The difficulty in prescribing imported drugs in public hospitals has become an openly acknowledged fact in the pharmaceutical industry.

In the eyes of an industry insider, the recent "imported Azithromycin incident" was just a concentrated focus, and the impact of centralized procurement over the past few years has finally penetrated from pharmaceutical companies and hospitals to the patient side.

When centralized procurement "tightens the screws," the presence of some imported drugs gradually fades from public hospitals, and public hospitals using centralized procurement drugs is the most cost-effective choice. In most areas, the usage of centralized procurement products in public hospitals has basically reached more than 90% or even 100%.

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The founder of a doctor group explained that the so-called difficulty in prescribing imported drugs in public hospitals mainly refers to imported drugs that have domestic generic drugs of the same variety and have been included in centralized procurement, rather than out-of-pocket drugs or original research drugs that have no substitutes.

However, there is always a demand for imported drugs and original research drugs.

As the trend of public hospitals "ensuring the basics" becomes more and more clear, within the medical circle, the out-of-hospital market begins to show a glimmer of vitality—especially commercial insurance companies and a group of ambitious private hospitals, who are persistently looking for a "different choice."

They are no longer entangled in the single question of "why can't public hospitals prescribe imported drugs," but ask "where can I buy imported drugs? Can I make this market?"

Let the medical insurance go to medical insurance, commercial insurance go to commercial insurance, and out-of-pocket go to out-of-pocket—this is becoming the solution sought by multiple parties.

However, can this part of the market demand that is "squeezed out" from public hospitals be transformed into a long-term, real business?

Write the right to take imported drugs on the insurance policy.Senior insurance broker Zhang Li (pseudonym) has noticed that since the beginning of this year, there has been a significant increase in the demand for purchasing commercial health insurance among clients, particularly for the need to purchase drugs from external sources. When patients are unable to obtain original research drugs at public hospitals, purchasing drugs externally becomes the widely discussed Plan B. "Nowadays, the first question many clients ask is 'Does this insurance product cover external drug purchases? Can I get reimbursement for buying drugs at pharmacies outside the hospital with a prescription?'" Zhang Li said, "Insurance company claims staff also have a direct feeling that the number of claims for external drug purchases is increasing."

Zhang Li also observed that with the reform of medical insurance payment methods and the in-depth development of centralized procurement, the insurance liability for external drug purchases is increasingly becoming an important responsibility for commercial mid-range medical insurance and even million-yuan medical insurance. "There has been a very obvious change in the past two years. It used to be a value-added highlight responsibility, but now it is a fundamental and important responsibility."

Sensitive insurance companies have detected the market's demand and have begun to update or launch insurance products that include "external drug liability." For example, in 2024, in the latest version of "ZhongAn Online Property Insurance Co., Ltd. Personal Medical Insurance Terms (Internet 2024 Edition D)," ZhongAn Insurance's established million-yuan medical insurance "Zunxiang E Sheng" has been upgraded. Not only has its positioning been updated to mid-to-high-end medical insurance, but for the first time, "external drug and external medical device cost medical insurance funds" have been explicitly written into the insurance terms as an optional responsibility. The updated "Zunxiang E Sheng" offers four insurance products to choose from, with no restrictions on the list of external drugs and coverage for external drugs ranging from 10,000 yuan to 3 million yuan.

ZhongAn Insurance is not the only one that has added "external drug liability" to its insurance products. "External drug liability" has even become a handle for commercial health insurance to find new growth points at present.

The last time commercial health insurance was popular was when "million-yuan medical insurance" opened up the Chinese people's understanding of commercial insurance. Several years have passed, and the market for million-yuan medical insurance that can be mined is almost exhausted. Moreover, under the medical insurance cost control and DRG/DIP reform, million-yuan medical insurance has also been widely debated as "chicken ribs," with many policyholders feeling that it is of little use.

In this anxiety of being caught between two stools, the public's expectation for "external drug liability" has brought new opportunities for commercial insurance. In the view of Long Ge, co-founder and general manager of Zhongtuo Help, "In recent years, the competition in commercial health insurance has developed to the point where the basic products have been almost fully explored. Now there is a new 'pain point' of the demand for external imported drugs, and all insurance companies are very concerned."

Insurance companies also have another level of observation and excitement - it is difficult for public hospitals to prescribe imported drugs, and some patients with needs will increasingly frequent places outside the basic medical insurance system, such as the international departments, special needs departments of public hospitals, and non-designated private hospitals. This will also bring sales growth to other commercial insurance products.As a senior practitioner in the insurance industry, Long Ge candidly stated that he himself spends an additional 7 yuan per month on commercial insurance premiums to purchase a million-yuan medical insurance policy with additional coverage for specific diseases and special medical insurance funds. "If I encounter these more complex diseases, I can go to the special needs department or international department of public hospitals to get better drugs and treatments," he said.

Therefore, starting from 2023, some insurance companies have begun to upgrade their mid-range medical insurance policies, which already included international departments and special needs responsibilities, with additional value-added services. To date, some insurance companies' products are still in the preparation stage for market launch.

