Win-Win Achieved: Roche Diagnostics' 30% Price Cut Drives RMB 6 Billion Annual Revenue under Nanjing's Volume-Based Procurement
Roche
Oncology Drug Research, Development, and Manufacturing
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//Source of this article: Lingbei Mountain Man
From September 27 to 28, the Nanjing Municipal Medical Security Bureau organized a bulk procurement negotiation for medical consumables with Roche Diagnostics, involving the medical consumables procurement alliance of medical institutions in the Nanjing area. A total of 545 listed testing reagents achieved substantial price reductions, over 200 products were newly listed, with an overall price reduction of 30.3%. On November 7, the Nanjing Medical Security Bureau issued a notice, outlining requirements for the implementation of this negotiation.
From this notice, it can be seen that the overall volume-based price reduction negotiation procurement period is two years, with the first procurement cycle running from November 16, 2023, to November 15, 2024. This means that the agreed-upon volume and price must be adhered to during the two-year procurement period. This is similar to the inter-provincial alliance volume-based procurement led by Jiangxi and Anhui (hereinafter referred to as the Alliance Procurement). The difference is that Nanjing's negotiations concluded on September 28, with execution beginning on November 16, showcasing an extremely efficient and decisive approach.
The participating units in the bulk procurement include Jiangsu Provincial People's Hospital, etc.43 medical institutions, including public medical institutions and military hospitals。
The products for bulk procurement are biochemical immunoassay and other products.Immunoassay ReagentsIncluding testing配套 consumables; other reagentsIncluding coagulation, point-of-care diagnostics, molecular diagnostics, and urine analyzer reagent products。
In other words, this negotiation almost covers all the consumable products in the inspection department.Jiangxi Leads Biochemistry, Anhui Local Team Handles Coagulation and Point-of-Care Diagnostics Procurement; This Time, Also Leads the Alliance Purchase of Immune and Molecular Diagnostic Products, While Urine Analyzer Products Enter the Procurement Scope for the First Time.
The price reduction products listed in this negotiation include 1,067 items, covering biochemical, immunoassay, and coagulation reagents, as well as accessory consumables such as calibrators, quality controls, diluents, cleaning solutions, and electrodes. Additionally, 265 newly listed products, including reagents and consumables, have been added.
In terms of the volume-based procurement products and amounts, Jiangsu Provincial People's Hospital has the largest procurement amount, with an annual procurement amount reaching 106 million yuan. The largest procurement amount for biochemical immunity also belongs to Jiangsu Provincial People's Hospital, reaching 99 million yuan. The total procurement amount for biochemical immunity products from 43 companies is 550 million yuan, and for other products, it is 55 million yuan.The total procurement amount of 43 medical institutions is 607 million yuan;
For settlement, the products from this bulk procurement will implement the prepayment policy of the medical insurance fund, with a total prepayment amount of 182.358 million yuan. The Municipal Medical Insurance Management Center will complete the prepayment by November 30, 2023. The prepaid medical insurance fund will be fully utilized after one year.Settlement will be conducted after the year.Deduct from the monthly settlement payment of designated medical institutions。
This volume-based procurement implementsShared Results of Alliance ProcurementMedical institutions outside the centralized procurement alliance can also purchase the negotiated price-reduced products from Roche Diagnostics in the Nanjing Sunshine Procurement and Centralized Settlement System. Roche Diagnostics must ensure the supply. This means that, in fact, far more than these 43 medical institutions are actually included in the procurement. Other hospitals, if purchasing at the negotiated price, can also implement the price reduction results.
For distribution, the Municipal Medical Centralized Procurement Guarantee Center strengthens guidance on online procurement, distribution, and payment for designated medical institutions and Roche Diagnostics. It supervises the execution of pre-purchased volumes by designated medical institutions and ensures companies supply products with guaranteed quality and quantity. Following a "monthly monitoring and annual assessment" approach, regular analysis reports are provided, and relevant updates are communicated.
In terms of implementation, compared to other alliance procurements, the Nanjing Municipal Medical Insurance Bureau is much stricter. This indicates that all relevant designated medical institutions should carefully organize and implement the results of this overall volume-based price reduction negotiation according to the pre-purchase amount for each category of reagents.Roche Diagnostics Signs Procurement Agreement, centralized procurement and centralized settlement will be conducted on the Nanjing Sunshine Bidding and Procurement Centralized Settlement System online, subject to supervision, to ensure the completion of the bulk purchasing plan. Roche Diagnostics must ensure the quality and quantity of product supply and guarantee supply at the negotiated price.Strictly Prohibit Offline Procurement and SettlementOnce verified, the relevant medical institutions and production/supply enterprises will be dealt with seriously according to the regulations.
Through the above analysis, it is not difficult to see that, despite both being alliance-based volume procurement and led by the National Healthcare Security Administration, the outcomes are vastly different.
First, regarding the price reduction, after 24 hours of negotiations between the Nanjing Municipal Medical Insurance Bureau and Roche Diagnostics, pay attention, it was non-stop face-to-face negotiations between both parties, eventually reaching the above result. The Nanjing Municipal Medical Insurance Bureau achieved the goal of reducing product prices, which is the ultimate objective of volume-based procurement.Overall average decrease of 30.3%This figure is also the final consensus reached in the balance of price and quantity.
