National Healthcare Security Administration Confirms Launch of Initial Pricing Mechanism for New Drugs, Signaling Shift in China's Innovative Medicine Policy

On July 31, CCTV News reported that the National Healthcare Security Administration (NHSA) has officially introduced a mechanism for setting the initial launch price of newly approved drugs. The announcement represents the first formal confirmation that this pricing framework has been established at the policy level, following the consultation process initiated last year for new chemical drugs.

Wang Xiaoning, Director-General of the Department of Drug Price and Tendering Procurement under the NHSA, emphasized the administration's intention to support high-level pharmaceutical innovation. He noted that innovative drugs should receive returns that reflect the high investment and risk involved at the early stage of market entry, describing the resulting price level as "satisfactory." Wang also suggested that a fixed price stabilization period will be introduced for such drugs.

In addition to pricing, Wang stated that the NHSA is also supporting network listing procedures for innovative drugs through a coordinated provincial acceptance system, designed to accelerate clinical deployment of new treatments. The broader regulatory shift reflects China's evolving pricing strategy, moving from a cost-control orientation to one that encourages high-quality innovation.

According to the same report, the NHSA has streamlined the pricing approval pathway for emerging technologies and urgently needed clinical innovations, launching over 100 new pricing projects across 30 batches of national guidelines. The underlying policy message is that price-setting and technological advancement are now developing in tandem.

Industry experts highlighted long-standing issues around the absence of clear mechanisms for first-launch pricing in China. Many pharmaceutical companies face a fragmented market access process with inconsistent evaluation standards, often leading to low price listings and limited network inclusion following drug approval. This situation has been especially challenging for smaller biotech firms, which risk not recovering research and development costs due to pricing uncertainties during the early commercialization phase.

Examples from the market illustrate the challenge. On June 13, Evepharm (002019.SZ) disclosed that the terminal price of its injectable drug Epegfilgrastim Alpha in the United States is nearly fourteen times higher than its domestic price. Similarly, Shanghai Junshi Biosciences (688180.SH) sells its PD-1 anti-cancer therapy in the U.S. at more than thirty times the price seen in China.
Healthcare policy analyst Xu Yucai remarked that the need to drastically lower prices to gain entry into the national reimbursement list has dampened innovation incentives among domestic pharmaceutical companies. He added that this new pricing mechanism addresses previous shortcomings in the NHSA’s negotiation model by protecting innovation incentives.

The language used by Wang, such as "satisfactory price level" and "price stabilization period," has been interpreted as an elevation from implicit policy to institutional framework. Gu Xianfeng, Deputy Secretary General of the Anhui Pharmaceutical Industry Association, stated that this formalization offers structural support to pharmaceutical innovation and provides potential price references prior to reimbursement negotiations.

Although specific details of the policy have not yet been published, the draft guidance released in February 2024 outlined the direction of reform. It reinforced the principle of market-determined pricing, supplemented by government oversight to increase the listing efficiency of new drugs and ensure appropriate returns. Under this guidance, companies can self-evaluate their products based on pharmaceutical innovation, clinical relevance, and evidence strength, which determine eligibility for more flexible pricing and faster listing support.

The NHSA has confirmed that this new approach will coexist with current listing models. For drugs rated with high innovation scores, a five-year price stabilization period will be available, during which they will be exempt from collective procurement and protected from price interference, allowing pharmaceutical companies to recover investments more swiftly.

Peng Teng, a professor at the School of Pharmacy at Chengdu University of Traditional Chinese Medicine, noted that policy-level flexibility in early-stage drug pricing will have a significant impact. He emphasized that innovation is vital to the pharmaceutical industry’s vitality but also pointed out that many firms currently lack the resources to pursue meaningful innovation, making supportive policies even more critical.

The interprovincial "coordinated acceptance" process mentioned by Wang is also viewed as a pivotal implementation tool aligned with the pricing mechanism. Gu Xianfeng remarked that faster provincial listings would allow companies to collect earlier feedback from physicians, better plan sales strategies, and secure valuations in both primary and secondary capital markets sooner. 

Executives from across the sector have expressed optimism about the evolving policy environment. Zhou Jianjun, General Manager and CEO of Shanghai Junshi Biosciences (688180.SH), indicated that the national policy shift in support of high-quality pharmaceutical innovation is already generating momentum across the industry. As the healthcare reimbursement system undergoes deeper reform, the dynamic adjustment mechanisms are increasingly focused on balancing volume-based procurement strategies with fair innovation returns.

Gu Xianfeng concluded that the formal release of this pricing mechanism is highly anticipated, as it will enhance confidence in research and development investment and strengthen China's strategic importance in global drug launch planning. Provided that the mechanism’s implementation pathway is clear and stable, it is expected to significantly bolster trust in domestic pharmaceutical innovation.