China's National Healthcare Security Administration Reports Over 100 Innovative Drugs Applied for Commercial Insurance Listing and Reforms Drug Procurement Rules to Move Beyond 'Lowest Price' Criteria

On July 25, according to information released on the official website of the National Healthcare Security Administration (NHSA), the NHSA recently convened the second in a series of symposia on medical insurance support for innovative drugs and medical devices. Representatives from more than ten medical institutions, pharmaceutical companies, healthcare-focused investment firms, and news media outlets presented updates on the research and development, application, and investment in new technologies and products within the pharmaceutical sector, and offered their comments and suggestions.

At the symposium, the principal official from the Department of Price and Procurement of the National Healthcare Security Administration (NHSA) introduced new measures to leverage healthcare security pricing policies in empowering innovation in pharmaceuticals and medical devices. These initiatives include standardizing newly established service items for medical service pricing to accelerate the clinical application of high-level technological innovations; studying and implementing a launch price mechanism for newly marketed drugs, optimizing online listing services by category to encourage R&D innovation in pharmaceuticals; and supporting Chinese innovative drugs and medical devices in going global, thereby promoting the globalization of the pharmaceutical industry.

Drug pricing has long been a major issue of widespread concern across all sectors of society. In addition to the aforementioned new initiatives, the National Healthcare Security Administration has implemented a range of measures in its efforts to deepen the governance of drug prices.

According to information released at the State Council Information Office’s press conference on July 24, in recent years, the National Healthcare Security Administration has standardized prices for more than 27,000 drug specifications and formulations, building upon comprehensive improvements in pharmaceutical data quality. It has also advanced eight rounds of actions to address price risks associated with drugs, urging 566 enterprises to adjust prices for 726 drug specifications and formulations.

Additionally, according to relevant officials from the National Healthcare Security Administration, a new Commercial Health Insurance Innovative Drug Directory has been established as part of the “Dual Medical Insurance Catalog” reform. This represents one of the concrete measures taken by the medical insurance system to support pharmaceutical innovation. Currently, more than 100 drugs have applied for inclusion in the Innovative Drug Directory, and follow-up procedures will be advanced accordingly.

Deepening Drug Price Governance: Centralized Procurement No Longer Uses "Lowest Price" as a Reference

Drug prices directly affect the cost of medical care for the public, and there is widespread societal concern over drug price regulation.

According to relevant officials from the National Healthcare Security Administration, apart from anesthetics and Class I psychotropic substances, which are subject to government-guided pricing, all other drugs are priced independently by enterprises through market competition. In practice, it has been observed that some companies abuse their autonomous pricing rights by disrupting market order through means such as medical kickbacks, incentive-driven sales, and monopolistic control over distribution channels, thereby increasing the pharmaceutical expenditure burden on the public.

The National Healthcare Security Administration has taken a clear stance in supporting and encouraging the high-quality development of pharmaceutical innovation, adhering to the reform direction of market-determined pricing, respecting enterprises’ right to set prices independently, while better leveraging the role of the government to enhance capabilities in drug price governance and maintain normal market order.

In recent years, the National Healthcare Security Administration has primarily adopted four measures to deepen the governance of drug pricing.

1. Organize and implement centralized volume-based procurement of pharmaceuticals.

Since 2018, the national government has conducted ten rounds of centralized drug procurement, covering 435 drugs. Localities have also successively launched provincial and inter-provincial alliance-based centralized procurement, forming a collaborative and complementary framework. Practice has demonstrated that centralized procurement is an effective approach to addressing artificially inflated prices, promoting the gradual standardization of industry order, reducing the medication burden on the public, and enhancing the overall quality and accessibility of medicines for the population.

Recently, the 11th round of centralized procurement has been launched. In accordance with the optimized measures for centralized procurement reviewed and approved by the State Council’s executive meeting, the National Healthcare Security Administration has adhered to the principles of “stabilizing clinical practice, ensuring quality, preventing bid rigging, and countering cutthroat competition,” and has studied and optimized the specific procurement rules.

Regarding volume reporting, medical institutions may specify volumes for particular brands they recognize and intend to use. In terms of selection criteria, the “anchor” for price differential calculations has been optimized; the lowest bid is no longer used as the sole reference. Additionally, the bidder with the lowest quote must publicly justify the reasonableness of its pricing and commit that the quoted price is not below cost. With respect to quality assurance, manufacturing lines for bidding drugs must have had no violations of Good Manufacturing Practice (GMP) for pharmaceutical products within the preceding two years. Regulatory authorities will conduct comprehensive inspections and product sampling tests covering all enterprises selected in the centralized procurement process, imposing stricter requirements than in the past.

Second, implement special governance on the prices of drugs listed online.

On the basis of comprehensively improving the quality of drug data, the National Healthcare Security Administration launched a price governance initiative for “four-same” drugs—those sharing the same generic name, manufacturer brand, dosage form, and specification—standardizing the prices of more than 27,000 drug items and specifications. It also initiated price governance for “three-same” injections—those with the same generic name, manufacturer brand, and specification—to address unfair pricing issues arising from factors such as package quantities. Meanwhile, a national list of posted drug prices is being developed to comprehensively aggregate and display price information from various regions, flag abnormal prices, and promote continuous correction of unreasonably high posted prices across localities.

