On April 15, the innovative drug sector saw gains. On the A-share market, Borui Pharmaceutical (688166) surged by the 20% daily limit, while Zhejiang Conba Pharmaceutical (600572), Zhejiang Hisun Pharmaceutical (600267), and Beijing Beida Pharmaceutical (000788) each rose by the 10% limit.
The movement follows the release of a policy document by the General Office of the State Council on April 14 titled "Several Opinions on Improving the Drug Price Formation Mechanism." The document outlines 14 measures, including optimizing the initial pricing mechanism for newly launched drugs such as innovative medicines, leveraging medical insurance payment standards to guide price formation, encouraging pharmacies to set reasonable retail prices, and ensuring supply and price stability for scarce drugs. Shi Zihai, Vice Minister of the National Healthcare Security Administration, explained on April 15 that the policy combines an effective market with proactive government intervention—supporting where necessary, ensuring where needed, and regulating where required—through a series of reforms covering the entire drug lifecycle, all distribution channels, and key therapeutic areas.
Jiang Changsong, Assistant President of the National Institute for Health Care Security at Capital Medical University and Director of the Price and Procurement Office, noted that this top-level design document systematically summarizes eight years of drug price management practices, including innovative drug negotiations and volume-based procurement of established drugs. It also introduces new institutional improvements tailored to current and future socioeconomic conditions, featuring innovative measures such as the initial listing mechanism and real-world comprehensive evaluation. The policy spans the entire drug lifecycle, all distribution channels, and key drug categories, exhibiting a balanced approach—using soft support policies to guide innovation in the pharmaceutical industry while employing rigid regulations to maintain a fair and orderly market environment.
Han Sheng, Deputy Director of the International Research Center for Pharmaceutical Administration at Peking University, emphasized that as a guiding document from the State Council, the policy systematically outlines pricing mechanisms for products at different lifecycle stages and innovation levels, establishing a top-level framework. Crucially, it provides high-level confirmation on previously debated areas—such as initial listing, price registration, and real-world research—offering stability and certainty to the industry, enterprises, and researchers.
**Support for High-Level Innovative Drugs: Early-Stage Pricing Reflecting High Investment and Risk**
Drug pricing impacts public access to medications, the sustainability of medical insurance funds, and industry development. The payment challenges for innovative drugs have long been a concern in China’s pharmaceutical sector, exemplified by significant price disparities—sometimes ten to thirty times higher—for certain domestic innovative drugs in the U.S. compared to China. Industry voices argue that if innovative drug manufacturers cannot achieve reasonable returns on substantial R&D investments, the sustainability of innovation will be compromised.
The policy introduces a self-assessment system for new drug launches, guiding pharmaceutical companies to evaluate factors such as clinical value, market demand, competitive landscape, and societal affordability when setting prices independently, subject to public oversight and peer review. It distinguishes between high-level innovative drugs, improved new drugs, and generic drugs, providing tailored policy support and guidance. For highly innovative drugs with significant clinical value, the policy supports setting initial prices that reflect high investment and risk, maintaining relative price stability for a certain period.
"Classifying drugs by innovation level enables differentiated pricing, moving away from a one-size-fits-all model and ensuring innovation is truly reflected in price," said Jin Chunlin, Director of the Shanghai Health Development Research Center. He described the document as a major positive for innovative drugs, indicating that pricing autonomy has been loosened for truly innovative drugs—the higher the innovation, the greater the pricing freedom.
Jin added that, in the short term, the policy may boost capital market confidence in innovative drugs. Medium-term, it could optimize the pharmaceutical industry structure, increasing the share of innovative drugs from the current less than 10% toward levels seen in developed countries, while also accelerating the global expansion of Chinese innovative drugs. Long-term, it aims to shift pricing power for innovative drugs, establish internationally influential drug prices, and create a "China solution." Overall, the document systemically integrates the entire chain from R&D and pricing to payment and usage, injecting strong momentum into the high-quality development of innovative drugs.
The policy also proposes using real-world study results to enable scientific, objective assessments of drug value, informing dynamic adjustments to the medical insurance catalog and payment standards.
Han Sheng pointed out that previous pricing and insurance negotiations for innovative drugs relied solely on limited clinical trial data, leading to two issues: overestimation of value, where drugs performed well only in specific trial populations but received high prices and payment standards, resulting in poor cost-effectiveness for patients; and underestimation of value, where important innovative drugs (e.g., certain oncology, anti-infective, or neuropsychiatric drugs with long-term benefits) could not fully demonstrate their value in short-term trials, leading to conservative pricing that hampered investment returns and innovation, ultimately affecting patient access. Both scenarios necessitate post-launch "real-world value assessment" to clarify each drug’s relative and long-term value within its therapeutic area, better balancing patient needs, clinical decisions, and insurance fund burdens.
