National Healthcare Security Administration Discloses Details: All Major Thoracic Stent Manufacturers Except Lifetech Scientific Have Voluntarily Reduced Prices
Endovastec
Developer and Manufacturer of Aortic and Peripheral Vascular Interventional Medical Devices
Medtronic
Medical Device Manufacturer
The incident of Endovastec being publicly questioned by the National Healthcare Security Administration continues to escalate.
On August 19, the National Healthcare Security Administration issued a Price Inquiry Letter to Shanghai MicroPort Endovascular MedTech (Group) Co., Ltd. regarding its Castor Aortic Stent Graft and Delivery System, requesting evidence to determine whether the product's prices were inflated by agents during sales or if any improper marketing practices were implemented, with a response required within one week. (See details at:Factory Price 50,000, Selling Price 120,000? National Healthcare Security Administration Requests Endovastec to Respond）
On the morning of August 20, Endovastec (Shanghai MicroPort Endovascular MedTech (Group) Co., Ltd.) urgently issued an announcement,Medtronic stated that it was not unwilling to cut prices, but had already made a commitment to the National Healthcare Security Administration (NHSA) to lower them. The relevant issues are still in the stage of further communication and preparing responses.
What is the real truth?
On the evening of the 20th, Jian Shi Ju obtained a document titled "Letter on the Notification of the Results of Price Risk Disposal for Thoracic Aortic Stent Grafts" from an authoritative source, revealing more background details behind the public inquiry into Endovastec's "出厂价 of 50,000 RMB sold by agents for 120,000 RMB." The document shows that the National Healthcare Security Administration recently instructed the healthcare security bureaus of Beijing, Shanghai, and two other regions.Risk management was carried out for thoracic aortic stent graft products, urging multiple domestic and international companies to adjust reasonable online listing prices.
Attached to the document are the lists of price reductions promised by various companies. According to the findings organized by Jian Shi Ju,Including Medtronic, Lifetech Scientific, Terumo Medical, and 11 other well-known companies that voluntarily reduced prices after being summoned for talks., the price of aortic stents has been controlled to be within 80,000 yuan, with some varieties as low as 20,000 yuan.Endovastec is the only one not included.
The Threefold Meaning of the Risk Management by the National Healthcare Security Administration
The letter detailing the aforementioned resolution shows that the National Healthcare Security Administration had previously organized a round of discussions involving all enterprises producing or acting as agents for the sale of thoracic aortic stent grafts, includingMedtronic, Beijing Youzhuo Zhenglian, Gore, Terumo, ClearLife, Lifetech Scientific, Huamai Taikang, Yuhengjia, Zhongtuo Chenhe, Weiqiang Medical, Hunan Aiputeetc.
The negotiation results were quite fruitful, with almost all products voluntarily reduced to below 80,000 yuan.The 200mm thoracic aortic stent graft imported by Medtronic has a committed listing price of no more than 59,614 yuan, while the similar product produced in China by Terumo has a committed price of no more than 56,437 yuan.
This list reveals at least three layers of meaning:
First,The National Healthcare Security Administration does not intentionally target domestically produced enterprises but treats both domestically produced and imported products equally.Among the 11 companies that committed to price reductions, five have products registered under the "GuoXieZhuJin" category, which are imported products; additionally, one product line from Cook Australia has ceased sales in China. Including Endovastec, the companies involved in this discussion consist of an equal number of Chinese and foreign enterprises.All foreign companies have promised to cut prices.
Second,Distributors mark up prices, tracing back to the production enterprises.In the list provided by the National Healthcare Security Administration, all domestic products have been thoroughly investigated and their companies summoned for discussions, while for imported products, the general agents in China were summoned, most of whom are sales institutions of manufacturing enterprises in China. Based on previous experience investigating pharmaceutical commercial bribery, attempts to evade responsibility by claiming it as an individual act of medical representatives or agents have proven ineffective.
