In-depth analysis of the sustainable development path of Chinese healthcare's multi-payer system: a case study of MedTrust Health

China’s innovative drugs and medical devices are experiencing a stage of stark contrasts in development.

On the one hand, China's innovative drugs and medical devices have achieved breakthroughs in both quantity and quality. Taking innovative drugs as an example, in terms of quantity, the number of clinical trial applications for innovative drugs accepted in China was less than 500 in 2017, but by 2023—five years later—this number surged to 2,255, an increase of nearly fivefold. Additionally, the global share of China's new drug development pipeline rose from 3% in 2013 to 28% in 2023, growing nearly tenfold over the decade. In terms of quality, the number of China's license-out transactions increased from 33 in 2019 to 105 in 2023, while the transaction value surged from $1 billion to $42.1 billion. This reflects the growing global recognition of China's innovative drugs.

However, amid the booming growth, the structural imbalance in the payment system for innovative drugs and medical devices remains a serious challenge. According to the *China Innovative Drugs and Devices Multi-Payer White Paper (2025)*, data from 2024 shows that medical insurance funds covered 44% of medical expenditures, while out-of-pocket payments accounted for as much as 49%. This indicates that under the current payment system, China's medical insurance funds and out-of-pocket payments by individuals account for a significant proportion, creating substantial pressure, yet they still struggle to fully cover the demand for high-priced innovative drugs and medical devices.

Insufficient payment capacity not only affects the accessibility of innovative drugs and devices but also directly impacts companies' confidence and direction in R&D. When a single payer struggles to bear the burden alone, building a diversified payment system becomes an inevitable choice for industry development. More importantly, healthcare is a critical matter of public welfare, and the construction of a multi-payer system involves complex negotiations among the government, healthcare insurance, insurers, pharmaceutical companies, and patients—far from a temporary fix. Therefore, diversification is a must-answer question, while sustainability is the ultimate goal.

Before exploring how to build a sustainable multi-payer system for pharmaceuticals, it is necessary to conduct a detailed analysis of the rationale and necessity for establishing such a systemIn a nutshell, the rationale for building a diversified medical payment system stems from the conflict between the new demands of innovative drugs and devices and the existing payment system. Further, this conflict can be broadly categorized into three dimensions: payment funding, payment speed, and payment precision.

CAR-T therapy costs 1.2 million yuan per injection, while  BBM-H901 (generic name: Dalnacogene Ponparvovec Injection) of Belief BioMed, China’s first domestically developed AAV gene therapy, requires patients to pay over 2 million yuan out of pocket. While we celebrate breakthroughs in cutting-edge treatments and the newfound hope they bring to patients, we must also acknowledge that, alongside the rapid advancement of innovative drugs and medical devices, humanity continues to achieve remarkable innovations in the field of medicine. The annual treatment cost for a single patient has also been rising sharply, jumping from the "ten-thousand-yuan level" to the "million-yuan level."

However, in January this year, data released on the official website of the National Bureau of Statistics showed that the per capita disposable income of Chinese residents in 2024 was only 41,314 yuan, still at the "ten-thousand-yuan level". This means that the majority of patients cannot afford the costs of cutting-edge therapies, and some may even lose the possibility of a cure as a result. As one of the main payers in China, medical insurance is also unable to provide strong coverage for innovative drugs and devices due to multiple

Specifically, it has long been a consensus within the industry that healthcare funds face significant payment pressures. According to the 2024 National Healthcare Security Development Statistical Bulletin issued by the National Healthcare Security Administration, although revenue for the employee healthcare fund increased in 2024, the growth in fund expenditures was even greater, indicating that the gap between healthcare fund revenues and expenditures continues to enlarge.

Moreover, since the primary purpose of medical insurance funds is to cover basic medical needs. Based on this, multiple industry experts have indicated that the current pace of including innovative drugs in the national negotiations is unsustainable in the long term. Furthermore, given the ongoing financial pressure on medical insurance funds, it is increasingly difficult for innovative drugs to rely solely on medical insurance as the single payer to support industry development.

