No More Waiting for Effective Medicines: Healthcare Reform Accelerates China’s Pace of Innovative Drug Development
On July 1, 2025, the National Healthcare Security Administration and the National Health Commission released the “Several Measures to Support the High-Quality Development of Innovative Drugs,” marking a new phase in China’s pharmaceutical innovation ecosystem. This policy document employs a systematic approach to address the three major pain points in innovative drug development—challenges in R, hospital adoption, and reimbursement—leveraging medical insurance to drive industrial upgrading and provide robust support for building a Healthy China.
Dynamic Adjustment Mechanism Reshapes Medical Insurance Access Logic
The medical insurance catalog adjustment cycle has been compressed from eight years to one year. The inclusion rate of newly launched drugs within five years has surged from 32% to 98%, with 33 drugs achieving “approval and inclusion in the same year.” This accelerated pace reflects the medical insurance authorities’ deep recognition of innovative drug value—the 38 “globally novel” drugs included in the 2024 medical insurance list achieved a negotiation success rate 16 percentage points higher than the overall average, with post-market sales generally doubling. The dynamic adjustment mechanism not only shortens the time for patients to benefit but also reinvests market returns into R, creating a virtuous cycle of “innovation-access-payment.”
In designing renewal rules, the medical insurance authorities demonstrated institutional wisdom: simplified renewals saw an average price reduction of just 1.2%, with nearly 80% of drugs renewed at their original prices. Category 1 innovative drugs can be renegotiated to respond to market changes. This “flexible adjustment” safeguards fund security while avoiding excessive price cuts that could stifle innovation momentum. As Huang Xinyu, Director of the National Medical Insurance Bureau, stated, “We must ensure that truly clinically valuable innovative drugs receive reasonable returns.”
Multi-tiered Payment System Breaks Payment Impasse
The establishment of a commercial health insurance innovative drug directory stands as the most significant highlight of this policy. This directory not only creates a new pathway for high-value innovative drugs exceeding the payment capacity of basic medical insurance but also eases restrictions on healthcare institutions using innovative drugs through the “three exclusions” policy (excluded from out-of-pocket rates, centralized procurement monitoring, and diagnosis-related group payments). When commercial insurance directories are synchronized with basic medical insurance directories in terms of application and adjustment, companies can independently choose a “dual-track approach.” This institutional design clearly defines the role of basic medical insurance as “covering the basics” while reserving space for the development of commercial insurance.
The synergistic innovation between medical insurance and commercial insurance is even more groundbreaking: data sharing enables “one-stop settlement,” allowing patients to seamlessly coordinate medical insurance and commercial insurance payments at healthcare facilities; intelligent supervision platforms ensure fund security, preventing commercial insurance from becoming a target for fraud. This model, where “data runs the errands while patients reduce their burden,” is fundamentally reshaping the underlying logic of healthcare security.
Full-chain support unleashes innovation momentum
On the R front, the opening of medical insurance data marks a milestone. Through disease spectrum analysis and aggregation of medication needs, pharmaceutical companies can strategically align their R pipelines, avoiding homogenized competition. In 2024, China approved 48 Class 1 innovative drugs—a fivefold increase from 2018—a surge directly empowered by policy. The synergy between national science and technology initiatives and healthcare policies has forged a complete chain from “basic research to clinical translation to market application.”
Reforms in clinical application are equally noteworthy: breaking the “one drug, two specifications” restriction, enforcing a three-month adjustment requirement for pharmaceutical committees, and establishing a case-by-case negotiation mechanism—these measures directly address the persistent issue of drugs being covered by insurance but not adopted in hospitals. When DRG/DIP payment reforms are combined with special case negotiations, healthcare institutions’ enthusiasm for using innovative drugs is fully mobilized. In 2024, fund expenditures for negotiated drugs during the agreement period exceeded 100 billion yuan, validating the effectiveness of these policies.
Innovation Breakthroughs in a Global Context
China’s innovative drugs are transitioning from “following” to “leading.” Over 90 overseas licensing deals totaling more than $50 billion in 2024 signify that Chinese pharmaceutical companies have attained global competitiveness. Medical insurance authorities safeguard the overseas expansion of innovative drugs through price confidentiality mechanisms and the development of cross-border transaction platforms.
In this global competition, the unique advantages of Hong Kong and Macao, China, are becoming increasingly prominent. Leveraging the international capital and intellectual property protection systems of Hong Kong and Macao, China’s innovative drugs are accelerating their integration into the global industrial chain. This “dual circulation” strategy not only consolidates the domestic market foundation but also enhances China’s voice in shaping international rules.
Challenges and the Future
Despite remarkable achievements, China’s innovative drug development still faces challenges such as homogenized competition and insufficient payment capacity. Data indicates that in 2024, per capita funding for resident medical insurance reached only 1,070 yuan, while utilization rates for commercial health insurance funds remained below 50%. The multi-source payment system urgently requires refinement. In response, policies explicitly advocate “supporting genuine innovation and differentiated innovation,” guiding resources toward high-value innovations through health technology assessments and real-world data applications.
Looking ahead, medical insurance reform will continue to function as a “strategic purchaser”: dynamic adjustment mechanisms will become more precise, commercial insurance directories will serve as key outlets for innovative drugs, and data empowerment will reshape R paradigms. When medical insurance, healthcare, and pharmaceuticals synergize, China’s pharmaceutical industry will achieve a historic leap from a “major producer of generic drugs” to an “innovation powerhouse.”
The ultimate goal of this reform is to ensure every patient timely access to quality medicines. As Wang Guodong, Deputy Director of the National Healthcare Security Administration’s Medical Insurance Center, stated, “Every penny of the medical insurance fund must be spent where it matters most.” As innovative drugs become powerful tools for safeguarding lives and multi-tiered protections weave a safety net for health, the vision of a Healthy China is rapidly becoming a reality.