No forbidden zones! In-depth analysis of insufficient competition for the procurement of drugs with quantity

In the "Reply of the National Medical Insurance Bureau to Recommendation No.

In fact, these four inclusion principles have long been well known in the industry, but with the normalization of collection, it seems that more and more inter-provincial procurement based on these four principles of selection criteria have begun to relax

Among them, the principle of large dosage and high purchase amount is also beyond reproach, after all, large varieties have been recruited, and the big deal is reduced from the initial 5000W/year inclusion standard to 1000W/year; Clinical use maturity can also be broadly regarded as a long time to market (beyond the patent period) to meet the requirements

01 What kind of products can be counted as "competitive enough"

01 What kind of products can be counted as "competitive enough"

First, "full competition" is not just for policymakers to draw conclusions; it is a relatively precise economic term

Probably affected by the initial national collection policy, we usually believe that in the process of drug procurement, meeting the production of 3 enterprises is a necessary threshold

In fact, there is a classic case when discussing full competition: in the global commercial aircraft market, only two manufacturers in the world Boeing and Airbus can manufacture, but both from the perspective of profit margins and customer demand, the competition between Boeing and Airbus is quite sufficient; This also tells us in reverse that when the tide is evenly matched, only two suppliers are needed to meet the conditions for

However, this is not a reason why

On the one hand, the vast majority of the competitive landscape with only two suppliers cannot achieve parity, and factors such as products, channels, and networks are prone to monopoly, which in turn creates a dominant pattern; On the other hand, even if the two can be evenly matched, this dynamic balance is also quite delicate, when any one of the two enterprises objectively appears in product quality, operational risks and other issues, or any 1 enterprise subjectively appears in the low-price dumping and other willingness to dominate the market, this balance of equal strength will instantly collapse into an oligopoly, then the supply and demand relationship of the market will also undergo subversive changes

Because of this, regulators are also very cautious when regulating markets supplied by fewer than 3 companies

On August 1 this year, the National Development and Reform Commission and other departments issued the Several Opinions on Strictly Implementing the Laws and Regulations on Bidding and Bidding to Further Regulate the Conduct of Bidding and Bidding Entities (Development and Reform Regulations [2022] No.

Here, we can basically draw a preliminary conclusion - when bidding in the context of non-monopoly, it is reasonable to adopt the product group bid by 3 or more enterprises as the full competition group, and the part that is not bid for less than 3 enterprises may not be insufficient, but it needs to be fully demonstrated

When carrying out bidding in the context of non-monopoly, it is reasonable to adopt the product group bid by 3 or more enterprises as the full competition group

02 How should insufficiently competitive drugs be applied to the selection of the recruitment directory

02 How should insufficiently competitive drugs be applied to the selection of the recruitment directory

Local procurement has developed to the present, and the exploration of drugs with insufficient competition has appeared

However, in the author's opinion, since the issuance of the Several Opinions on Strictly Implementing the Laws and Regulations on Bidding and Bidding to Further Regulate the Conduct of Bidding and Bidding Entities on August 1, it seems that it should be moderately cautious

In particular, some provinces still use the past when describing the selection principle of shortlisted varieties: "In drugs with large dosages, high procurement amounts, sufficient competition, and mature clinical use, the procurement varieties are determined through expert selection", but there are a large number of product groups

At this time, it is recommended that for the product groups of drugs with less than two production enterprises participating in the bidding, a research or evaluation report should be issued with reference to the requirements of the Development and Reform Regulations [2022] No.

The experience of local procurement in the past three years has taught us that "everything can be collected" is not a joke, but the government's real determination

"Everything can be collected" is not a joke, but the government's real determination
.

It is only recommended that the drugs that are about to be purchased in quantity should be fully investigated, especially for drugs that are not fully competitive
.
Because for a drug, if it is still in a state of insufficient competition after many years of listing, there must be a story behind it, which may be due to the process that the latecomer cannot imitate, or it may be due to the monopoly of raw materials that the latecomer cannot produce, or it may be due to the small market volume and sufficient competition across generic names, etc.
, resulting in other enterprises not having the willingness to
imitate.
These possible reasons are all things that the government needs to clarify in advance before the official documents on
volume procurement are issued.