After approval, innovative drugs need to be quickly brought to market to generate commercial returns, thereby supporting the development of other research projects. However, in the past, to accelerate marketization, companies primarily had two paths: either strive for inclusion in the national medical insurance or forgo medical insurance negotiations and directly enter the non-medical insurance market.

Regardless of the choice a company makes, it will face corresponding challenges: if it opts to pursue inclusion in the medical insurance system, it must not only endure a lengthy negotiation process but also potentially face significant profit reductions. Conversely, if the company chooses not to enter the medical insurance system, it will directly target the patient population. However, as previously mentioned, most patients lack the ability to pay for innovative medical devices and drugs. Thus, the company will still encounter commercialization difficulties.

Moreover, it is worth mentioning that previous media reports have pointed out that in a system relying solely on medical insurance as the single payer, the medical insurance payment standard has effectively become the market pricing benchmark for innovative drugs. This, in turn, is one of the reasons for the relatively low pricing of domestically developed innovative drugs.

According to reports, the annual treatment cost of some PD-1 drugs from domestic pharmaceutical companies such as BeiGene, Innovent, and Hengrui is approximately $5,000–$6,000 per year. Lower product pricing may lead to reduced profit margins for innovative drugs, which is clearly detrimental to subsequent R&D investment and does not help boost confidence in domestic innovation.

Payment precision needs improvement, which is one of the main challenges innovative medical devices and drugs face in terms of reimbursement. We can understand the payment precision of innovative medical devices and drugs from two dimensions.

First, areas such as oncology and rare diseases are currently the primary focus of innovative drug and device development, with numerous innovations already emerging. However, a significant payment gap remains between these innovations and their target populations. Although payers like health insurance have increased coverage for oncology and rare diseases, the breadth and depth of this coverage remain relatively limited overall. Compounded by the comparatively lower payment capacity of oncology and rare disease patients versus "general patients," innovative drugs and devices under a single-payment system cannot achieve adequate coverage for these targeted groups.

Second, ideally, the payment for innovative drugs and devices should be based on differentiated pricing according to efficacy, disease progression, and patient demographics. Although the industry is actively promoting such pricing models, there remains a significant gap between the current reality and the ideal scenario. This may lead to a situation where a patient with a lower demand for a particular innovative drug is forced to forgo its use or even abandon treatment altogether due to the higher costs associated with treating higher-demand conditions. These patients, who could and should have access to better and more advanced treatment options, are left without viable choices. Therefore, advocating for the establishment of a "pay-for-performance" payment system is an advanced requirement put forward by the development of innovative drugs and devices.

In other words, currently, the payment systems of medical insurance and out-of-pocket expenses constrain the development of domestic innovative drugs and medical devices, and establishing a sustainable, diversified medical payment system is the only way to break through this dilemma.

So, how should we build a sustainable multi-payer system for pharmaceuticals? According to VCBeat, the construction of a sustainable multi-payer system for medicine should include three key components related to sustainability: funding sources, payment structure, and payment technology and efficiency.

In reality, aside from the previously mentioned medical insurance payments and out-of-pocket expenses, innovative medical devices and pharmaceuticals can also be covered through commercial health insurance, medical assistance, charitable donations, and mutual aid programs. However, compared to the proportion of payments made by medical insurance and individuals, the share covered by commercial health insurance and other methods remains relatively small.

However, as previously mentioned, due to the sustained pressure on the healthcare fund's payments in recent years and the continuous widening of the fiscal gap, its capacity for "replacing the old with the new" is limited. This poses a serious challenge to the sustainability of its role as the primary payer for innovative drugs and medical devices.

Medical assistance primarily provides financial aid to impoverished individuals who lack the economic means to afford medical treatment. The amount of aid is generally constrained by the total financial investment available. The high cost of innovative drugs and medical devices limits their inclusion in medical assistance programs, which are typically restricted to life-saving and emergency treatments. Consequently, the coverage for innovative drugs and devices remains relatively limited.