Zhang Li introduced, "Some insurance companies will sign contracts with public hospital doctors who practice in multiple locations. Customers can choose to receive treatment at private hospitals where the contracted doctors are on duty, thereby gaining access to a wider selection of drugs and medical devices."

Medical insurance belongs to medical insurance, and commercial insurance belongs to commercial insurance—when this evolution is gradually becoming a trend, the industry begins to regain its imagination and confidence in the market.

Even though purchasing drugs externally is not a rare occurrence. In addition to the certain impact of centralized procurement, for cancer patients, due to the high cost of many cancer drugs, they are non-medical insurance drugs, or are included in the medical insurance catalog but are difficult to obtain in hospitals. These patients often need to purchase the required drugs on their own outside the hospital with a doctor's prescription. In 2019, Tencent Micro Insurance also joined hands with Taikang Online and Magnesium Trust Health to launch the "Medicine God Insurance · Anti-Cancer Special Drug Protection Plan" early on, and the special drug insurance responsibility gradually became a standard configuration for commercial medical insurance.

However, at present, this demand has further expanded. Zhu Minglai, director of the Center for Health Economics and Medical Security Research at Nankai University, told "Jianwen Consulting" that the current time point has reached the diversion of the multi-level medical security system. "The trend of basic medical insurance to cover the basics is very clear, only providing medical security for the general public. If there is a need to reflect differences in benefits, drugs, or services, it depends on building a multi-level medical security system."

A senior hospital management person sighed that in a few years, the difference in seeking medical treatment in public hospitals may no longer be between special needs and non-special needs, but whether the payment method is medical insurance or commercial insurance. He believes that the situation that is very likely to appear in the future is, "If you go through commercial insurance reimbursement, you can choose imported drugs and original research drugs; if you are a medical insurance identity, you use some cost-effective, domestic, and centralized procurement drugs."

Patients who want to take imported drugs flock to private hospitals.

As one of the providers of medical services, private hospitals have also discovered the invisible contradiction between the "demand and acquisition" of imported drugs.

Even, practitioners in private hospitals have found that more people are coming to them to find imported drugs.In Shanghai, patients with purchasing power have a strong demand for imported drugs. Li Xin (a pseudonym), an operations executive at a private medical group, has heard clinical doctors' feedback that since the second half of 2023, more and more patients in the group's specialized cancer hospitals have been asking, "Do you have a certain original research drug?"

Neither constrained by centralized procurement policies nor limited by medical insurance cost control, Li Xin exclaimed that private hospitals, especially those not designated as medical insurance points, have a "huge advantage" in this area.

Li Xin also said that the situation faced by imported devices and imported drugs is even similar.

Taking coronary artery bypass grafting surgery as an example, in some public hospitals, due to price factors, even if imported brands such as Medtronic and Abbott have entered the centralized procurement, hospitals are more inclined to purchase domestic brands. However, some social medical institutions that are not designated as medical insurance points directly advertise "imported stents" to attract patients who have certain requirements for the brand of consumables to undergo surgery.

The dean of a private hospital summarized the experience, "The drugs from national negotiations and centralized procurement are all required to have zero price difference in public hospitals. Once private hospitals mark up the price, it becomes higher and has no competitive advantage compared to public hospitals. However, if the sales proportion of non-centralized procurement drugs can be increased, profit growth can be achieved."

Under the pressure of centralized procurement price reduction, tightly grasping the "straw" of imported drugs and playing a "differentiation" strategy with public hospitals is gradually becoming the "little abacus" in the minds of many private hospital deans.

In the first half of this year, the dean of a private hospital in Shanxi found another local private hospital, trying to form a group to do a "union centralized procurement of non-centralized procurement drugs." His plan is, "Our two hospitals can join forces, and we can even establish a pharmaceutical company to jointly purchase non-centralized procurement drugs."

Such practices have also been precedented a few years ago.

In the second half of 2022, an industry alliance mainly composed of orthopedic hospitals appeared in the Jiangsu and Zhejiang areas, carrying out resource sharing and mutual assistance. The dean of a private hospital in the alliance introduced, "The alliance has currently developed 49 hospitals, and a pharmaceutical group has been established within the alliance to achieve unified and interconnected drug management within the group, putting our entire package of drugs into the alliance. At the same time, it also expands the capacity of self-paid drugs, continuously adding drugs that can better compete with public hospitals in the alliance."

Looking back further, in the field of oncology, around 2018 when centralized procurement just started, a group of private hospital practitioners realized that policies such as "soul bargaining" in centralized procurement and zero price difference for drugs would put considerable pressure on the introduction of new and special anti-cancer drugs into the hospital. At that time, sensitive private hospitals detected opportunities.Almost concurrently with the first batch of national procurement, two major imported PD-1 drugs, BMS's O-drug and Merck's K-drug, were successively launched in China in 2018, officially entering the Chinese market. At that time, in a first-tier city, the original O-drug and K-drug had not entered public hospitals, and their injections mostly took place in private oncology specialty hospitals near public hospitals, an industry term for "hospital-side injection."