Han further noted that incorporating "real-world study results" marks a shift from static pricing—where prices were set once and difficult to adjust—toward dynamic value competition based on real-world data. This does not mean effective drugs will continuously rise in price, but rather that top-performing drugs can achieve and maintain favorable prices during initial negotiations/listings. Underperforming competing products will be required to adjust prices downward, promoting fair pricing across drug categories. Additionally, real-world evidence accumulated in China will provide robust data support for the global expansion of innovative drugs, representing an opportunity for China to export research standards and rules.
**Medical Insurance Reaffirms Support for Innovation: Negotiated Drug Prices in Non-Designated Hospitals Not Bound by Payment Standards**
As the largest payer in China’s pharmaceutical industry, the basic medical insurance system reported total expenditures exceeding RMB 3 trillion in 2025. Wang Xiaoning, Director of the Medical Insurance Pricing and Procurement Department at the National Healthcare Security Administration, highlighted that the administration has consistently supported pharmaceutical innovation, conducting eight consecutive years of medical insurance catalog negotiations and including 199 innovative drugs for reimbursement. As of February this year, insurance funds had spent RMB 504.8 billion on negotiated drugs, generating sales of RMB 740 billion and benefiting 1.17 billion patients—demonstrating tangible support for innovative drugs.
The policy reiterates medical insurance’s support for innovation, adhering to basic insurance’s "basic coverage" principle while balancing patient benefits and innovation incentives, and optimizing catalog adjustment rules. For exclusive drugs applying for inclusion in the catalog, payment standards will be negotiated with companies based on factors like reasonable initial pricing, aligning with economic development levels and market scale to reflect clinical value.
Operationally, the policy specifies that pharmaceutical companies supply negotiated drugs to designated medical institutions at prices not exceeding the payment standard, while market prices for non-designated institutions are not constrained by this standard. After generic versions enter the market, provinces should promptly adjust payment standards accordingly. For non-exclusive drugs, payment standards will be formed through competitive bidding. Jin Chunlin views the flexibility for companies to set prices independently in non-designated institutions as opening up room for off-hospital price negotiations.
**Drug Volume-Based Procurement: Innovation Exempted from Procurement, Procurement Targets Non-Innovative Drugs**
The 2026 Government Work Report emphasized optimizing centralized drug procurement. The policy states that for drugs with multiple suppliers and long market history, procurement will adhere to demand orientation, quality priority, integrated procurement and volume, and price-volume linkage, with voluntary participation, autonomous bidding, and fair competition forming reasonable prices. It strengthens coordination between payment standards and winning bid prices in volume-based procurement, using winning prices as the benchmark for payment standards for procured generic drugs within the insurance catalog.
Wang Xiaoning stressed that volume-based procurement targets drugs with multiple suppliers and established market presence, explicitly excluding innovative drugs—summarized as "innovation is not procured, procurement targets non-innovation." He also emphasized that companies bear primary responsibility for supply and quality; violations will lead to disqualification and inclusion in a violation list, restricting bidding eligibility. The administration will continue collaborating with drug regulatory authorities to enhance quality oversight of procured drugs and welcomes reports of adverse reactions from medical institutions and professionals to ensure drug safety.
Jiang Changsong noted that volume-based procurement has effectively squeezed inflated prices for mature drugs, compelling the industry to transition toward innovation and high-quality development. He believes the policy’s core direction remains encouraging genuine innovation and enhancing competitiveness. However, he emphasized that drug prices ultimately depend on market dynamics and supply-demand balance; even with milder rules, products with high homogeneity and full competition will see prices return to reasonable levels.
The policy introduces "intelligent drug price monitoring" and "drug price risk alerts." Shi Zihai explained that this involves using a national drug price list to flag excessively high prices on provincial procurement platforms with "red or yellow" labels—not to prohibit procurement but to inform medical institutions of price risks, guiding them toward cost-effective options and encouraging rational pricing by companies.
**Diversified Payment Methods: Leveraging Commercial Health Insurance and Other Functions**
Beyond basic medical insurance, diversified payment methods like commercial insurance are critical. In late 2025, the National Healthcare Security Administration released the first commercial insurance innovative drug catalog, including 19 highly innovative, clinically valuable drugs beyond basic insurance coverage.
The policy promotes "diversified payment and reasonable price formation for innovative drugs," explicitly advocating a multi-level security system that fully utilizes commercial health insurance, charitable resources, and multi-stakeholder price negotiations to broaden payment channels. It accelerates the implementation of commercial health insurance innovative drug catalogs and recommends their use by commercial insurers and mutual aid systems. Leveraging the medical insurance information platform, it encourages pharmaceutical companies, charities, and special funds to provide targeted support for users of innovative drugs.
Jiang Changsong noted that basic insurance has inherent funding and payment limits, necessitating complementary payment methods like commercial health insurance to form a synergistic security framework. The inclusion of commercial insurance in a State Council document signals a shift from cost containment toward balancing innovation, accessibility, and fairness—particularly creating new payment pathways for expensive but high-value drugs.
Han Sheng added that the policy’s support for diversified payment is expected to accelerate the application of commercial insurance in real-world settings, enhancing patient protection, reducing financial burdens, and fostering sustainable industry growth.