21st Century Economic Report reporter Yan Shuo, intern Song Caiwei
Medicines are special livelihood products that safeguard the health of the entire population. Their price formation mechanism is linked to the medication burden and health of billions of people on one end, and the innovation vitality and future development of the pharmaceutical industry on the other, which is also crucial for the long-term sustainable operation of medical insurance funds.
For a long time, China has continuously optimized the price formation mechanism for medicines, but there are still many challenges in practice. On one hand, the interests involved in drug pricing are very complex, requiring optimization of resource allocation and balancing the interests of all parties, while ensuring that the market does not fail; on the other hand, the technical threshold for pharmaceuticals is relatively high, and there is information asymmetry, which means that the government cannot be absent in safeguarding the health and well-being of the people.
Recently, the General Office of the State Council publicly released the &#34;Several Opinions on Improving the Price Formation Mechanism for Medicines&#34; (hereinafter referred to as &#34;Opinions&#34;), proposing 14 specific measures from the perspectives of the entire cycle, all channels, and all fields, regulating the pricing, supply, and payment of medicines in key areas. Based on this, on April 15, the State Council Information Office held a regular press conference to introduce the relevant situation of the &#34;Opinions.&#34;
<img src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Othgb7NqLHTwq_AJ4FIKfzwqaP9_9lcorTSdaNC_TMVKkAA/641?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://inews.gtimg.com/om_bt/Othgb7NqLHTwq_AJ4FIKfzwqaP9_9lcorTSdaNC_TMVKkAA/641"/> Scene of the State Council policy regular press conference | Source: State Information Network
Deputy Director of the National Healthcare Security Administration Shi Zihai stated that the &#34;Opinions&#34; fully leverage the decisive role of the market in resource allocation, better play the role of the government, and improve the market-led price formation mechanism for medicines, supporting the high-quality development of the pharmaceutical industry and ensuring that the public has access to high-quality and reasonably priced medicines.
Jin Chunlin, director of the Shanghai Health and Health Development Research Center, pointed out to the 21st Century Economic Report that the &#34;Opinions&#34; construct a new mechanism for drug price formation characterized by classified management, diversified payment, and full-chain governance. &#34;The core breakthrough lies in granting limited pricing power to enterprises, implementing self-evaluation and self-pricing by enterprises, while the government shifts from being a direct price setter to a rule maker. The implementation of the policy will bring certain benefits to innovative drugs.&#34;
<h4>Saying Goodbye to Fragmented Adjustments</h4>
In the past, drug price reforms in China mainly focused on core links such as centralized procurement and medical insurance payments, making it difficult to cover the entire chain of drug listing, circulation, sales, and regulation, and unable to meet the pricing governance needs of different categories and channels.
The core breakthrough of this &#34;Opinions&#34; lies in promoting systematic reform across the entire cycle, all channels, and all fields through top-level design, achieving a fundamental change in the logic of drug price formation in China.
Full-cycle pricing implements classified policies for different stages of medicines. For newly listed drugs, a drug launch price mechanism is introduced, distinguishing between high-level innovative drugs, improved new drugs, and generic drugs based on the company's self-evaluation results regarding clinical value and innovation level, providing policy support and guidance; for drugs included in the medical insurance catalog, the medical insurance payment standards play a guiding role in drug pricing; for drugs with diverse supply, long market presence, and included in centralized procurement, the centralized procurement rules are optimized based on the characteristics of different types of drugs, and the price formation mechanism for drug centralized procurement is improved. For regular online drugs, the focus is on improving the management and dynamic adjustment system of online drug prices
Shi Zihai pointed out that the &#34;Opinions&#34; classify pricing policies for drugs throughout their lifecycle, leaving room for high-level innovative drugs and encouraging companies to continue their research and innovation; at the same time, it sets rules for self-pricing for other drugs, guiding companies to price fairly and reasonably.
In terms of distribution channels, the &#34;Opinions&#34; propose arrangements for public medical institutions, designated retail pharmacies under medical insurance, online pharmacies, etc. Drugs in public medical institutions should be procured through provincial medical procurement platforms and sold at zero markup (except for traditional Chinese medicine pieces), while a reasonable markup is allowed for traditional Chinese medicine pieces. For designated pharmacies under medical insurance, prices will be guided to be more reasonable through management of medical insurance agreements, public price comparisons, and quantity-price comparison indices. For online pharmacies, regular online and offline price comparisons will be conducted to assess and correct abnormal prices.
