Company: HMDCF
Filing Date: 2025-03-19
Form Type: 20-F
Source: 0001410578-25-000377
Chunk: 234

Company: HUTCHMED (China) Ltd
Filing Date: 2025-03-19
Form: 20-F
Item: Item 1
Chunk 234
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 the State Council further promulgated the Notice on Issuing the Key Working Tasks for Deepening the Reform of Medicine and Health System in 2017. According to these rules, a two-invoice system is encouraged to be gradually adopted for drug procurement. The two-invoice system generally requires a drug manufacturer to issue only one invoice to its distributor followed by the distributor issuing a second invoice directly to the end customer hospital. Only one distributor is permitted to distribute drug products between the manufacturer and the hospital. The system also encourages manufacturers to sell drug products directly to hospitals. Public medical institutions are required to adopt the two-invoice system, and its full implementation nationwide is targeted for 2018. As of the date of the filing of this annual report, the relevant local rules with respect to the “ Two-Invoice System” have been promulgated in some provinces and municipal cities in the PRC, and the reform is still in progress. Private medical institutions are encouraged but not yet required to adopt the two-invoice system. Pharmaceutical manufacturers and distributors who fail to implement the two-invoice system may be disqualified from attending future bidding events or providing distribution for hospitals and blacklisted for drug procurement practices. These rules aim to consolidate drug distribution and reduce drug prices. The impact on our company is that Shanghai Hutchison Pharmaceuticals was required to restructure its distribution and logistics network and our Distribution Business began to shift its prior Seroquel distribution model to a fee-for-service model. For more details, please refer to Item 4. B. “ Business Overview - Other Ventures.”

Foreign Investment and “ State Secret” Technology Drugs

The interpretation of certain PRC laws and regulations governing foreign investment and “state secret” technology is uncertain. Under the Special Administrative Measures (Negative List) for Foreign Investment Access (“ Negative List”), published by the MOFCOM and the China National Development and Reform Commission (“ NDRC”) from June 26, 2018 to December 27, 2021, “manufacturing of modern Chinese medicines with confidential proprietary formula” has been deemed prohibited for any foreign investment. In the 2024 version of the Negative List published on September 6, 2024, the prohibition of “manufacturing of modern Chinese medicines with confidential proprietary formula” has been removed. The technology and know-how of the She Xiang Bao Xin pill is classified as “state secret” technology by China’s Ministry of Science and Technology (“ MOST”), and the National Administration for the Protection of State Secrets (“ NAPSS”).

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