Third,Not within the scope of medical insurance reimbursement, the Medical Insurance Bureau still has regulatory authority.Aortic stents are covered by medical insurance in Guangdong, Shanghai and other places. Moreover, even for dental implants that are not reimbursed by medical insurance, the National Healthcare Security Administration has organized national bulk procurement. The "Three-Function Plan" of the National Healthcare Security Administration clearly stipulates,The medical insurance department sets the prices for medicines, medical consumables, and medical services.
Whether it is the performance of imported or domestically produced products, it makes Endovastec's performance appear out of place. The focus of the National Healthcare Security Administration's inquiry has naturally shifted from product pricing issues to the reasonableness of the price difference between terminal prices and factory prices, as well as the funding allocation for sales expenses included in the terminal price.
The core issue of concern to the National Medical Security Administration and the public is consistent:From 50,000 to 120,000, is the gap between them a reasonable profit for enterprises and distributors, or space reserved for "bribery sales"?
In other words, the primary issue is not about debating "what is a reasonable price or profit level?" but rather "where do the profits go?" If the ex-factory price is 50,000 yuan and the selling price is 120,000 yuan, and most of the profit genuinely goes to the production and R&D company, relevant authorities may not necessarily intervene. However, if the 70,000-yuan difference does not end up in the pockets of the production and R&D company but instead flows into intermediary channels for unethical practices, then regulators are bound to take notice.
"Generally speaking, the hope is to achieve 'the demand side spends money clearly and the supply side earns money cleanly.'" An authoritative person related to the incident explained to the Jian Shi Ju.
Rapid Growth in Sales Expenses
Aortic Stents Face Centralized Procurement
In the first half of 2024, Endovastec achieved operating revenue of 777 million to 808 million yuan, representing a year-on-year increase of 25% to 30%. The involved product, Caster stent, is one of the company's star products.
Jian Shi Ju learned that Endovastec mainly adopts a distributor model for sales. After purchasing the company's products, distributors sell them directly or through logistics providers to hospitals. The company's sales department is responsible for distributor management and provides product technical support and other related tasks.
In 2023, Endovastec's sales expenses reached 130 million yuan, increasing by 25.14% over the previous year.Endovastec explained that the increase in sales expenses was mainly due to the rise in sales volume during the reporting period. Under the distributor model, manufacturing companies will determine the sales price to distributors based on product costs while fully considering the reasonable profit of distributors.
Endovastec had previously warned in its sales risk report that if the company fails to promptly enhance its management capabilities over distributors, there may be instances where some distributors' marketing activities are inconsistent with the company's brand mission and business objectives, orDealers experience chaotic self-management and illegal activities, and even situations where disputes arise between the company and distributors.
Regarding the issues required by the National Healthcare Security Administration to provide a written response, Endovastec stated in its clarification announcement that it is still in the process of further communication and preparing its reply. Whether this meeting and the initiative to adjust prices will impact the thoracic aortic stent industry remains to be seen.It is generally believed in the industry that aortic stents will face centralized procurement in the future.
This inquiry by the National Healthcare Security Administration is evidently consistent with the logic of "squeezing out excess" in the centralized procurement of high-value medical consumables.
On July 24, the Hebei Provincial Medical Insurance Bureau launched six categories of vascular interventional medical consumables products.Endovastec's thoracic aortic stent and guiding catheter (peripheral vascular intervention) products have been included in the centralized procurement scope.
The progress of the high-value consumables centralized procurement has obviously exceeded the expectations of Endovastec. Just three months ago, during the earnings call for the first quarter of 2024,Company Executives State: It Is Still Uncertain Whether Aortic Intervention Products Will Be Included in Centralized Procurement in 2024, which needs to be determined based on the policy release time and the subsequent implementation progress in various regions.
With the overall price adjustment of mainstream enterprises in the aortic stent product market, it is inevitable that there will be nationwide centralized procurement in the future. The market is using centralized procurement to "exchange price for volume," and the trend of leveraging economies of scale is irreversible. Regarding this major trend, Endovastec seems not yet psychologically prepared.
By Leigong
Editor: Jiang Yun, Jia Ting
Operation｜Han Jinrui
Illustration｜Visual China
Statement: Original content by Jian Shi Ju, please do not reprint without permission.
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