In 2014, there was still a feeling of overwintering for most Chinese pharmaceutical companies. The growth rate declined, profits declined, and marketing was weak. Despite this, the voice of the cracking of ice can be heard fascinatingly. The allocation of resources in the two major areas of drug pricing and medical services has returned to the market.

The valuation margin of the current pharmaceutical sector relative to the broader market has fallen sharply from the beginning of the year, but the absolute valuation is still at the highest level in the past two years. Under this background, the 2015 medical sector will be severely divided and new investment opportunities will be brewing in the four new changes in new patterns, new technologies, new models, and new services.

The return of the industry to the market accelerated In 2014, the pharmaceutical industry was a year when administrative intervention was reduced and returned to the market. The pharmaceutical pricing policy, tendering policy, usage policy and medical insurance payment policy constitute the four major external forces of the industry.

Over the years, the Chinese government’s pharmaceutical industry’s price control, tendering and access control have made the government’s hands deeper and deeper. In 2014, this form of restraint began to loosen, and various ministries and commissions have issued nearly 20 policy reform industry developments involving children's medicine, medical devices, medical services and other sub-sectors. Among them, the adjustment of the pricing policy and the access reform of social doctors have great influence on the development of the industry.

In terms of pricing policy reforms, at the end of November, the NDRC's “Promotion of Drug Price Reform” draft was issued to all pharmaceutical industry associations, declaring that they would cancel the maximum retail price limit or ex-factory price of the pharmaceutical government, through medical insurance control fees and tender procurement, and actual drug trading. The price is formed by market competition and is planned to be implemented from January 1, 2015.

The centralized tendering policy also began to show signs of loosening. In the recently launched New Deal for Tendering, many provinces began to change their “low price only” policy, the quality weights began to rise, and news of classified purchases began to spread. However, there is still no clear direction for changes in tendering compared to the vigorous and vigorous reform of price policies.

What is gratifying is that the pace of drug price reform is still moving forward. In November, Chongqing and Sanming successively launched trials for the payment of benchmarks for Medicare payments. If the method of payment by case basis is implemented, this may be a fatal blow to the centralized bidding system. By then, hospitals can directly negotiate prices with pharmaceutical companies, and administrative intervention will be less and less.

In addition to the reform of the pharmaceutical policy, the medical service industry is also an aspect that promotes the marketization of the industry. In April, the National Development and Reform Commission, the Health and Development Commission, and the Ministry of Human Resources and Social Security jointly issued policies to completely liberalize the price control of non-public medical institutions. In June, the National Health and Family Planning Commission issued a document for the first time to control the excessive expansion of public hospitals. Some local governments have higher enthusiasm for promoting private investment in the medical service market. In July, Beijing promulgated the "Measures for the Administration of Multiple Practices of Beijing Physicians"; in November, Shenzhen issued the "Regulations on the Medical Treatment of the Shenzhen Special Economic Zone" (draft for solicitation of opinions), and proposed to cancel the restrictions on the location of the first practitioner.

The enthusiasm of the government has also stimulated the enthusiasm of non-public capital. Since last year, from financial capital to industrial capital, various funds have begun to compete for public hospitals to acquire the battlefield. The investment direction of many pharmaceutical companies such as Wuhan Jianmin and Kunming Pharmaceuticals clearly points to medical services; real estate companies such as Vanke and Evergrande have started preparations for self-built hospitals; many branch offices in Beijing and Fujian have opened. At the end of the year, two top private hospitals that had been planning for many years, Peking University International Hospital and Tsinghua Changgeng Hospital were opened one after another, marking a perfect footnote for the first year of private-owned hospitals.