As the population in China ages, demand for medicine is on the rise. In order to cope with rising medical costs, China has been actively reforming the entire medical system in recent years. Key reforms, including the “Two Invoices System” and the elimination of 15% drug mark-up policy in hospitals, are aimed at lowering the price of medicines. It is expected that drug price in various provinces and cities will continue to trend down. While the tender offer prices for most of the drugs have decreased, some key pharmaceutical and innovative drug producers are able to maintain their pricing power, with their tender offer prices and demand continue to remain strong. As such, pharmaceutical companies with strong research and development capabilities are still expected to enjoy rapid growth in the reform of the medical system. Recommend for long-term investment.

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