As for charitable aid, due to factors such as the current lack of a well-established system in our country, it faces issues like small scale and significant fluctuations in fundraising. Consequently, it is also unable to provide strong and sustainable financial support for the funding pool of innovative drugs and medical devices.

Compared to medical insurance, commercial health insurance offers more differentiated and personalized coverage with higher protection limits; compared to forms like medical assistance or charitable aid, it provides advantages such as payment certainty. On top of this, commercial health insurance’s inherent strength—"leveraging insurance to provide substantial coverage with relatively low premiums"—gives it the potential to become a major payer for innovative drugs and medical devices.

Based on this, various players in the industry are actively promoting the development of commercial health insurance and have achieved significant results. The National Financial Regulatory Administration stated: "Commercial health insurance has become the most important payment method for innovative drugs outside of medical insurance. In 2024, the total payout amount of commercial health insurance for innovative drugs and medical devices was approximately 12.4 billion yuan, with high growth for three consecutive years and a compound annual growth rate of 103%. With the reform of payment methods and the continuous improvement of policy measures such as the 'dual-channel' system, the difficulty of getting drugs covered by commercial health insurance into hospitals is expected to be gradually resolved. The accessibility of related innovative drugs will also steadily increase, thereby enhancing the role of commercial health insurance in supporting innovative pharmaceuticals.

Relevant data further corroborates the immense potential of commercial health insurance in financing innovative drugs and medical devices. According to the China Innovative Drugs and Devices Multi-Payer White Paper (2025) forecast, under the premise of fully unleashing the scale and payment capacity of commercial insurance, China's commercial health insurance payments for innovative drugs and medical devices will reach 440 billion yuan, with payments for innovative drugs accounting for 44% of the total payment.

To achieve this goal, it is necessary to further improve the payment structure of commercial health insurance and enhance its operational efficiency.

In fact, regarding the coverage of innovative drugs and medical devices, commercial health insurance has initially developed a multi-tiered product system, primarily categorized into reimbursement-based medical insurance, lump-sum payment critical illness insurance, and specialized insurance for individuals with pre-existing conditions covering specific diseases and medications. Among these, reimbursement-based medical insurance mainly includes public-benefit insurance, million-yuan medical insurance, corporate supplementary medical insurance, and mid-to-high-end medical insurance. They provide coverage for the diverse needs of different populations for innovative medical devices and drugs.

Among them, Huimin Insurance (a type of urban customized supplementary medical insurance) has emerged as a phenomenal product in recent years, covering approximately 150 million people annually. Notably, 90% of such plans nationwide include special drug coverage, significantly alleviating the financial burden on participants, especially the elderly and those with pre-existing conditions.  In terms of drug categories, medications included in Huimin Insurance special drug coverage generally share three key characteristics:  First, they are often oncology drugs that are widely used in clinical practice but have not been included in the national reimbursement drug list (NRDL) due to production costs or market strategies. Second, they may be breakthrough therapies that have recently entered the market but have not yet undergone NRDL negotiations or have certain indications not covered by national insurance. Before being included in the NRDL, Hui Min Bao can serve as a key channel for market expansion.  Third, they include innovative drugs for rare diseases that have been launched in recent years.

In other words, at this stage, Huimin Insurance does provide strong support for the payment of innovative drugs and medical devices. However, it must be acknowledged that despite the continuous expansion of Huimin Insurance's coverage for innovative drugs and devices, there are still shortcomings. For instance, in terms of drug categories, the current focus is on including oncology drugs, while coverage for innovative drugs related to chronic diseases remains limited. Additionally, to address payout pressures, some Huimin Insurance plans have lowered the payment limits for special drug coverage.

Therefore, there is a view that, Huimin Insurance can only serve as a short-term growth engine for the payment of innovative drugs and devices within the commercial health insurance sector. However, in terms of long-term payment potential and capacity, the industry still needs to explore payment methods that can play a significant role in covering innovative drugs and devices. Commercial health insurance remains the most promising option.

