Round 12 national drug volume-based procurement expands in scope, with both pricing pressure and IP barriers rising
AI summary card
Round 12 national drug volume-based procurement expands in scope, with both pricing pressure and IP barriers rising
UBS believes that Round 12 of the national drug volume-based procurement has entered the company submission stage, with 65 products included. The median exposure across covered companies' 2025 IQVIA drug sales is 8%, and the policy is extending from mature generic drugs to blockbuster chronic disease products and growth-oriented products.
- This round of volume-based procurement includes 65 drug products, down from the 77 in the preliminary screening, and has formally entered the company submission stage.
- The median exposure in 2025 IQVIA drug sales for UBS-covered pharma companies is 8%; Huadong Medicine has the highest exposure at 58%, followed by Simcere Pharma at 24% and United Laboratories at 18%.
- The scope upgrade is reflected in blockbuster products such as ARNI, SGLT2 combinations, P-CAB, and AR inhibitors, as well as growth assets including baricitinib, edoxaban, alogliptin, and paliperidone extended-release formulations.
- Intellectual property risk review has been moved forward to the NDA stage, with 8 products marked as disputed; UBS believes its covered pharma companies have low exposure to these IP-disputed products, while Huadong Medicine may benefit from patent litigation related to indobufen.
- The median valuation of the China pharma sector is 16.0x 2026E P/E and 1.3x 2026E PEG.
Report interpretation
Overview
The report focuses on China's Round 12 national drug volume-based procurement. On June 23, 2026, the National Organization Drug Joint Procurement Office published the Round 12 national drug volume-based procurement announcement on the Shanghai Sunshine Medical Procurement Network, marking the formal entry of this round into the company submission stage. A total of 65 products are included in the procurement scope, with the policy impact extending from traditional mature generic drugs to higher-sales blockbuster products and earlier-stage growth assets.
Core views
The core views are: first, sales exposure to this procurement round is uneven across UBS-covered pharma companies, with Huadong Medicine, Simcere Pharma, and United Laboratories showing significantly higher exposure; second, the included product scope has expanded, indicating that volume-based procurement is extending from price cuts on mature generic drugs to pricing reform for next-generation chronic disease treatment solutions; third, tightening intellectual property compliance requirements may exclude some generic competitors that cannot provide non-infringement undertakings or face patent uncertainty, thereby changing the competitive landscape; fourth, highly competitive products may still face substantial price-cut pressure.
Analysis framework
The report is based on the product list in the Round 12 procurement announcement, combined with 2025 IQVIA drug sales data to estimate sales exposure for covered pharma companies, and uses the number of competing companies for each product to assess potential price-cut pressure; at the same time, by identifying IP dispute flags and changes in patent risk review at the NDA stage, it evaluates the potential policy impact on the competitive landscape. The valuation section uses 2025-2027E P/E, PEG, and EPS CAGR for covered China pharma companies for horizontal comparison.
Methodology notes
Measures company exposure by the proportion of 2025 IQVIA drug sales affected by the products included in Round 12 of the volume-based procurement.
The higher the exposure, the greater the impact of procurement-related price cuts and bidding outcomes on the company's relevant drug revenue; the report provides the exposure ranking and key product contribution for UBS-covered pharma companies.
Uses the number of competing companies for each product as a proxy indicator for potential price-cut pressure.
The more competing companies there are, the more intense the bidding competition in volume-based procurement and the greater the potential downward price pressure; vitamin B6 injection, compound amino acid injection, and fenofibrate have the highest numbers of competing companies.
Products that cannot provide non-infringement undertakings at the NDA stage or have intellectual property uncertainties may face delisting and be barred from re-entry during the contract period.
This rule raises the participation threshold for generic drugs, may reduce the number of competitors for some products, and benefits companies with valid IP protection or those advancing patent litigation.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Huadong MedicineHigh-exposure covered company in Round 12 volume-based procurement
- Strengths
- Some products such as indobufen, tacrolimus, metformin + pioglitazone, and cyclosporine account for a relatively high share of sales; indobufen-related patent litigation may allow the company to benefit under stricter IP review.
- Weaknesses
- Its 2025 IQVIA drug sales exposure reaches 58%, the highest among covered companies, and related products face procurement-related price cuts and competitive pressure.
- Comparison
- Exposure is higher than Simcere Pharma's 24%, United Laboratories' 18%, and the sector coverage median of 8%.
- Risks
- Larger-than-expected procurement-related price cuts, a high number of competitors, and uncertainty over patent litigation outcomes and policy implementation.
- Simcere PharmaHigh-exposure covered company in Round 12 volume-based procurement
- Strengths
- Rated Buy in the comparable company table, with 2026E P/E of 12.8x and 2026E PEG of 0.7x.
- Weaknesses
- Exposure related to evogliptin sales is 24%, with 17 competing companies.
- Comparison
- Exposure is lower than Huadong Medicine's but higher than United Laboratories' and the sector coverage median.
- Risks
- Bidding pressure on key products and uncertainty over the magnitude of price cuts and bidding outcomes.
