CITIC Securities: The trend of policy optimization such as centralized procurement is strengthening, which may drive the pharmaceutical sector steadily upwards.

Citic Securities research report indicates that since 2025, the government has repeatedly proposed policies to optimize drug procurement, support innovative drugs, and the upcoming release of a new commercial insurance innovative drug catalog. The pharmaceutical policy environment is improving. The eleventh batch of national drug procurement has begun drug information reporting, and it is expected that the rules and price reductions of the eleventh batch may be optimized. The focus will no longer be on the lowest price, but will instead strictly control quality and scientifically select the drugs for procurement. The adjustment of the National Basic Medical Insurance Catalog and the Commercial Health Insurance Innovative Drug Catalog will begin in 2025. The major change this time is the establishment of the Commercial Health Insurance Innovative Drug Catalog, which will operate parallel to the basic directory in a "dual catalog" model. The positioning of the Commercial Health Insurance Innovative Drug Catalog is expected to become a platform for high-value innovative drugs, with support for "three exceptions" in payment, which is expected to help open up commercialization opportunities for innovative drugs in China. Regarding the basic directory, renewal rules will be optimized, the price reduction rate of drugs during the agreement period will be reasonably controlled, and expectations for stable new drug prices will increase, which is expected to improve the enthusiasm for new drug research and development by pharmaceutical companies. Regular adjustments to the basic directory with a "tight balance" in rules for adding and removing drugs are expected. Continuing with previous industry views, the certainty of the trend towards policy optimization such as procurement will be strengthened, and market sentiment may be restored after procurement optimization. The era of true innovation and internationalization in medicine will bring returns, and the layout of the autonomous and controllable industrial chain will experience more catalysts in the second half of the year, driving the sector steadily upwards. It is recommended to continue layout around innovation-driven, internationalization, independent controllability, and off-campus marketing model reforms in three dimensions.