Starting from 2019, the hospital-side injections of the original drugs began to increase in volume. Even with the impact of the pandemic, by 2021, the hospital-side injection model had become very common next to large oncology hospitals in many places, and the competition had already become very fierce.

To this day, as imported drugs gradually fade from public hospitals, the momentum of innovative pharmaceutical and medical device companies choosing to layout in the extramural market has quietly spread from oncology drugs to other diseases.

Liu Yang (a pseudonym), a senior executive at a high-end private hospital, revealed that the most urgent need for innovative pharmaceutical companies is to find new sales channels for their off-list products that have not entered the centralized procurement.

High-end private hospitals are now taking a bite out of the "original research drugs, imported drug sales" cake.

Liu Yang pointed out that, for example, Novartis Pharmaceuticals launched a new type of lipid-lowering injection (Inclisiran injection) in China in 2023, with a price of about 9,000 yuan per injection. "From a market share perspective, the prescription volume of this new drug in international hospitals or high-end private medical institutions has already approached half of the national market, and the other half is through DTP pharmacies prescribed by the international departments and special needs departments of public hospitals."

In order to meet the high-end medical needs, these private hospitals are accelerating the pace of business transformation.

According to Liu Yang's further understanding, the proportion of income from surgical and oncology services in private healthcare is increasing. Especially in top private medical institutions such as United Family and Jiahui, the combined income accounts for more than 50%.

New business is also challenging.

As the treatment and flow of on-list and off-list products become increasingly differentiated, and commercial insurance and private hospitals provide an "alternative choice" for imported drugs, industry insiders are also cautiously touching the bumps along the way.Long Ge stated outright that currently, the overall scale of commercial health insurance in China remains relatively small, with a slower growth rate in recent years. Overall, the sales increase brought by the "external medication liability" is still quite limited in its impact.

As of 2023, the premium scale of China's commercial health insurance market exceeded 900 billion yuan, with the market scale of mid-to-high-end medical insurance being less than ten billion yuan. According to data from Taikang Longevity Era Research Institute, the premium scale of high-end medical insurance is approximately six billion yuan, and the premium scale of mid-end medical insurance is preliminarily estimated to not exceed five billion yuan.

"At this stage, whether it is some million-yuan medical insurance adding an unrestricted list of 'external medication liability' to upgrade to mid-end medical insurance, or traditional mid-end medical insurance providing more additional liabilities or value-added services, the growth of mid-end medical insurance that can be driven is very limited," Long Ge said.

Many people in the commercial health insurance industry and insurance companies are also worried about the inherent risks of "external medication liability."

A health insurance person in charge from a leading insurance company, Wang Kai (a pseudonym), pointed out that external medication liability requires the establishment of a mutual trust relationship between hospitals and commercial insurance companies. "The insurance company must trust that the hospital will not act recklessly, otherwise it would not dare to grant credit. For example, if the hospital finds that commercial insurance can be reimbursed and there are cases of fabricating or even forging medical records, the insurance company is in a weak position when supervising and dealing with such insurance fraud."

Long Ge more directly pointed out, "For example, some issues with reimported drugs, it is very difficult for basic medical insurance to control risks, isn't it even more difficult for commercial insurance?"

On September 11, the State Council issued "Several Opinions on Strengthening Supervision, Preventing Risks, and Promoting High-Quality Development of the Insurance Industry," proposing to enrich the forms of commercial medical insurance products and promote rapid settlement of medical expenses. Long Ge interpreted, "What is currently more urgent is to connect the data of medical insurance and commercial insurance to achieve synchronized settlement. It is expected that in the next 3 to 5 years, the volume of direct docking between commercial insurance and hospitals will greatly increase. It is too little now, with commercial insurance being able to directly reimburse only a few hundred million in scale in public hospitals across the country each year."

In high-end private hospitals, the influence of commercial insurance exists, but it is still relatively limited at present.

Liu Yang observed that in recent years, private medical care has seen a certain degree of growth, but the increase mainly comes from self-paying patients, while the total number of commercial insurance patients has not changed much.

He pointed out, "The proportion of self-paying in top private medical institutions continues to grow, with the self-paying proportion basically maintaining above 50%, and some medical institutions can reach a self-paying proportion of 70%."Furthermore, the imagination of private hospitals attracting new customers by "opening up imported drugs" may also face the stark reality of impact.

A key issue is that people's trust in the level of medical services provided by private hospitals still needs to be improved. In Wang Kai's view, the main body providing medical services is doctors. Instead of investing energy in drugs, private hospitals should put more effort into finding good doctors, improving their reputation. "Compared with making money from imported drugs, if the reputation of private hospitals goes up and the level of doctors' ability goes up, the benefits that can be leveraged for the hospital will be greater."

History has come to a diverging crossroads. When the figure of imported drugs "leaves" the ordinary department of public hospitals and disperses to outpatient pharmacies, international departments and special needs departments, private hospitals, and online retail platforms, interests are being redistributed, payment methods are changing accordingly, and who will ultimately be able to pan the first gold? The answer still awaits the test of time.