In the dimension of the entire field, prices will be guided to maintain reasonable levels based on the differences among various drug categories. The &#34;Opinions&#34; clearly state that for innovative drugs, the promotion of diversified payment and reasonable price formation should be encouraged; for shortage drugs, the focus should be on ensuring supply and stabilizing prices, optimizing direct online listing rules; for narcotic drugs and first-class psychotropic drugs, government-guided pricing will be implemented according to the law; for drug raw materials, packaging materials, and traditional Chinese medicinal materials, price guidance should be strengthened to prevent monopolistic and disorderly price increases.
In addition, the &#34;Opinions&#34; simultaneously deploy measures to strengthen drug price governance, proposing to implement drug price risk warnings, prevent irrational bidding impacts on supply during centralized procurement, severely punish illegal behaviors such as forcing price increases through shortages in the drug and raw material sectors, improve the credit evaluation system for price procurement, and establish a drug medical insurance value assessment system, among other targeted measures, to guide drug prices to operate within a reasonable range.
<h4>Empowering the Development of Innovative Drugs</h4>
Pharmaceutical innovation is the core support for safeguarding people's health and a key engine for the high-quality development of the pharmaceutical industry. For a long time, balancing the high-priced R&amp;D returns of innovative drugs with patient accessibility has always been a core challenge of pharmaceutical reform.
This time, the &#34;Opinions&#34; clearly support pharmaceutical innovation and provide a series of institutional arrangements to safeguard the entire process of R&amp;D, market launch, payment, and use of innovative drugs.
Wang Xiaoning, Director of the Drug Price and Bidding Procurement Department of the National Medical Insurance Administration, introduced that the National Medical Insurance Administration has conducted negotiations on the medical insurance catalog for eight consecutive years, incorporating a total of 199 innovative drugs into the reimbursement scope. As of February this year, the medical insurance fund has spent a total of 504.8 billion yuan on negotiated drugs, driving market sales of 740 billion yuan, benefiting 1.17 billion people.
The large-scale payment of the medical insurance fund not only allows innovative drugs to quickly enter clinical use and benefit patients but also provides stable guarantees for companies to recover R&amp;D costs, becoming an important driving force for promoting pharmaceutical innovation. The &#34;Opinions&#34; further optimize the adjustment rules for the medical insurance catalog, promoting that the payment standards formed through negotiations reasonably reflect the clinical value of drugs, balancing patient benefits and corporate innovation incentives.
For innovative drugs outside the basic catalog, the &#34;Opinions&#34; propose to accelerate the implementation of commercial insurance innovative drug catalogs, encouraging pharmaceutical companies, charitable organizations, special funds, and other social forces to provide precise and effective assistance to users of innovative drugs, broadening payment channels for innovative drugs and introducing multi-party participation to support the high-quality development of innovative drugs.
Jin Chunlin believes that in the short term, commercial insurance and charity will still find it difficult to undertake high-priced innovative drugs on a large scale, serving more as a supplement to medical insurance rather than a replacement. In the long run, the role of commercial insurance will become increasingly significant, as basic medical insurance cannot include all high-priced innovative drugs, especially those with clear efficacy that meet unmet clinical needs
Commercial insurance is also willing to include it in the coverage scope, and the proportion of commercial insurance in medical payments will gradually increase in the future.
&#34;The value of this 'Opinion' lies in opening up policy space, but the improvement of payment capacity still requires multiple supporting reforms to be gradually promoted,&#34; said Jin Chunlin.
The 'Opinion' clearly states that during the centralized procurement phase for drugs participating in collective procurement, a focus will be placed on drugs that have diverse suppliers and have been on the market for many years, while innovative drugs will not be included in collective procurement, adhering to the principle of &#34;innovation not included in procurement, procurement not for innovation.&#34; At the same time, during the regular listing phase, it promotes that reference preparations and generic drugs reflect reasonable price gradients, demonstrating support for innovative research and development.
In addition, the 'Opinion' proposes to establish a drug medical insurance value assessment system, where the medical insurance department will legally promote real-world research on drugs, objectively evaluating drug value from multiple dimensions such as clinical effectiveness, innovation, and accessibility using reliable and credible real-world data.
