Take you to the pharmaceutical and biological industry earnings - which are the most "lost" "gold"?

According to shenwan industry classification, A-share pharmaceutical bio-sector listed companies a total of 352.
the first three quarters of 2020, the 352 pharmaceutical companies achieved a total operating income of 1330 billion yuan, of which 198.1 billion yuan was spent on sales expenses, accounting for 14.9% of operating income.
is the cost of selling in the pharmaceutical and biological industry really high? Higher than other industries: the proportion ranked second in the A-share 28 Shenwan I-class industry, pharmaceutical and biological sales costs ranked second, second only to the leisure services industry, than the textile and clothing and food and beverage industry advertising is higher.
Chart 1: Sales expenses/total operating income of A-share industries in the first three quarters of 2020 Source: Tonghuashun, Zhongkang Industrial Capital Research Center is higher than other costs: more than five times the cost of research and development! In the first three quarters of 2020, the sales expenses of pharmaceutical and bio-A-share listed enterprises accounted for 14.9% of operating income, compared with 38.1 billion yuan in research and development expenditure, accounting for only 2.86% of operating income.
That is to say, a pharmaceutical company income of 100 yuan, 15 yuan spent on sales, but less than 3 yuan for research and development of new products, heavy "gold" are smashed in the sales of non-research and development.
Chart 2: Comparison of A-share pharmaceutical and biological industry sales and research and development expenses in the first three quarters of 2020 Source: Tonghuashun, Zhongkang Industrial Capital Research Center is higher than in history: the five-year doubling of the average operating income of the pharmaceutical and biological industry increased from 2.9 billion yuan in 2015 to 5.1 billion yuan in 2019, achieving rapid growth.
at the same time, the average sales expense in 2015 was only 410 million yuan, doubling to 870 million yuan in 2019, and revenue increased by about 3%.
sales costs are much higher than the growth in operating income, the performance is all "money" hit.
Chart 3: Average sales cost and revenue ratio of pharmaceutical biology Source: Tonghuashun, Zhongkang Industrial Capital Research Center 02 money are "lost" where? There is no doubt that the cost of sales in the pharmaceutical and biological industry is "high", but where is the cost of such a high cost? According to the Evergrande Research Institute research data show that the sales costs of pharmaceutical and biological enterprises mainly have six major flows: public relations bidding agency fees, public relations hospital-related person-in-charge costs, doctor rebates, pharmaceutical representative commission, ticketing costs and general costs.
, doctor rebates alone account for more than half of them.
according to the domestic pharmaceutical leader Hengrui pharmaceutical financial report data show that nearly 90% of the sales costs for marketing and other costs.
pharmaceutical and biological industry sales costs, are used in relationship maintenance and marketing, that is, "with gold sales."
Chart 4: Pharmaceutical bio-enterprise sales expenses flow source: Evergrande Research Institute, Zhongkang Industrial Capital Research Center Chart 5:2020 First Half Hengrui Pharmaceutical sales expenses constitute the source: company financial results, Zhongkang Industrial Capital Research Center 03 why "with gold sales"? With the industrial chain and sales model related to the pharmaceutical bioclassies there are 6 level II sub-industries: chemical pharmaceuticals, biological products, medical devices, Traditional Chinese medicine, pharmaceutical business and medical services.
Among them, chemical and pharmaceutical, biological products, Chinese medicine and medical device sub-industry manufacturing enterprises belong to the upper reaches of the industry, its production of drugs, equipment and other products sold through dealers to pharmacies and hospitals, due to the speciality of hospital channels, and then appeared with gold sales.
products of upstream enterprises need to go through the bidding process into the hospital, and then through the doctor's prescription flow to the terminal patient, although the payer is the end patient individual and health insurance, but the decision of the prescription is in the doctor's discretion.
decision has resulted in grey rebate fees, which are the main source of sales costs for upstream pharmaceutical companies.
Figure 6: Pharmaceutical and biological industry chain sources: public materials, China Health Industry Capital Research Center responsible for the circulation of pharmaceutical commercial enterprises, as well as services to upstream enterprises and individuals of medical services enterprises, do not rely on the hospital prescription link, so its sales costs are much lower than upstream manufacturing enterprises.
From the first three quarters of 2020 sales revenue ratio, pharmaceutical business and medical services accounted for only single digits, while chemical pharmaceuticals, biological products and Traditional Chinese medicine accounted for more than 20%, nearly 10% higher than the level of the Class I pharmaceutical and biological industry.
Chart 7: Sales expenses in the pharmaceutical bio-sub-industry in the first three quarters of 2020: Tonghuashun, Zhongkang Industrial Capital Research Center hospital side is still the main sales channel of medical products Zhongkang data show that even under the prescription outflow and other medical reform measures In the distribution of china's drug market channels, the proportion of grade hospital channels in the last three years is about 75%, still occupies an absolute advantage, which determines that upstream manufacturing enterprises still take hospitals as the main sales channels, medical products once sold by hospitals, it is difficult to avoid "gold sales."
