Can foreign companies participate in China’s medical insurance (医保) system?

Can Foreign Companies Participate in China’s Medical Insurance (医保) System?

China’s medical insurance system (基本医疗保险, commonly referred to as 医保 or yībǎo) covers over 95% of the population — approximately 1.35 billion people — through a combination of Urban Employee Basic Medical Insurance (UEBMI) and Urban and Rural Resident Basic Medical Insurance (URRBMI). For foreign pharmaceutical and medical device companies, participation in this system translates directly to market access: drugs and devices covered by the National Reimbursement Drug List (NRDL) or provincial reimbursement catalogues can see sales volumes increase by 300-800% within 12 months of listing, while non-reimbursed products face severe prescription and procurement barriers. Understanding how foreign companies can engage with China’s medical insurance system is therefore essential for any healthcare company with ambitions in the China market.

Short answer: Yes, foreign companies can participate in China’s medical insurance system, but access is indirect. Foreign-developed drugs and medical devices can be listed on the National Reimbursement Drug List (NRDL) and provincial reimbursement catalogues, subject to the same evaluation criteria as domestic products. Since 2017, the National Healthcare Security Administration (NHSA) has conducted annual price negotiations for NRDL inclusion, and foreign companies have been active participants — including Pfizer, Roche, Novartis, AstraZeneca, Merck, and Johnson & Johnson. As of 2025, approximately 45% of NRDL-listed innovative drugs were developed by foreign companies. However, the system also imposes significant price reduction requirements, volume-based procurement (VBP) participation, and hospital procurement access challenges that foreign companies must navigate strategically.

Understanding China’s Medical Insurance System

China’s medical insurance system operates at two primary levels:

How Foreign Drugs Get on the NRDL

Short answer: Foreign-developed drugs are listed on the NRDL through the annual NHSA price negotiation process, which begins with a drug registration certificate from the NMPA, followed by an expression of interest, pharmacoeconomic evaluation, budget impact analysis, and final price negotiation.

What to know: The NRDL negotiation process occurs annually since 2017 and follows a structured timeline:

1. NMPA registration (prerequisite): Only drugs with a valid NMPA Drug Registration Certificate (药品注册证书) are eligible for NRDL consideration. For imported drugs, this means the foreign manufacturer must first complete the NMPA registration process — which typically takes 12-36 months for new drugs.
2. Expression of interest (May-June): The NHSA publishes criteria for NRDL inclusion and invites submissions. Foreign manufacturers typically apply through their China legal entity (wholly foreign-owned enterprise or joint venture).
3. Expert review (July-September): Pharmacoeconomic and clinical experts evaluate each drug against criteria including clinical value, cost-effectiveness compared to existing therapies, budget impact (total cost to the medical insurance fund), and innovation level.
4. Price negotiation (October-December): The NHSA negotiates directly with manufacturers. The negotiation uses a “ceiling price” model — the NHSA determines a confidential maximum reimbursement price based on pharmacoeconomic analysis. Manufacturers can accept this price (often 40-70% below the market price), propose a counter-offer, or decline. Declining means the drug is not listed for that year.
5. Implementation (January 1): Negotiated prices take effect nationwide. Hospitals are required to procure NRDL-listed drugs within 6 months.

Foreign Company Participation in NRDL Negotiations

Short answer: Foreign companies are among the most active participants in NRDL negotiations. In the 2024 NRDL update cycle, 43 drugs from multinational companies were successfully negotiated into the list, including cancer therapies from Merck (Keytruda), Roche (Tecentriq), and AstraZeneca (Tagrisso).

What to know: Foreign companies face a strategic dilemma in NRDL negotiations: accepting the NHSA’s price reduction (typically 50-70% off the pre-negotiation price) in exchange for volume guarantees, or declining and maintaining higher margins on a smaller patient base. Historical data shows that most foreign companies accept price reductions, betting on volume expansion:

Strategic note: The average price reduction has been gradually declining (from 62% in 2021 to 55% in 2024), suggesting that the NHSA is becoming more flexible with innovative foreign drugs. Drugs with clear clinical advantages over existing therapies — especially first-in-class oncology, rare disease, and pediatric drugs — tend to achieve smaller price reductions. Foreign companies with truly innovative products should emphasize the “innovation premium” in their pharmacoeconomic submissions.

