With the deepening of national medical insurance policies, the in vitro diagnostics (IVD) industry is undergoing new changes. After the Sichuan Provincial Medical Insurance Bureau announced a strict centralized procurement policy for reagents and consumables, Zhejiang Province quickly followed suit, which seems to indicate that multiple provinces will follow suit and the "centralized procurement" war in the IVD industry has begun.

Industry restructuring under centralized procurement

In the past few years, the IVD reagent consumables market has experienced a series of storms, from excessive marketing and inflated prices to the charging standards for some branded reagents using high priced items. The aggressive measures taken by Sichuan and Zhejiang provinces to implement quantity based procurement of reagents and consumables indicate that the IVD industry has entered a relatively strict stage of major reshuffling. In particular, against the background of cash dividends and capital dividends brought by COVID-19 Testing, IVD industry once became one of the concerned market segments in the field of biomedicine. However, the risks hidden behind this frenzy - the possibility of implementing quantity based procurement - are gradually becoming apparent.

The impact and implementation of centralized procurement policy

In recent years, institutions such as the National Medical Products Administration and the National Medical Security Administration have attempted centralized procurement of reagents and consumables on a small scale, and have received support from provincial or regional alliances. Given that IVD reagents require professional equipment and technical personnel to conduct reasonable pricing evaluations, it is expected that volume based procurement in the IVD field will be carried out in the field of universal reagents with high clinical usage and fierce market competition, such as biochemical reagents. According to the minutes of the Guangxi Working Conference of the National Health Insurance Bureau recently exported, considering the demand of the epidemic situation, the meeting discussed the results of the centralized collection of COVID-19 nucleic acid and antibody reagents, emphasized the price and moisture of IVD reagents, and suggested that all provinces should pay attention to this problem.

The strategy of centralized procurement in Sichuan and Zhejiang

The new policy of "IVD centralized online sunshine procurement" released by Sichuan Province has attracted widespread attention in the industry and is regarded as one of the key events in the first half of 2021. At the same time, the "Interim Measures for Centralized Quantity based Procurement of Drugs and Medical Consumables in Zhejiang Province (Draft for Comments)" issued by the Zhejiang Provincial Medical Insurance Bureau has also sparked heated discussions. According to the document, all public medical institutions in Zhejiang Province will participate in provincial or municipal joint centralized quantity based procurement, while county-level units are not allowed to carry out such activities separately. In addition, for varieties that have already been implemented at the national or provincial level, the city level joint centralized procurement with quantity cannot be repeated. The number of products entering the price review will be determined based on the number of declaring enterprises, generally not exceeding 8, and there will usually be 4 products winning the bid.

The Future Competitive Direction of IVD Enterprises

In the past, IVD companies have engaged in fierce competition in capital operation, hospital admission mode, and public relations marketing, and the deployment of "equipment bundled reagents" is a common business strategy. However, with the introduction of the policy of price linkage for volume based procurement, this traditional business model is facing challenges, forcing many small and medium-sized IVD enterprises to accelerate their transformation pace. The core concept of centralized procurement is "quantity for price", which means that the marketing model of "high pricing, high cost" is no longer an effective means for enterprises to make profits. On the contrary, reducing high marketing expenses while ensuring sufficient sales can help production-oriented enterprises maintain normal operations and may even obtain a better development environment by simplifying sales processes.

The efforts and breakthroughs of Desheng New Materials

As a member of the IVD industry, Desheng New Materials continuously explores new methods in cost control while improving product quality, striving to maintain competitiveness in a centralized procurement environment. The chemiluminescent reagents and chromogenic substrates developed by the company not only have high sensitivity and specificity, but also have been optimized in manufacturing costs to ensure that their products can occupy a place even in centralized procurement environments. By introducing advanced production equipment and technology, Desheng New Materials has improved production efficiency and reduced costs. At the same time, the company continues to increase its R&D investment and develop new products that meet clinical needs, ensuring an unbeatable position in the increasingly fierce market competition.