3. Continuously advance the management of pharmaceutical pricing risks.

For drugs subject to routine monitoring, those with price anomalies reported by departments or strongly complained about by the public, measures such as price verification, regulatory interviews, public inquiries, and credit evaluations have been implemented to urge enterprises to standardize their pricing practices, reduce excessive markups in distribution channels, and lower artificially inflated prices. To date, eight batches of drug price risk mitigation efforts have been carried out, prompting 566 enterprises to adjust the prices of 726 drug specifications.

Fourth, conduct price comparisons between online and offline retail pharmacies.

The National Healthcare Security Administration has guided the launch of a mini-program for public price comparison at designated retail pharmacies across all 31 provincial-level regions in China, facilitating public access to pharmacies with affordable pricing. Through the “Online Pharmacy Price Comparison” initiative, the administration has steered online listing prices toward greater rationality. In response to discrepancies in pricing between online and offline channels, as well as between medical insurance and non-insurance payment methods at designated retail pharmacies, nearly 200,000 such pharmacies have been urged to complete corrective actions.

Purifying the Ecosystem of the Medical and Pharmaceutical Industry

In addition to price governance, the National Healthcare Security Administration has implemented a series of measures over the past five years to promote the purification of the healthcare and pharmaceutical industry ecosystem.

According to relevant officials from the National Healthcare Security Administration, the first measure is to regulate “pharmaceutical companies.”

For some time, issues such as kickbacks and “commission-driven sales” in the pharmaceutical procurement and distribution sector have been frequent, leading to layered price markups and artificially high prices for drugs and medical consumables, which has drawn significant public criticism.

To this end, the National Healthcare Security Administration has established a credit evaluation system for pharmaceutical pricing and procurement. Provincial-level centralized drug procurement agencies conduct credit evaluations and implement tiered disciplinary measures against enterprises based on court judgments or administrative penalties, thereby cracking down on unfair competition. By the end of 2024, 735 enterprises had been rated as dishonest across various provinces. Enterprises subject to such negative credit ratings face varying degrees of restrictions on their eligibility for online listing and participation in centralized procurement. Additionally, healthcare institutions at all levels receive alerts regarding these enterprises’ dishonest records during procurement processes. Most dishonest enterprises have acknowledged their issues and proactively corrected their misconduct. The implementation of the credit evaluation system is gradually reshaping the market expansion strategies of pharmaceutical companies, shifting from the previous model of “high list prices, agency recruitment, high rebates, and high sales volumes” toward standardized management and competition based on quality.

Second, standardize the operations of “designated institutions.” Through a series of fund supervision measures, promote standardized use of medical insurance funds by designated medical institutions and designated retail pharmacies, so as to provide the public with high-quality and efficient medical services.

The National Healthcare Security Administration has established an intelligent healthcare security supervision system, shifting the oversight of healthcare security funds upstream to enable early detection, early warning, and prompt handling of illegal and non-compliant activities. Meanwhile, it has improved post-event supervision and unannounced inspection mechanisms for healthcare security funds, using regulatory enforcement to promote standardized practices. In addition, the administration has implemented the collection and application of drug traceability codes, leaving no room for “recirculated drugs” resold on the secondary market to hide, and ensuring that illegal institutions and individuals involved in fraudulently claiming insurance benefits through the purchase and sale of such recirculated drugs face widespread condemnation and strict crackdowns.

Third, the definition of "medical personnel" has been standardized by establishing a management system for the medical insurance payment eligibility of relevant individuals at designated medical and pharmaceutical institutions. This ensures that supervision of medical insurance funds is precisely targeted to individuals, significantly enhancing the precision and deterrent effect of regulatory oversight.

This management system primarily implements a “driver’s license-style” point-based scoring mechanism for relevant personnel at designated medical and pharmaceutical institutions. Once any such personnel have their medical insurance payment qualifications suspended or terminated at one designated institution, corresponding measures will be taken against them at other designated institutions as well, with processing information shared nationwide and coordinated across regions. Meanwhile, the National Healthcare Security Administration will notify the health authorities and drug regulatory departments of the point scores and details regarding the suspension or termination of personnel, so that these departments can strengthen oversight of the individuals concerned in accordance with their respective responsibilities, thereby forming a joint regulatory effort.

Furthermore, it was reported that the National Healthcare Security Administration (NHSA) is actively promoting coordinated development. By establishing a multi-tiered healthcare security system, various healthcare insurance reforms continue to empower the high-quality development of medical institutions and the pharmaceutical industry. Immediate settlement, direct settlement, and synchronized settlement are being steadily advanced. The National Reimbursement Drug List (NRDL) has achieved nationwide uniformity, with the total number of listed drugs reaching 3,159. Healthcare insurance payment methods are continuously being improved. Centralized volume-based procurement of drugs and medical consumables is operating on a normalized and institutionalized basis. Pilot programs for healthcare service price reform are progressing in an orderly manner, and a dynamic adjustment mechanism for healthcare service prices has been fully established.