Abnormal cycle of Chinese herbal medicine？ Maori downward pharmaceutical companies face the choice of price increase.

　　"Up for three years, down for three years, flat for three years,The cycle of material price change is generally ten years. Based on this cyclical feature, people in the timber industry expected at the end of 2023 that "the price of timber has been rising for three years and should fall back." However, in the first half of this year, the price of Chinese herbal medicines continued to rise after a short-term adjustment at a high level.

　　After a whole year’s inventory digestion of raw materials of traditional Chinese medicine, the gross profit margin of some listed Chinese medicine enterprises changed greatly in the first quarter of this year, and the pressure of raw material cost began to appear.

　　Manager Li, a staff member of the original purchasing department of a listed pharmaceutical company, told the Cailian reporter: "Last year, some enterprises did predict the price increase of Chinese medicine raw materials and reserved raw materials, but generally speaking, the raw materials reserved by a company are usually one year, at most two years."

　　Since the beginning of this year, the index of Kangmei Chinese herbal medicine has risen from 1810.99 points to 2248.52 points, with an increase of 24.16%. The prices of some varieties such as Atractylodes macrocephala, Cortex Moutan and Radix Paeoniae Alba have increased several times. The prices of Chinese herbal medicines continued to rise overall on the basis of last year’s high prices, while pharmaceutical companies turned to buy high-priced medicinal materials in the market after their own low-priced raw material stocks were exhausted, which may continue to push up the production costs of enterprises. The impact of this year’s price increase on listed Chinese pharmaceutical companies may be deepened.

　　The gross profit margin of some Chinese medicine pharmaceutical companies has dropped significantly.

　　As can be seen from the financial report data of Chinese medicine listed companies in the first quarter of this year, the gross profit margin of some companies showed a clear downward trend.

List of some enterprises whose gross profit margin decreased year-on-year in the first quarter

　　The gross profit margin of the above-mentioned companies in Q1 2024 decreased by an average of 7.65pct compared with the same period of last year, and the gross profit margin of many listed companies decreased by more than 10pct.

　　In this regard, Cailian reporters called some listed companies as investors, and some listed companies said that the rising price of Chinese herbal medicines caused cost pressure on the company’s products.(300519.SZ) A company official said: "The price of Chinese herbal medicines doubled from last year to this year."

The price index of Chinese herbal medicines reached a new high this year.

　　(002603.SZ) said at the performance briefing that Chinese herbal medicines haveAttribute, there is a certain periodicity. Among the Chinese herbal medicines used in the company’s exclusive products, the prices of some Chinese herbal medicines rose significantly compared with last year, which affected the gross profit margin of some products to some extent. The company will take measures to reduce costs and increase efficiency to maintain relatively stable gross profit margin. In addition, the company will further strengthen the construction of Chinese herbal medicine breeding bases, which can not only guarantee the quality of Chinese herbal medicines from the source, but also alleviate the price pressure of some Chinese herbal medicines to some extent.

　　The reporter of Cailian found that the prices of raw materials for the main products of several listed companies with obvious decline in gross profit margin have indeed risen sharply. such as(002728.SZ), the price of raw materials for washing Aster rose from 45 yuan/kg at the end of 2022 to 90 yuan/kg at present, while that of Radix Platycodi rose from 37 yuan/kg to 43 yuan/kg, that of Radix Peucedani rose from 45 yuan/kg to 85 yuan/kg, and that of Radix Glycyrrhizae rose from 22 yuan/kg to 31 yuan/kg. Only Fructus Aurantii decreased slightly from 23 yuan/kg.

　　However, it should also be noted that not all companies’ gross profit margin decreases are caused by changes in the cost of medicinal materials, and changes in the company’s product structure and the results of medical insurance negotiations will have a greater impact on the company’s gross profit margin.

　　However, for most Chinese medicine pharmaceutical companies, the overall price of Chinese medicine is still on the rise this year, and the gross profit margin of enterprises is affected by the change of raw material cost or more obvious than last year. This year, the prices of some commonly used Chinese herbal medicines, such as Atractylodes macrocephala, Radix Paeoniae Alba and Radix Aucklandiae, have risen sharply, and the market sentiment continues to rise. However, the prices of Chinese herbal medicines, such as Angelica sinensis, Codonopsis pilosula and Glycyrrhiza uralensis, which fell back in the second half of last year due to excessive increase, also showed signs of stabilization.

　　After investigating and interviewing the distribution market of Chinese herbal medicines and some listed companies, the reporter of Cailian found that for enterprises with Chinese herbal medicine planting bases, the stability of product supply can be basically guaranteed when the price of Chinese herbal medicines rises, but because most of the medicinal materials in most enterprises are mainly planted in a cooperative way, the purchase price of raw materials is purchased at a protective price that goes with the market, which will not greatly benefit when the price of the medicinal materials rises.

　　Manager Li told Cailian reporter: "The raw material reserves of most large Chinese medicine pharmaceutical companies generally analyze the price when purchasing medicinal materials. If the current price of a medicinal material is significantly higher than normal, enterprises generally will not make a large number of purchases, but will only use it as needed."