The bargaining chip in the hands of Nanjing Medical Insurance Bureau is to use the reagent consumables supply of 43 medical institutions as a condition for exchange. Based on the reduced supply price, it amounts to 600 million RMB annually, with a procurement cycle of two years. The figure of 600 million may not mean much to most people, but among biochemical reagent manufacturers in China, this number ranks among the top few.
At another level, in the regular consortium procurement, it is basically a price-cutting game behavior in the stock market. Each medical institution reports the usage and procurement demand, and the rules set by the Medical Insurance Bureau are to ensure the degree of price reduction for the reported volume. More importantly, from the perspective of distribution rules,In a stock market, prices must drop, but volume relies on companies to capture from the market.。
From the current operations of the alliance, the leading province lacks sufficient leverage over the other provinces in the alliance. For the leading province, achieving the required price reduction percentage is enough to fulfill its duty to the central government. The remaining implementation-level tasks fall under the responsibility of the medical insurance bureaus of the alliance provinces. The leading province neither imposes constraints nor engages in monitoring or enforcing compliance.
The true original intention of bulk procurement is to exchange price for volume. From this starting point, Roche and the Nanjing Medical Insurance Bureau have achieved it.A 30.3% reduction, bringing in an annual sales revenue of 600 million."This is what truly constitutes a bulk procurement in the real sense."
For medical insurance payments, in the alliance's centralized procurement, only a few provinces have implemented the method of medical insurance prepaying 30% to medical institutions, with settlement occurring the following month. However, the implementation of Nanjing's bulk procurement is different: the municipal medical insurance bureau directly conducts prepayment settlements with Roche, and the prepaid amount is deducted from the medical insurance payments to the medical institutions.
In this way, it not only solves the problem of price reduction and volume increase, but also addresses the settlement issue. Similar to the operation of high-value consumables, the medical insurance system directly adopts a prepayment settlement model with the manufacturers.
CloseThose who pay attention to bulk procurement will find that this is not the first time Nanjing Medical Insurance Bureau has done such an operation.The holistic price negotiation is an innovation by Nanjing's medical insurance department, which started in 2019 and has organized N sessions to date. It seems that the medical insurance bureau’s separate meetings with enterprises to lower prices are also becoming a new trend.
Since the first round of overall bulk negotiations with BD in Nanjing in 2019, 4,131 products from eight companies have been reduced in price, saving 239 million yuan annually.
In 2019, three high-value consumables enterprises in China and abroad reduced their prices by 25% to 30% overall. Since 2019, they have cumulatively saved 130 million yuan in funds. In March this year, these three enterprises also renewed their contracts.
In early September 2021, the Nanjing Municipal Medical Insurance Bureau organized a second round of negotiations, targeting 176 digestive intervention and respiratory intervention devices from Nanwei Medicine, resulting in an overall price reduction of 36.29%.
End of September 2021,The Medical Insurance Bureau of Nanjing City organized a comprehensive price negotiation between the medical institution alliance in the Nanjing area and Mindray, includingFinishedIn vitro diagnostic reagents and some orthopedic consumablesThe overall price reduction for these two categories of products is35.51%. But only the reduction幅度 was announced, without disclosing the specific medical institutions implementing it and the volume-based amount.
This negotiation resulted in a 30.3% reduction.Saved 102 million in medical insurance funds。
In fact, as early as 2021, the Nanjing Medical Insurance Bureau also met with Roche, hoping for a reduction of more than 30% to set a good start for bulk procurement, but unfortunately, the negotiation three years ago was not successful. It is precisely because of this that today's 600 million has been achieved.
This model, which secures hospital entry and volume-based sales through price reductions, completely transforms the standard operations of alliance procurement. Moreover, this one-on-one negotiation for volume-based procurement has far greater impact than alliance procurement.can be truly referred to as "volume-based procurement.Purchase"!
Behind the simple numbers, we seem to be able to discern other market opportunities. The amount of biochemical immunity tests exceeds more than 90% of the total amount, and the two-year cycle will inevitably bringNew installations of single units and pipelines, consolidate the sales volume for the next few years.
The inclusion of coagulation, point-of-care diagnostics, molecular diagnostics, and urine products will bring new opportunities for medical institutions to adopt equipment. Procuring reagents in bulk with accompanying devices entering the hospital system avoids a series of issues related to equipment approval.
Roche's price reduction at the Nanjing Medical Insurance Bureau will inevitably affect online procurement platforms across China. However, in the context of widespread price cuts, taking the initiative is much better than being forced to lower prices, as there are still opportunities for negotiation and requirements for volume.
It remains to be seen how much impact this wave of operations will have on the industry, and what lessons it may offer to medical insurance bureaus in other regions as well as manufacturers. However, one thing is certain: price cuts are inevitable. As imported brands begin to lower their stance and engage in fierce competition, everyone's situation is becoming increasingly difficult!
※ This article is reprinted, all opinions belong to the original platform. IVD Union remains neutral on all views in the article and is only for sharing and communication.
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