Under 2025’s new medical insurance policies, only 15% of pharmaceutical companies will be able to seize the dividends of the "Golden Decade". Leading enterprises such as Hengrui and Innovent have broken through with genuine innovation: the price reduction pressure on PD-1 has been halved, 50% of CAR-T therapy costs are covered by commercial insurance, and international pharmaceutical companies enjoy dual pricing advantages. Remember—pipeline depth, patent barriers, and commercialization capabilities are all indispensable; pseudo-innovation will eventually be eliminated by policies.

——From Hengrui Medicine to Innovent Biologics: How to Seize the "Golden Decade" Amid Policy Dividends

I. Introduction: "A Song of Ice and Fire" at the Policy Inflection Point

In July 2025, a document from the National Healthcare Security Administration (NHSA) sent the innovative drug sector into a collective "frenzy"—the principle of "new drugs are not included in volume-based procurement (VBP); VBP does not cover new drugs" was implemented, driving leading companies like Hengrui Medicine and Innovent Biologics to rise by over 15% in a single day.

But don’t celebrate too soon. This is not a "blanket cash handout" but a targeted "policy red envelope rain": only 15% of pharmaceutical companies will truly benefit. The rest are either "pseudo-innovators" or followers who "can’t lie flat nor keep up with the competition".

For example: The price reduction of Hengrui’s PD-1 narrowed from 58% to 35%, while a small pharmaceutical company’s "improved sustained-release tablet", despite claiming to be a "Class 1 new drug", was still suppressed by VBP due to limited clinical value.

Policies are rewarding genuine innovation, but retail investors often misunderstand—they think "exemption" means "all pharmaceutical companies can easily profit".

II. Policy Truth: Three Leaps from "Price Slaughter" to "Innovation Protection"

Exemption During Patent Protection Period

New drugs are exempt from VBP for 5–8 years after launch, reducing price reduction pressure from over 60% to 30%.

Case: Hengrui’s PD-1 achieved over 20 billion yuan in sales in 2025 through the "efficacy-linked renewal" mechanism.

Pitfall: Improved new drugs (Class 2) do not enjoy exemptions. For instance, a company that reformulated a regular tablet into a sustained-release version and applied for "Class 1" status is merely deluding itself.

Dual-Track Payment System

Basic medical insurance covers essential needs + commercial insurance supplements high-end treatments. For CAR-T therapy (1.2 million yuan per injection), commercial insurance can reimburse 50%.

Risk: Commercial insurance coverage in third- and fourth-tier cities is less than 20%, leaving patients potentially facing the awkward situation of "affording the drug but not the insurance".

Green Channel for Internationalization

Overseas innovative drugs are exempt from domestic VBP monitoring. For example, after Junshi Biosciences’ PD-1 was launched in the U.S., its domestic price remained unchanged.

III. Three Screening Criteria for Beneficiary Pharmaceutical Companies

Don’t just focus on rising stock prices—true winners must meet these three "hard criteria":

Pipeline Depth: ≥3 Class 1 new drugs in Phase III clinical trials, such as BeiGene’s "BTK + PD-1 + TIGIT" combination.

Patent Barriers: Global patent coverage, such as Rongchang Bio’s ADC drugs protected by patents in China, the U.S., and Europe.

Commercialization Capability: Either building an in-house sales team (Hengrui) or partnering with multinational pharmaceutical companies (Innovent’s collaboration with Eli Lilly).

A common mistake for retail investors: A Biotech claims to have "10 new drugs in R&D", but 8 are "old wine in new bottles" (generics), and the remaining 2 are still in the lab.

IV. Three Core Beneficiary Targets and Operation Strategies

1. Leading Pharmaceutical Companies: From "VBP Victims" to "Valuation Reconstruction"

Representatives: Hengrui Medicine (12 ADC pipeline candidates, 3 in international Phase III), Kelun Pharmaceutical (gross margin of high-end infusions recovered from 25% to over 35%).

Strategy: Hold medium-term; reduce holdings by 30% when PE exceeds the industry average by 10%. Don’t be greedy—policy dividends do not mean unlimited growth.

2. International Biotechs: Driven by Both Commercial Insurance and Overseas Expansion

Representatives: Innovent Biologics (PD-1 medical insurance negotiations advanced to Q2), Rongchang Bio (overseas licensing revenue accounts for 40%).

Strategy: Deploy on dips and monitor FDA approvals. For example, if Innovent’s LAG-3 monoclonal antibody is approved, its stock price may surge again.

3. Hidden Champions in Niche Tracks

Representatives: Hanyu Pharmaceutical (GLP-1 weight-loss drugs with over 80% gross margin), Shengnuo Bio (dual pricing for peptide formulations in China and the U.S.).

Strategy: Short-term trading based on earnings pre-announcements. Enter when MACD forms a golden cross + northbound funds flow in for 3 consecutive days; exit quickly.

V. Retail Investor’s Guide to Avoiding Pitfalls: Beware of Three "Pseudo-Innovation" Traps

"Pseudo-Class 1 New Drugs": Claiming a sustained-release tablet as "Class 1"? Check the "registration classification" in the CDE approval document—genuine Class 1 will be labeled "Chemical Drug Class 1".

"Inflated Data": A Biotech’s interim report pre-announced a 200% increase, but its non-recurring net profit declined, propped up entirely by government subsidies.

"Payment Cliff": Drugs in commercial insurance catalogs have less than 10% coverage in second- and third-tier cities. For example, a gene therapy is only available in top hospitals in Beijing, Shanghai, and Guangzhou.

Fun Fact: Hengrui’s operating cash flow/net profit ratio reaches 1.3, while "data-inflating" companies typically have a ratio below 0.5.

VI. Conclusion: From "Policy Gambling" to "Value Investing"

The essence of this policy reform is to eliminate pseudo-innovation through "exemptions" and drive out low-end players through "quality requirements". For retail investors, remember three things:

Pipeline depth is more reliable than concept hype—don’t be fooled by "world’s first" PPTs.

Internationalization capabilities determine the ceiling; companies that only excel domestically will not go far.

Commercial insurance coverage is a hidden threshold—no matter how good the drug is, it will remain a castle in the air if payment channels are not 打通.

"Exemption does not equal easy profits; clinical value is the ultimate moat"—mark these words and verify them in 2027.

Disclaimer

This article is only a policy and industry analysis and does not constitute any investment advice. The stock market is risky, especially the innovative drug sector, which is highly volatile—stocks may hit the daily limit today and drop to the daily limit tomorrow. Readers must make decisions based on their own risk tolerance. No need to thank me for profits, and please don’t blame me for losses.

Data sources: National Healthcare Security Administration, ASCO Annual Meeting, listed company announcements.