- United LaboratoriesMedium-high exposure covered company in Round 12 volume-based procurement
- Strengths
- Rated Buy in the comparable company table, with 2026E P/E of 10.8x and 2026E EPS CAGR of 24.5%.
- Weaknesses
- Exposure related to imipenem + cilastatin sales is 18%, with 11 competing companies.
- Comparison
- Exposure is lower than Huadong Medicine's and Simcere Pharma's, but higher than Hengrui Medicine's, Hansoh Pharma's, and most covered companies'.
- Risks
- Procurement-related price-cut pressure on anti-infective products and changes in the competitive landscape.
- Hengrui MedicineMedium-exposure covered company in Round 12 volume-based procurement
- Strengths
- Rated Buy in the comparable company table, with a relatively large market capitalization and a strong base of innovative drug assets.
- Weaknesses
- Sevoflurane accounts for about 6.5% of 2025 IQVIA sales, with 10 competing companies; total company exposure is about 8%.
- Comparison
- Exposure is close to the median among covered companies and lower than that of Huadong Medicine, Simcere Pharma, and United Laboratories.
- Risks
- Price cuts for mature products such as anesthetics and lower-than-expected pricing in innovative drug NRDL negotiations.
- Hansoh PharmaMedium-exposure covered company in Round 12 volume-based procurement
- Strengths
- Rated Buy in the comparable company table, with 2026E P/E of 25.4x and 2026E PEG of 1.5x.
- Weaknesses
- Paliperidone and enzalutamide account for 4.2% and 3.7% of 2025 IQVIA sales, respectively, with 10 and 13 competing companies.
- Comparison
- Overall exposure is about 8%, close to the median among covered companies.
- Risks
- Repricing of growth assets after inclusion in volume-based procurement, and intensified competition in CNS and oncology-related products.
- China pharma sectorSector valuation and policy-sensitive assets
- Strengths
- The sector median is 16.0x 2026E P/E and 1.3x 2026E PEG, providing some basis for relative comparison.
- Weaknesses
- The procurement scope has expanded to blockbuster and growth-oriented products, broadening the impact of policy on revenue and margins.
- Comparison
- Exposure varies significantly across companies, so sector medians alone cannot be used to assess the risk of an individual company.
- Risks
- Larger-than-expected VBP price cuts, intensified competition, lower-than-expected NRDL negotiation prices, slower-than-expected consumption recovery, tighter regulation, and geopolitical risks.
Key data
- Number of products included in this procurement round65Reduced from the 77 products in the preliminary screening.
- Median 2025 IQVIA sales exposure for covered pharma companies8%Measures the proportion of drug sales for UBS-covered pharma companies affected by Round 12 volume-based procurement.
- Company with the highest exposureHuadong Medicine 58%Followed by Simcere Pharma at 24%, United Laboratories at 18%, Hengrui Medicine at 8%, and Hansoh Pharma at 8%.
- Number of products with IP dispute flags8Including sacubitril/valsartan, dapagliflozin/metformin, vonoprazan, baricitinib, alogliptin, edoxaban, indobufen, and azilsartan.
- Product with the most competing companiesVitamin B6 injection: 143 companiesCompound amino acid injection has 76 companies, and fenofibrate has 73, all implying significant price-cut pressure.
- Products with fewer competing companiesDalteparin: 7 companies, Ambroxol: 7 companiesCompetition intensity is relatively lower.
- Median valuation of the China pharma sector16.0x 2026E P/E, 1.3x 2026E PEGFrom the report's comparable company valuation table.
Impact & implications
The impact of this procurement round on China's pharmaceutical industry is mainly reflected in the simultaneous deepening of price reform and changes in competitive barriers. Companies with high exposure face more direct pressure on revenue and margins, especially for mature products with many competitors; meanwhile, stricter intellectual property review may reduce generic competition for some products, increasing the importance of patent compliance and the quality of R&D assets. From an investment perspective, it is necessary to distinguish among companies simply exposed to highly competitive generics, companies benefiting from IP protection, and whether valuations of innovative drugs and growth assets are sufficient to withstand policy-driven price pressure.
Risks
- Larger-than-expected price cuts in VBP programs.
- Industry competition intensifies, especially for procurement products with a large number of competing companies.
- Prices for innovative drugs after entering NRDL negotiations come in below expectations.
- China's consumption recovery is slower than expected.
- Regulatory announcements and enforcement are stricter than expected.
- Geopolitical tensions unexpectedly escalate and affect business operations.
- There is uncertainty around IP review outcomes, patent litigation progress, and rules for product re-entry.
What to watch
- Company submissions and final bidding results for Round 12 volume-based procurement.
- Actual price-cut magnitude for highly competitive products, especially vitamin B6 injection, compound amino acid injection, and fenofibrate.
- Repricing of blockbuster products and growth assets, including sacubitril/valsartan, dapagliflozin-related combinations, vonoprazan, and enzalutamide.
- Implementation of NDA-stage review, delisting, and re-entry restrictions for products flagged with IP disputes.
- Progress in Huadong Medicine's indobufen patent infringement litigation.
- Whether 2026E earnings forecasts, P/E, and PEG valuations for covered companies are adjusted due to procurement results.