The reason is that in 2024, the average penetration rate of the top 30 drugs by overall reimbursement amount in commercial health insurance (including but not limited to million-yuan medical insurance and Huimin Insurance) reached 17%. Most of the drugs with higher penetration rates are innovative medicines with novel targets and treatment mechanisms, or rare disease "orphan drugs" that have recently entered the market. This indicates that commercial health insurance has become a significant source of payment for innovative drugs—"it can even be said that these drugs have developed and penetrated the market alongside health insurance from the moment they were

As for critical illness and specific drug insurance designed for patients, its enrollment methods and plan design are more flexible than commercial health insurance, making it gradually one of the payment methods for newly launched innovative drugs for chronic and rare diseases. Additionally, although the average claim amount for critical illness insurance in the oncology field is much lower than that of commercial health insurance, it still serves as a strong supplement to the market beyond commercial health insurance.

When multi-tiered product design meets the medical device and drug innovation needs of diverse populations, what else should a sustainable and diversified medical payment system focus on? An obvious answer is efficiency—because it affects not only the speed of payment but also the operational costs of the entire system and the experience of all stakeholders.

When the digital transformation of commercial health insurance has become an inevitable trend, the maturity and practical application of artificial intelligence and large model technologies have added new momentum to this transformation. When it comes to the primary purpose of applying cutting-edge technological forces in the health insurance industry, the first reaction within the sector remains cost reduction and efficiency.

Taking the claims settlement process as an example, in the past, the average review cycle for traditional paper medical records took 12-15 working days, which not only resulted in a poor experience for patients. However, today, through automated processing of medical records and intelligent review of claims materials, combined with OCR and NER technologies to automatically extract key information from claims documents, perform image analysis, and structure the content, the claims process can be digitized, significantly improving both the efficiency and accuracy of claims.

In addition, by integrating multimodal data and real-time risk monitoring, health insurance can also use AI to identify fraudulent activities in real time and generate alerts, thereby effectively reducing operational costs. Meanwhile, in the sales process, health insurance can similarly utilize intelligent customer service to address user inquiries, thereby lowering sales labor costs, while simultaneously conducting customer risk assessments and gauging purchase intentions to increase conversion rates.

It is worth mentioning that the application of artificial intelligence and large model technology can also empower product development and pricing by identifying users' latent needs, analyzing customer behavior preferences, and risk factors.

Generally, with the continuous iteration and advancement of artificial intelligence and digitalization, its application in the health insurance industry will eventually progress beyond simple tasks such as information processing and image-text generation, shifting toward critical areas like new product development, pricing, and risk assessment. This will drive the health insurance industry toward greater refinement and intelligence, thereby promoting the efficient, orderly, and sustainable operation of the broader diversified medical payment system.

A diversified pharmaceutical payment system involves multiple stakeholders, including policymakers, pharmaceutical companies, insurance institutions, and platforms, all of whom need to actively participate and collaborate efficiently. Therefore, building an efficient and sustainable ecosystem is crucial.

Among them, as the driving force and leader of the entire industry's development, national and local government departments have introduced a series of policies, providing direction for the overall development of the industry and the construction of an ecosystem.

For example, in July 2024, the State Council executive meeting passed the Implementation Plan for Whole-Chain Support of Innovative Drug Development, emphasizing the use of other policies, including commercial insurance, to collectively drive breakthroughs in innovative drugs. In December of the same year, the National Healthcare Security Work Conference proposed exploring a diversified payment mechanism for innovative drugs, supporting and guiding inclusive commercial health insurance to promptly include innovative drugs in coverage, and researching and exploring the formation of a Category C drug list.

In addition to introducing a series of incentive policies, the country is also implementing innovative measures to boost the development of commercial health insurance. One of the most significant initiatives is promoting the establishment of a mechanism for sharing healthcare and medical insurance data. This indicates that, in advancing commercial health insurance, the country has gradually moved from policy advocacy to considering practical implementation.