From the perspective of industrial development, the policy empowerment has already shown initial results: during the 14th Five-Year Plan period, over 200 innovative drugs were approved in China, and the number of innovative drugs under research accounts for about one-third of the global total. By 2025, the total amount of overseas licensing transactions for innovative drugs is expected to exceed USD 130 billion, with China holding 6 seats among the top 50 pharmaceutical companies globally. The implementation of the 'Opinion' will further activate innovative vitality and accelerate China's transformation from a major pharmaceutical country to a strong pharmaceutical country.
<h4>Improving the Regulatory Closed Loop</h4>
This 'Opinion' also proposes to coordinate the advancement of price regulation, anti-monopoly enforcement, and industrial collaboration, further improving the full-chain regulatory closed loop of pre-warning, in-process control, and post-punishment, severely cracking down on price violations and monopolistic behaviors, standardizing market competition order, and promoting drug prices to return to the source of clinical value.
Yao Lei, Director of the Price Supervision and Inspection and Anti-Unfair Competition Bureau of the State Administration for Market Regulation, introduced that in recent years, market regulation departments have gradually built a full-chain price regulation system covering raw materials, finished drugs, medical institutions, and retail pharmacies, effectively maintaining the price order of the drug market. In terms of strengthening anti-monopoly enforcement in the pharmaceutical sector, since 2023, China has investigated 12 cases involving monopolistic practices in the pharmaceutical field, with fines exceeding 2.4 billion yuan; since 2025, 28 cases of concentration among drug operators have been concluded, legally prohibiting monopolistic acquisitions and forming a strong deterrent against violations.
The 'Opinion' further clarifies the need to strengthen drug price and anti-monopoly enforcement, legally punishing illegal behaviors such as price increases through shortages, monopolistic price hikes, and market price manipulation in the production and operation of drugs and raw materials. It also emphasizes comprehensive and penetrating audit supervision throughout the pharmaceutical field.
In the past, drug price regulation was mostly punitive after the fact, making it difficult to prevent price risks in advance. The 'Opinion' clearly relies on the national drug price list to implement &#34;red and yellow label&#34; risk warnings for drugs with excessively high prices on provincial procurement platforms, establishing an intelligent monitoring and early warning system for drug prices. This measure will break down price barriers through information disclosure, providing risk guidance for medical institutions' procurement and guiding companies towards rational pricing.
Medical institutions are important participants in the formation of drug prices, and severing the interest chain between medicine and drugs has always been an important task in medical reform. Relevant departments have implemented reforms such as zero-profit margins for drugs in public medical institutions and centralized procurement of drug consumables, and this 'Opinion' further deepens related arrangements
In addition to &#34;deepening the promotion of the standardization and normalization of centralized drug procurement,&#34; the &#34;Opinions&#34; propose the implementation of a zero-profit policy for traditional Chinese medicine formula granules and the improvement of pricing policies for pharmaceutical medical services. At the same time, it encourages medical institutions to register actual procurement prices on provincial pharmaceutical procurement platforms, studies effective ways to reasonably link listed prices with negotiated prices, and clarifies that selected drugs in centralized procurement and negotiated drugs during the agreement period cannot be subject to price negotiations.
Wang Xiaoning stated that the above measures are conducive to motivating medical institutions and healthcare personnel to participate in price formation and actively control costs, and are also beneficial for stabilizing market expectations. Overall, severing the interest chain between medicine and drugs is a systemic issue that requires further joint efforts, comprehensive policies, and collaboration from all parties.
As supporting policies such as the initial pricing mechanism, commercial insurance catalog, centralized procurement rules, and online management are gradually advanced, the subsequent implementation of the drug pricing formation mechanism will become a focus of attention for the pharmaceutical industry and the market

The drug pricing mechanism is being comprehensively reshaped to support innovative drugs and optimize market allocation. The "Opinions" issued by the State Council propose 14 measures aimed at regulating drug pricing, supply, and payment, emphasizing the decisive role of the market in resource allocation, while the government shifts to being a rule-maker. The new mechanism will achieve full-cycle and all-channel drug price governance, promote high-quality development of the pharmaceutical industry, and ensure the public has access to high-quality and reasonably priced drugs

Comprehensive Restructuring of Drug Pricing Mechanism: Making Way for Innovative Drugs and Restoring Market Position