China's pharmaceutical pricing domain is undergoing a systemic transformation. High-level innovative drugs are expected to receive a &#34;price protection period&#34; upon initial launch, marking the formal implementation of a top-level institutional design that shifts pricing power toward enterprises.
On the 15th, the A-share innovative drug and chemical pharmaceutical sectors continued to strengthen throughout the afternoon. Stocks such as Peking University Pharmaceutical, Sino-Lu Pharmaceutical, Harbin Pharmaceutical Group, and Hisun Pharmaceutical hit the limit up, while Ruisen Biology rose over 10%, and Yuekang Pharmaceutical and Shutaishen also saw significant gains.
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In terms of news, on April 14, the General Office of the State Council officially released the &#34;Several Opinions on Improving the Drug Price Formation Mechanism&#34; (Guo Ban Fa [2026] No. 9, hereinafter referred to as the &#34;Opinions&#34;), which was issued on March 30. The &#34;Opinions&#34; proposes 14 measures centered on core dimensions such as the drug lifecycle, distribution channels, product categories, and price governance. It explicitly supports high-level innovative drugs with high innovation levels and significant clinical value to set prices commensurate with high investment and high risk during the initial launch phase and maintain relative stability for a certain period. On April 15, Wang Xiaoning, Director of the Medical Price and Procurement Department of the National Healthcare Security Administration, provided a detailed interpretation of these measures at a State Council Information Office briefing.
Multiple brokerage firms indicate that the innovative drug sector is currently in a favorable stage characterized by &#34;earnings realization, valuation repair, and meeting catalysts.&#34; The implementation of these policies is expected to become an important catalyst for a new round of market activity.
<h2>Pricing Power Returns to Enterprises; &#34;Price Protection Period&#34; is the Core Breakthrough</h2>
The breakthrough most closely watched by the market lies in the limited return of pricing initiative to enterprises.
According to the level of innovation, the &#34;Opinions&#34; classifies drugs into three categories: high-level innovative drugs, improved new drugs, and generic drugs (generic copies), applying differentiated policy guidance to each. For high-level innovative drugs, it supports setting prices consistent with their value during the initial launch phase and maintaining relative stability for a certain period; for improved new drugs, it encourages setting prices matched to patient benefits, with a relatively shorter price stability period; for generic drugs, it guides reasonable pricing based on similar drugs without a stability period, allowing centralized procurement to proceed directly.
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Director Jin Chunlin of the Shanghai Health and Development Research Center told 21st Century Business Herald that the key difference among the three drug categories lies in the duration of the price stability period. He pointed out that the core breakthrough of the &#34;Opinions&#34; is &#34;to give pricing power back to enterprises to a limited extent, implementing enterprise self-assessment plus autonomous pricing, while the government shifts from a direct pricer to a rule-maker.&#34;
The &#34;Opinions&#34; also clearly states &#34;innovation is not subject to centralized procurement, and centralized procurement does not apply to innovation.&#34; Centralized procurement targets only drugs with diverse supply sources that have been on the market for many years and does not involve innovative drugs, further clarifying the boundaries between the two policy tools.
<h2>Reshaping Initial Pricing Mechanisms; Dynamic Adjustments Introduce Real-World Studies</h2>
At the initial pricing stage, the &#34;Opinions&#34; innovatively proposes an enterprise self-assessment system, exploring autonomous evaluation of clinical value and innovation levels by enterprises, supplemented by peer review and social supervision.
Jin Chunlin believes that the initial launch price of exclusive innovative drugs will become an important consideration in future medical insurance negotiations. &#34;Theoretically, the initial launch price of innovative drugs can be determined through enterprise self-assessment, supplemented by peer review, which is a major positive for innovative drugs,&#34; potentially changing the past game mode of setting high prices first and then significantly cutting them.
The &#34;Opinions&#34; also explicitly states for the first time that enterprises may appropriately adjust price levels based on real-world study results and actual clinical usage, building a dynamic verification mechanism. Zhong Chongming, former associate researcher at the National Medical Insurance Research Institute of Capital Medical University, pointed out that with sufficient evidence from real-world studies, enterprises can strive for more favorable and refined pricing for relevant products, especially when facing medical insurance directory negotiations or commercial insurance directory consultations.
To prevent micro-innovations from fetching high prices, the &#34;Opinions&#34; simultaneously constructed a constraint system: enterprise autonomous pricing must accept social supervision and peer review. High-level innovative drugs must prove high innovation levels and significant clinical value, while improved new drugs must demonstrate real clinical advantages rather than simple changes in dosage forms or specifications.
<h2>Diversified Payment System Opens Policy Space; Commercial Insurance Role Expected to Rise</h2>
On the payment side, the &#34;Opinions&#34; has built a diversified payment system combining basic medical insurance, commercial insurance, and charitable donations to expand payment channels for high-priced innovative drugs exceeding basic medical insurance payment capabilities.
Regarding basic medical insurance, the &#34;Opinions&#34; clarifies that pharmaceutical enterprises supplying negotiated drugs to medical insurance-designated medical institutions must execute prices no higher than the payment standard. However, when supplying to non-medical insurance-designated medical institutions, market prices are not constrained by the payment standard, establishing a dual-track price management system. Zhong Chongming noted that this arrangement may theoretically create new arbitrage spaces and regulatory challenges; defining arbitrage criteria and promoting healthy and orderly industry development remains a long-term task.
Regarding commercial insurance, the &#34;Opinions&#34; proposes accelerating the implementation of commercial health insurance innovative drug directories. The first commercial insurance innovative drug directory released by the National Healthcare Security Administration in 2025 landed in January this year, containing 19 innovative drugs from 18 enterprises. Jin Chunlin believes that in the long run, the role of commercial insurance will grow increasingly significant. Basic medical insurance cannot include all high-priced innovative drugs, so the proportion of commercial insurance in medical payments will gradually increase. Once innovative drugs are included in commercial insurance, the enrollment rate will rise, forming a benign catalytic cycle.
However, Jin Chunlin also cautioned that in the short term, commercial insurance and charities still struggle to massively absorb high-priced innovative drugs; they serve more as supplements to basic medical insurance rather than replacements. &#34;The value of the 'Opinions' lies in opening up policy space, but improving payment capacity requires gradual promotion of multiple supporting reforms.&#34;
<h2>Sector Valuation Repair Combined with Policy Catalysts; Earnings Realization Becomes Key Variable</h2>
From a capital market perspective, the innovative drug sector has shown signs of explosive growth since early April, reversing the continuous oscillating adjustment trend that had persisted since September 2025.
Multiple brokerage firms indicate that the sector is currently in a favorable stage of &#34;earnings realization, valuation repair, and meeting catalysts.&#34; The 2025 annual reports of leading pharmaceutical companies were impressive. Companies such as Hengrui Medicine and BeiGene continued to increase the proportion of innovative drug revenue, while several biopharmaceutical enterprises including InnoCare Pharma and RemeGen achieved historic turnarounds from losses to profits. Shenwan Hongyuan Securities noted in its pharmaceutical industry weekly report released on March 29 that as of March 29, 71 pharmaceutical listed companies had published their 2025 annual reports. Among them, 32 companies achieved positive growth in net profit attributable to shareholders, with 10 companies showing growth rates of 40% or higher.
Huaxin Securities pointed out that the development model of innovative drugs has shifted from relying solely on financing-driven models to a comprehensive driving method combining product commercialization, R&amp;D overseas licensing, and financing, making the allocation timing evident. The institution also believes that the sector has undergone a prolonged adjustment of more than half a year since the end of the third quarter last year, and valuation risks have been largely released. Short-term sentiment suppression does not alter the fundamental logic of the industry's long-term positive outlook.
Furthermore, the AACR Annual Meeting in April and the ASCO Annual Meetings in May and June are approaching. The dense disclosure of clinical data is expected to provide sustained momentum for valuation repair. Under the resonance of three factors—top-level policy implementation, upward earnings cycles, and academic meeting catalysts—innovative drug enterprises that truly possess high clinical value and can pass both self-assessment and peer review verification may become the most direct beneficiaries of this reform.

