Recently, the National Healthcare Security Administration (NHSA) and the Ministry of Finance released a notice titled “Notice on Effectively Implementing Medicare Fund Prepayment Work” (hereinafter referred to as “the Notice”). This initiative supports certain regions in further improving the management methods for prepayment funds, aiming to alleviate the financial burden of medical expenses for designated medical institutions. It incentivizes these institutions to provide better healthcare services to insured individuals.

The announcement led to a significant surge in pharmaceutical stocks yesterday. By the close of trading, companies such as Changyao Holdings, Weikang Pharmaceutical, Guangzheng Ophthalmology, and Wanbangde had hit their daily limit, while Lukang Pharmaceutical and Purui Ophthalmology also saw substantial gains.

It's noteworthy that the stocks that surged included a variety of sectors, spanning specialized hospitals and pharmaceutical companies. The CSI Medical Index rose by 1.2%, the CSI 300 Medical and Health Index increased by 0.97%, and the CSI Innovative Drug Industry Index saw a 0.9% rise. Some analysts mentioned that while the pharmaceutical industry's performance during the third quarter remained at a low point, previous suppressive factors are gradually being resolved. A reversal trend is now established, and it is advisable to pay more attention to the expected reversal in market performance in 2025 and the potential for growth.

Market Outlook

According to Everbright Securities, after the implementation of the Medicare prepayment system, it is expected to effectively relieve financial pressure on medical institutions in relevant regions, thereby improving the payment terms for companies supplying drugs and consumables. This will benefit medical institutions, pharmaceutical distribution, and pharmaceutical manufacturing enterprises.

At the recently concluded China International Import Expo, foreign and domestic pharmaceutical companies and medical device manufacturers showcased their latest research achievements and products. The innovative drug sector continues to be regarded as a key area for attention. Zheshang Securities indicated that the research and development of innovative drugs typically involves strong technical barriers. After undergoing significant adjustments, the innovative drug industry chain exhibits substantial valuation and performance elasticity, suggesting potential for improvement.

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