "three-tier integration". To solve the information asymmetry in the circulation of medical devices, the medical insurance bureau can make a good move.

Trend: DRG implements the ultimate goal of "fee control"

In retrospect, the two-ticket system eliminated dealers from circulation and allowed pharmacists to cut meat with purchases, but neither policy fully affected hospitals or doctors. In fact, these two policies cannot eliminate the incentive for doctors to misuse consumables.

However, these two policies undoubtedly remove redundant parts of the circulation of medical devices, and make the whole chain from production to use of medical devices controllable. At this time, DRG becomes a killing trick to control doctors and hospitals.

Before DRG was used to control fees, this method had been applied to efficiency tests between hospitals. By comparing the cost consumption index and time consumption index of the same disease in different hospitals, we can easily find the hospitals with abnormal value and find out the problems in time. This means that every operation requires precise use of high-value consumables.

In the past, the management and distribution mode of medical consumables in most hospitals were extensive and there was a large amount of waste. If there is an abuse of consumables, DRG will find out what is unusual about the doctor's operation from the consumption of consumables.

At the same time, DRG means the innovation of incentive mechanism for doctors, which internalizes drugs and consumables into operating costs of hospitals in the form of package fees. Under this incentive system, there is no reason for doctors to use consumables at will.

By the end of the DRG, the ultimate beneficiaries have been obvious. After the three big steps of two-vote system, quantity purchase and DRG, manufacturers of medical devices, distributors and doctors' hospitals were all restricted. At this time, the medical insurance bureau with the ultimate goal of "medical insurance cost control", which was consistent with the interests of patients, became the final winner.

The ideal policy path and realistic limitations under the goal of controlling fees

On the whole, ideally, through by means of a series of policy, the price confusion of high-value consumables market in our country problems, procurement mechanism imperfect, the price is not in the same period contrast, lack of the ticket management problems, public hospital loan delinquencies, purchasing information asymmetric information problems and so on problem will be solved one by one, finally gradually achieve national health control.

The whole reform process appears to be experienced from two votes to bring the purchasing, to the DRG's three big step, but the actual, consumables policies tend to have different provinces, cities and regions for the unit reform pace, in varying degrees, a single region hard to will be a policy implementation in place, at the same time, nanjing in jiangsu province province, sanming city, fujian and other places came to the forefront, roughly walked out of the path, but more cities are synchronized advancement, or stop purchasing for the realization of the belt, began to prepare pilot DRG.

Assuming, then, that such a sequential path of "one-vote, band-purchase, and DRG" is feasible, the focus of subsequent policy implementation will tend to make up for the gaps in the existing structure.

Without coding, it is difficult to define quality standards and ensure the effect of later diagnosis and treatment. Therefore, the first problem to be solved in this field is the inconsistency of high value consumables coding. In March 2019, the National Medical Insurance Administration held a symposium to discuss this issue. In 2020, the coding of many consumables has been completed, but the whole work is still not finished.

Secondly, how to establish the consistency evaluation of high value consumables is a more profound problem. The high-value consumables market in 2020 is an excellent opportunity for import substitution, because before the evaluation mechanism is established, all regional purchasing platforms still give priority to "low price", which means that imported consumables with high price and high quality will face the dilemma of price reduction or market loss beyond expectations.

Many high-value interventional consumables will exist in the body of patients for many years. It will be a kind of harm to patients if the quality is not evaluated solely for the purpose of "low price" when purchasing. In addition, such incentive mechanism is relatively one-sided. Although it can promote enterprises to develop products with lower cost under the same function, it also restrains the innovation with premium.

Moreover, the medical consumables medical insurance payment standard has not established a unified standard, so far, only a few cities to carry out the relevant pilot. Taking Tianjin as an example, the city once implemented benchmark price management for disposable medical consumables, and the medical insurance was insured according to the benchmark price. The more hospitals negotiated the price, the more benefits they would get. This is only a first attempt, and the standard medical consumables payment will probably be managed in the future according to the medical insurance payment.

Finally, talk about DRG. If there is no two-vote system (or even one-vote system) and volume purchasing clears the way for incentive mechanism, doctors may hesitate in the two directions of controlling fees and excessive dosage, and pharmaceutical equipment enterprises may still become the dominant prescription of pharmaceutical equipment dosage through gold sales. However, even with the support of two foreword policies, it is difficult for medicare bureau to fully utilize the effect of DRG to reduce operating costs before the big project of DRG coding is mature. It will take some time before DRG is applied in the field of high-value consumables.

How do companies navigate the wind?

The direction of policy, though scattered, is clear. With the achievement of benchmarking urban policies, dealers and device vendors must rethink their positioning and development direction under the control of fees.

For small and medium-sized dealers, this set of policy combination almost let them have no power to fight back. After losing the types of consumables involved in the purchase of the volume, they had to switch to those that were not covered by other policies. However, the end result of purchasing high-value consumables may be that all consumables are sold through the platform of medical insurance Bureau. At this time, the price difference between enterprise rebates and consumables in the past no longer exists, and digital logistics and back-end services are the only way out.

For domestic large enterprise consumables manufacturers, how to make low price and high quality products is the focus of current innovation. At this point in time, it will either take over 70% of the consumables category in the region, or it will be eliminated from this category. And in the long run, the manufacturer still needs to seek product "qualitative change".

For innovative high-value consumables manufacturers, although the policy has little relation with their income and expenditure, the products researched and developed by enterprises must be approved and listed after all. Therefore, these enterprises must consider the advantages and disadvantages of competing products more, make innovative and differentiated products, and avoid falling into the trap of "approval means death".

In 2020, the sound of shuffling CARDS can be heard all the time. In the wind and clouds, see the policy can be the last person to laugh.