Chart 8: Distribution of Graded Hospital End and Retail End Channels 2017-2019 Source: Zhongkang CMH-Retail Pharmacy, Zhongkang Industrial Capital Research Center 04 How to Cut "Gold" off the Blade? With gold sales caused by expensive doctors, doctors gray income and other series of problems, the Health and Health Commission has also issued relevant policies to improve this phenomenon.
following, we will take the most representative chemical and pharmaceutical sub-industry as an example to explore the relevant policy measures in recent years.
the beginning of 2017, China's National Health And Wellness Commission launched a "two-vote system" reform.
In the past, drugs in the circulation link after a multi-layer dealer layer increase, after the reform of drugs from the production enterprises to circulation enterprises to open an invoice, circulation enterprises to medical institutions to open another invoice, called the "two-vote system", intended to reduce the circulation link to reduce drug prices.
, however, in terms of average sales costs in the chemical and pharmaceutical sub-industry, the percentage of sales expenses in 2017 did not decline, and then increased by 5.3% in 2018.
the two-vote system shortens the circulation link, but the pharmaceutical companies only from the original low-open to high-open sales model, has not improved the problem of gold sales.
Chart 9: Chemical pharmaceutical sub-industry sales cost bubble chart Source: Tonghuashun, Zhongkang Industrial Capital Research Center in November 2018, the state organized centralized procurement of medicine, in exchange for the promised purchase volume in exchange for price reduction, piloted in 4-7 cities, commonly known as 4-7 urban belt procurement, followed by 2019 and 2020 intensive organization of the Alliance region, the second batch and the third batch of volume procurement.
the purchase of the same amount directly connected to pharmaceutical companies and hospitals, the winning price transparent, intended to cut the chain of interest between the two.
from the implementation of the belt procurement policy, with gold sales model is expected to become the past.
note that the chemical and pharmaceutical industry's revenue from sales expenses fell 3.6 percent from the first three quarters of 2020, the first decline since 2015.
Chart 10: Volume purchase time progress source: Tonghuashun, Zhongkang Industrial Capital Research Center to Huahai Pharmaceutical Industry, in the 4 plus 7 band volume procurement of 6 varieties of the exclusive winning bid, the Alliance region with volume procurement of 7 varieties of winning bids, the second batch of volume procurement of 2 varieties, can be described as the volume of procurement tender "big winner."
based on the time of the advance of strip procurement, since the implementation of the 4-7 city belt procurement in 2019, Huahai Pharmaceuticals' sales costs have decreased significantly, and its revenue share has decreased by 7.58pct compared to 2019. In 2020, with the subsequent volume of procurement batch landing, Huahai Pharmaceuticals single-quarter sales expenses accounted for a significant decline in revenue, the current proportion of only 13.24%, nearly 10pct lower than the level of the chemical pharmaceutical industry.
Chart 11: Huahai Pharmaceuticals Sales Expenses Revenue Ratio Source: Tonghuashun, Zhongkang Industrial Capital Research Center (Note: Year-over-year Difference - Single Quarter Sales Expenses Revenue Ratio - Sales Expenses Revenue%) Excluding Huahai In addition to the pharmaceutical industry, Colum Pharmaceuticals, Lepu Medical, Xinlitai and East China Pharmaceuticals 4 important participants in volume procurement, its sales costs from the first quarter of 2020 began to show a clear downward trend, with volume procurement policy cut "gold" ability can be described as strong.
Chart 12:4 Enterprise Sales Expenses Share Source: Tonghuashun, Zhongkang Industrial Capital Research Center (Note: 2020 as a single quarter value) compared the sales expenses and research and development expenses of these five enterprises in their respective revenue ratio, sales costs decreased at the same time, the proportion of research and development costs in the gradual increase.
Aside, with the volume of procurement cut off the middle belt gold sales link, saving the sales costs, enterprises have more money into research and development, on the other hand, generic drugs into the belt procurement led to lower profit margins, forcing enterprises to the road of innovation.
Chart 13: 5 enterprises research and development expenses revenue ratio source: Tonghuashun, Zhongkang Industrial Capital Research Center 05 small knot pharmaceutical bio-industry sales costs "high" has a long history, mainly determined by the sales model of the interest chain.
and the country also has relevant policies to try to cut this "gold", "two-vote system" after the introduction of the policy there are countermeasures, sales costs do not fall back up.
and volume procurement policy effect is obvious, not only cut off the gray area of the gold, but also promote enterprises to innovation.
but the policy can not be achieved overnight, the need to give pharmaceutical companies to leave room for transformation, so that the industry will be more healthy development, the past can not see the light of gold can also shine in the sun!