It may be that the latecomer cannot imitate it due to the process reasons, or it may be that the latecomer cannot produce due to the monopoly of raw materials, or it may be due to the small market volume and sufficient competition across generic names, etc.
, so that other enterprises have no willingness to imitate

03 How should the design of the recruitment rules for insufficiently competitive drugs be different?

03 How should the design of the recruitment rules for insufficiently competitive drugs be different?

In terms of recruitment rules, after the author's incomplete statistics, the recruitment methods of drugs with insufficient competition are generally divided into the following four categories
.

The first is the simplest grouping after the comparison price, the lower one is selected, and the higher one loses
.
This approach is too beneficial for drugs that would otherwise be less expensive
.
It is also often the case that the high price is completely unable to respond to the bid, and the low price can win the bid by symbolic price reduction, resulting in the failure to get the due reduction, and the hospital cannot use the drugs it wants to use (in most cases, expensive and expensive).

It is also true that this method has been phased out
in groups where competition is insufficient.

The first is the simplest grouping after the comparison price, the lower one is selected, and the higher one loses
.

The second method is to add an absolute reduction requirement
to the first method.
This method greatly increases the final reduction ratio, and is also the mainstream method
currently used by many provinces.
However, a natural flaw of this rule is that it is easy to flow the standard, because the drug market with insufficient competition itself is often in an unsaturated state, and under the influence of factors such as low agreed procurement volume and excessive reduction requirements, enterprises have completely lost the motivation to reduce prices when participating in bidding, resulting in flow of bids
.

The second method is to add an absolute reduction requirement
to the first method.

However, in recent years, many tenders have begun to emphasize the management
of flow standard drugs.
Taking the Guangdong Alliance as an example, the product cannot even be sold on the net in Guangdong Province after the product is streamed, so that the last channel of the enterprise is blocked and has to obediently apply for the standard
.

However, we think about it, the reason why procurement with quantity is better than other recruitment methods is because it has a relationship between volume and price, which can bring sufficient price reduction momentum to enterprises, and when the original intention of the enterprise to win the bid is forced to replace the pressure of administrative means of control by price, is there some violation of the original intention of the policy?

The third method is to completely pressure the bid - set a benchmark for the reduction to negotiate prices, and bring its own amount
after winning.
This method is more designed for price reduction and bidding, there is no obvious dividend after the election, and after the election, it loses the game qualification, fortunately, there are very few provinces that use this rule, and in recent years, they
have gradually been eliminated.

The third method is to completely pressure the bid - set a benchmark for the reduction to negotiate prices, and bring its own amount
after winning.

The fourth method is to take the form of a comprehensive score, and the highest score is selected
.
This method is relatively more scientific, but the index design is relatively complex, and it is also prone to the embarrassing situation of the highest score enterprise price or the decline rate is not up to standard, and the lowest price enterprise score is not qualified, and then the flow standard
is generated.

The fourth method is to take the form of a comprehensive score, and the highest score is selected
.

In the author's opinion, according to the characteristics of the products recruited, it is relatively reasonable
to adopt the method of grouping price comparison (by quality level) or the method of comprehensive scoring.
The key point is whether the government can carry out accurate analysis and research on the results of the recruitment, such as whether there is dumping or monopoly of APIs at the low price, whether the flow of bids is due to insufficient motivation for competition or collusion between enterprises
.
At the same time, in the case that it is clearly found that there is no collusion after the investigation, the results of their own recruitment should be accepted, and if the reasons for their own policy design cause the enterprise to have no incentive to reduce prices, why should it be forced to accept the result of the flow mark restriction?

04 Conclusion

04 Conclusion

In the author's view, because of the low saturation of market supply, it is often more necessary to compete in the market across generic names and a broader channel access network; Once entering the local volume procurement, the price reduction power derived from the volume and price relationship is relatively weak, and the only attractive thing is the access dividend derived from the selected identity of the volume procurement, and at this stage, the access dividend generated by this selection identity is extremely weak for the hospital that originally did not report the
volume.

In other words, if the government wants to really drive the price reduction of these competitive products with good efficacy and safety, it still needs a long supporting idea to explore
.
For manufacturers of drugs with insufficient competition, it is necessary
to actively give feedback and suggestions in the process of government exploration.

Throughout history, successful reform has always been the joint efforts and active efforts of all sectors of society
.
In the face of today's trend that local procurement with quantity has become a normalized trend, enterprises as direct participants should look forward to and support the improvement of procurement policies with quantity
.