Guided by national policies, local governments at all levels have also taken proactive steps. Among them, Shanghai has been particularly active, with its demonstration effect beginning to show. In July 2023, the Shanghai Municipal Healthcare Security Administration, in collaboration with seven other departments, issued the Several Measures to Further Improve the Multi-Payer Mechanism and Support the Development of Innovative Drugs and Medical Devices in Shanghai, proposing to promote the development of commercial health insurance and establish a multi-party shared payment mechanism for innovative drugs and medical devices. Within nearly half a year of implementation, this policy has achieved full coverage of basic medical insurance and commercial insurance for products listed in Shanghai’s New and Excellent Drugs and Medical Devices catalog. In August of this year, the Shanghai Financial Regulatory Bureau, together with the Shanghai Municipal Healthcare Security Administration and the Municipal Party Committee’s Financial Office, jointly issued the Several Measures to Promote the High-Quality Development of Commercial Health Insurance and Support Bio-Pharmaceutical Industry Innovation. This includes five aspects and 18 work measures, such as building a multi-tiered commercial health insurance product system, strengthening the service capacity of commercial health insurance, encouraging innovative practices in commercial health insurance, promoting data empowerment in commercial health insurance, and increasing policy support.

Favorable policies have been frequently introduced, creating fertile ground for building a diversified medical payment system. Within this landscape, pharmaceutical and medical device companies, along with insurance institutions, are continuously deepening their cooperation under the guidance of these policies, exploring product innovation and the expansion of coverage.

It is worth mentioning that, in the collaboration between pharmaceutical and medical device companies and insurance institutions, many enterprises opt to work through third-party platforms. The underlying reason is closely tied to efficiency. For example, Takeda Pharmaceutical once stated to the media that diverse payment methods represent a relatively new field, while third-party platforms possess relatively mature knowledge and experience in related areas, which can accelerate the collaboration process and enhance its success rate. Moreover, the products often involve numerous cities, and third-party platforms can undertake the tasks of calculation and evaluation. This also effectively reduces the investment costs for pharmaceutical companies and insurance institutions.

To concretely demonstrate the industry value of third-party platforms, we take MedTrust Health, China's largest diversified healthcare payment platform, as an example to observe how it serves as a nexus among multiple stakeholders in the industry chain. Through technological and ecological collaboration, it promotes the sustainability of diversified payment systems.

The first step in building an ecosystem must be the accumulation of resources from all parties in the industry. By providing pharmaceutical companies and insurance institutions with solutions that address their core challenges, MedTrust has successfully connected the resources of pharmaceutical companies, insurance institutions, and patients.

Specifically, addressing the critical issue of how pharmaceutical companies can accelerate product adoption under limited medical insurance coverage, MedTrust has launched the "Smart Pharma" solution. This solution covers the entire drug lifecycle commercialization needs, from connecting with multiple payers, to patient assistance and specialty drug distribution channel development, and even designing commercial insurance collaboration models. Through this system, pharmaceutical companies can not only gain market returns before medical insurance negotiations but also achieve product accessibility in a shorter cycle. According to publicly disclosed data from MedTrust, the company has established partnerships with 90% of the world's top 20 pharmaceutical companies, facilitating the accelerated launch of multiple innovative drugs in the Chinese market.

To address the pain points of complex claims processing and uncertain risk control in the insurance industry, MedTrust has launched the "Smart Insurance" solution. This solution, integrated with its self-developed mind42.ai intelligent hub, provides end-to-end digital tools for insurance companies. For instance, MedTrust's full-chain digital claims processing solution utilizes an AI claims engine powered by a vertical large-scale model to automatically analyze unstructured data such as medical records, prescriptions, genetic test reports, and imaging films, achieving "second-level" information extraction and structuring. Additionally, it employs an anti-fraud model trained on tens of millions of real claims samples to identify abnormal medication usage and falsified medical records in real time. It can also automatically calculate patients' out-of-pocket expenses and赔付 amounts based on multiple factors, including policy terms, medical insurance directories, charitable drug donation programs, and innovative drug assistance initiatives.