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New State Council policies explicitly establish a 'price protection period' for innovative drugs, allowing high-level innovative drugs to set their own prices during the initial launch phase and enjoy this protection period. Centralized procurement will not touch innovative drugs, while a diversified commercial insurance payment system simultaneously opens up new space. Stimulated by this news, the A-share innovative drug sector surged strongly in the afternoon session, with multiple stocks hitting the limit up. Brokerage firms point out that the convergence of earnings realization, valuation repair, and policy catalysts may have ushered in a new wave of market activity for the innovative drug sector

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E Fund CSI 300 Health Care ETF

Guotai SSE STAR Brand Name Drug ETF

Penghua CNI HK Connect Innovative Drugs ETF

ChinaAMC CSI Biotechnology Theme ETF

J.P.Morgan Asset Management CSI Brand Name Drug Industry ETF

E Fund CSI Innovative Drugs ETF

Eastmoney Fund CSI SH-HK-SZ Brand Name Drug Industry ETF

Tianhong Hang Seng Shanghai-Shenzhen-Hong Kong Innovative Drugs Selected 50 ETF

Harvest CSI Hong Kong Connect Innovative Drugs ETF

Yinhua CSI Innovative Drugs Industry ETF

CCB Principal CSI Innovative Drugs Industry ETF

Guotai CSI Hugangshen Innovative Drugs Industry ETF

GF CSI Innovative Drugs Industry ETF

E Fund Hang Seng SCHK Innovative Drug ETF

China Southern CSI Brand Name Drug Industry ETF

ICBCCS CSI Brand Name Drug Industry ETF

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SL PHARM

HPGC

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Staidson BioPharm

Hengrui Pharma

HENGRUI PHARMA

BeOne Medicines

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Explosive Growth in Innovative Drugs: Top-Level Pricing Mechanism Reform, Who Will Be the Biggest Winner?