　　If the current pharmaceutical companies start to use the purchasing strategy of low-inventory raw materials, under normal circumstances, the price of high-priced raw materials will slowly decrease due to weak demand, but if the price of this raw material continues to rise, pharmaceutical companies can only passively purchase.

　　Enterprises raise prices? Break the contract? Or involution?

　　Faced with the rising prices of Chinese herbal medicines, various companies have made different countermeasures for different products and markets.

　　Some listed companies have chosen to raise prices, the earliest is(600436.SH) issued the Announcement on Price Adjustment of Leading Products in May 2023, and the company indicated that the retail price of Pien Tze Huang tablets, the leading product, in the domestic market will be raised from 590 yuan to 760 yuan from May 6, 2023, with an increase rate of 28.8%.

　　For this price increase, the company said that it was mainly due to the rising cost of raw materials. The reporter of Cailian learned from the staff of Bozhou Drug Merchants Network that the price of bezoar, the main raw material needed by Pien Tze Huang, has increased significantly in the past two years. The price of natural bezoar per kilogram has risen from 500,000 yuan to a maximum of 1.8 million yuan, and now it has dropped slightly to around 1.5 million yuan.

　　However, Pien Tze Huang did not raise the price of Angong Niuhuang Pill, another product with bezoar as the main raw material. Earlier, a staff member of another Angong Niuhuang Pill manufacturer told the Cailian reporter that although the price of bezoar has increased greatly, the company’s price increase needs to take into account the situation of competitors of the same product. If the price increase is rushed, it may affect the product sales.

　　Except Pien Tze Huang,(002644.SZ) also announced in March this year that it will adjust the ex-factory price of its main proprietary Chinese medicine products due to rising raw materials and production costs, with an average price increase of 9%. Judging from the company’s first quarterly report, the gross profit margin of sales was 31.1%, which was indeed higher than that of 26.66% in the same period of last year. However, since the company raised the price in March, the boosting effect of the price increase on the gross profit margin has not yet fully appeared in the first quarterly report.

List of some enterprises whose gross profit margin increased year-on-year in the first quarter

　　From the product structure of the company, its main products include compound Huangqi Jianpi oral liquid, concentrated Danggui pill, Xiaoyao pill, Angong Niuhuang pill and Liuwei Dihuang pill, most of which are OTC products.The public selling price of e-commerce platforms such as Taobao shows that the price of the company’s products is relatively low compared with similar products of other brands, and the gross profit margin is relatively low.

　　In addition, Cailian reporters learned from pharmacies and some listed companies that the prices of main products of listed companies have also been adjusted. among(600993.SH) A company official said that the price of hemorrhoid cream under the company increased slightly. There are also staff members of a medical institution in Shijiazhuang City who reported to the Cailian reporter.The price of quick-acting jiuxin pills has increased recently.

　　Under the pressure of rising prices of Chinese herbal medicines, some enterprises chose to breach the contract. Last month, Shandong Province announced two batches of "Announcement on Medical Price and Credit Evaluation Results of Illegal Enterprises in Joint Procurement of Chinese Herbal Pieces by Sanming Purchasing Alliance Inter-provincial Purchasing Alliance". Many enterprises refused to fulfill their commitments and refused to fulfill their purchase, sale or distribution contracts without justifiable reasons.（600085.SH）、The subsidiaries of (600518.SH) and Zhendong Pharmaceutical (300158.SZ) are all on the list of general dishonesty/serious dishonesty.

　　The list mainly involves varieties such as Paeonia lactiflora, earthworm, Atractylodes macrocephala, Cortex Moutan, Angelica sinensis, Codonopsis pilosula, etc., which have increased greatly in the second half of last year or this year. Taking Atractylodes macrocephala as an example, the unified price of goods in Bozhou and anguo city markets rose from the lowest 28 yuan per kilogram last year to the highest 170 yuan per kilogram this year.

　　Some insiders told Cailian reporter that because the centralized collection of Chinese herbal medicines in Shandong was not forced by the government, but made by micro-doctors, the risk of default was low. Therefore, some pharmaceutical companies chose to take the initiative to default because the cost of some drinks increased too much, if they continued to supply, they would cause serious losses.

　　In addition to price increase and default, enterprises have a slightly helpless third choice. Some people in listed companies said that the price increase may face an unfavorable situation of competition with the same products, and now they can only support it, but the company will try its best to reduce various expenses.

　　Faced with the rising prices of medicinal materials, some experts in the medicinal materials industry, such as Bozhou and Anguo, have also begun to revise their judgments on the rising cycle of Chinese medicinal materials-"There is a constant inflow of funds, and it may rise." However, some old drug dealers believe that the actual demand growth of medicinal materials is not so great. The price increase of many medicinal materials is not driven by demand, but by funds. Medicinal materials are hoarded in cold storage to form inventory, and the risk of price decline in the market is increasing.