As of now, MedTrust has provided a one-stop closed-loop service of "online application, intelligent review, and instant settlement" for over 80,000 insurance policies, driving innovative drug claims toward digitalization and precision.

For patients, the most immediate benefit is the simplification of the payment process. To achieve this, MedTrust has introduced "One-Click Payment," which integrates multiple payment channels—such as insurance, inclusive health insurance, and charitable funds—into a single entry point, making it the first stop for medical payments. With "One-Click Payment," patients no longer need to go through the cumbersome process of "paying first and reimbursing later" when purchasing medication or seeking medical care. Instead, they only pay the out-of-pocket portion after deducting the covered amount. To date, One-Click Payment has been implemented in over 20,000 hospitals nationwide, gradually transforming the experience for patients when paying for high-cost.

And when all parties in the industrial chain had accumulated sufficient resources and the ecosystem was initially established, MedTrust began contemplating how to make this system operate efficiently. To this end, it built two underlying infrastructures: MediTrust Healthcare and MediTrust Rx. Among them, the MediTrust Rx supply chain has covered 295 cities and over 3,300 pharmacies, ensuring the efficient delivery of innovative drugs. Meanwhile, the MediTrust Healthcare exclusive doctor network can help patients optimize their treatment pathways and reduce the administrative burden on insurance companies. Moreover, the application of these two underlying infrastructures not only enhances the efficiency of the entire ecosystem but also contributes to the accumulation of resources for pharmaceutical companies, insurance institutions, and patients, laying the foundation for the sustainability of a diversified payment system in healthcare.

Overall, driven by factors such as rising healthcare demands, increasing medical costs, and lengthy negotiation windows for medical insurance, a single-payer system can no longer meet the multi-level demands for high-priced innovative drugs and medical devices, nor can it provide sustained support for the long-term development of China's innovative medical products. Building a sustainable multi-payer system for innovative drugs and devices on the foundation of the existing healthcare insurance system is an inevitable path for the industry.

The key elements in building a sustainable multi-payer system for pharmaceuticals are a diversified funding pool and risk-sharing structure, cost reduction and efficiency enhancement aided by AI, and collaborative ecosystem governance. Among these, commercial health insurance, particularly medical insurance, is poised to become a payment system for innovative drugs and devices in the non-public health insurance market. Furthermore, commercial health insurance has initially established a multi-tiered risk-sharing structure that caters to the diverse needs of different populations, leveraging cutting-edge technologies such as AI and large models to reduce costs, improve efficiency, and drive product innovation. In terms of ecosystem development, entities ranging from national and local government departments to pharmaceutical and medical device companies, insurance institutions, and local organizations are collectively striving for the long-term advancement of a diversified medical payment system and exploring effective mechanisms for ecological synergy.

However, we must also acknowledge that the current multi-payer system for pharmaceuticals still has many shortcomings. For instance, the management of coverage responsibilities for innovative drugs and devices is relatively crude, operational mechanisms require optimization, and payment convenience needs further improvement. Additionally, some innovative drugs and devices face challenges such as difficulties in entering hospitals, and due to varying supply situations across different pharmacies for commercial insurance-covered innovative products, issues like insufficient or untimely supply may also arise.

These issues highlight the urgent need for a diversified medical payment system to address existing challenges, requiring collective industry efforts to establish risk-sharing mechanisms. For instance, in product standardization, a commercial health insurance drug formulary selection platform could be developed to set selection criteria and standardized procedures, ultimately creating a formulary that meets diverse and differentiated needs across populations. In terms of innovative drug supply, a dedicated supply chain system for commercial insurance could be established, requiring designated pharmacies not only to meet service standards but also to ensure the availability of specified drugs within the coverage list. Regarding industry integration, continued exploration of collaborative innovation between pharmaceutical companies and insurance institutions is necessary to further unlock the payment potential of commercial health insurance, particularly for innovative drugs and medical devices. This will ultimately promote substantial, orderly, and healthy development in both the innovative drug/device and health insurance sectors.