Medical Devices and the Reimbursement System

Short answer: Medical devices are not directly included in the NRDL negotiation process. Instead, reimbursement for medical devices is determined through a combination of the Medical Service Pricing system (医疗服务项目价格), the Medical Device Fee Catalogue (医用耗材目录), and provincial-level volume-based procurement (VBP).

What to know: For imported medical devices, reimbursement access operates differently than for drugs:

• Medical Service Pricing: When a medical device is used in a reimbursed medical procedure, the device cost is typically bundled into the service fee. The NHSA and provincial medical insurance bureaus set service fees, which indirectly determine device pricing. Foreign manufacturers of implantable devices (stents, artificial joints, pacemakers) are particularly affected by this bundled pricing approach.
• Provincial Medical Device Catalogues: Each province maintains a catalogue of reimbursable medical devices (医用耗材医保目录). Inclusion in these catalogues determines hospital procurement eligibility. The criteria and coverage vary significantly between provinces — a device reimbursed in Guangdong may not be covered in Henan.
• Volume-Based Procurement (VBP): Since 2020, the NHSA has conducted national and provincial VBP rounds covering medical devices — including coronary stents (2020, average 93% price reduction), artificial joints (2021, 82% reduction), and intraocular lenses (2023, 50-70% reduction). Foreign manufacturers of these products must participate in VBP or risk complete exclusion from the public hospital market.

Volume-Based Procurement (VBP) and Foreign Companies

Short answer: Foreign companies can — and do — participate in China’s volume-based procurement (VBP) rounds, but face a fundamental pricing dilemma: offer steep discounts (often 70-90% off pre-VBP prices) to win bids, or decline and lose public hospital market access.

What to know: The VBP system, established by the NHSA in 2018, has expanded from generic drugs to include medical devices, biologics, and insulin. Foreign company participation has been mixed:

• Drug VBP winners (foreign): Sanofi (clopidogrel), AstraZeneca (ticagrelor), Bayer (acarbose) — all won bids by offering 70-90% price reductions. Sanofi’s clopidogrel saw a 94% price reduction but maintained market share in winning provinces.
• Drug VBP non-participants (foreign): Many foreign companies opted out of early VBP rounds, losing 60-90% of their volume in public hospitals. Some have since re-entered through follow-up rounds or provincial extensions.
• Medical device VBP: Foreign stent manufacturers (Abbott, Boston Scientific, Medtronic) participated in the 2020 national coronary stent VBP. Abbott won with a bid of ¥780 ($108) per stent — a 93% reduction from the pre-VBP average price of ~¥10,000. Boston Scientific’s stent was not selected, and its China stent revenue dropped by approximately 80% in the first year post-VBP.

For foreign medical device companies, the VBP landscape has evolved: since 2023, multi-province alliances have adopted “quality tier” evaluation criteria (质量分层) that differentiate between domestic and imported devices based on clinical performance data. This creates a potential pathway for premium-priced imported devices that can demonstrate superior clinical outcomes — though this remains an emerging trend with limited real-world application as of 2025.

Hospital Procurement Access

Short answer: Even after NRDL listing or VBP win, foreign companies face hospital procurement barriers — including hospital drug formulary committees, prescribing restrictions, pharmacy profit margin concerns, and the “two-invoice system” that limits distribution chains.

What to know: Getting listed on the NRDL is only the first step. Hospitals must independently decide to procure a drug or device through their hospital formulary (医院药品目录) or medical device procurement committee. Key barriers include:

1. Hospital formulary capacity limits: Most Chinese hospitals limit their drug formularies to 1,500-2,000 drugs. With the NRDL now covering ~2,800 drugs (including ~1,500 negotiation-listed drugs), hospitals cannot list every NRDL drug. An estimated 25-35% of NRDL-listed drugs are not actively stocked in tier-3 hospitals 12 months after listing.
2. Two-invoice system (两票制): Since 2017, the drug distribution chain is limited to a maximum of two invoices from manufacturer to hospital. This eliminates multi-layered distribution and requires foreign companies to develop direct relationships with provincial distributors and hospitals — significantly increasing the cost and complexity of market access.
3. Zero markup policy: Chinese public hospitals must sell drugs at zero markup (zero profit margin), which reduces hospital incentives to prescribe expensive imported drugs. Some hospitals have also faced NHSA audits for achieving “drug revenue ratios” above the mandated targets (typically 30% of total hospital revenue).
4. Drug budget caps (DIP/DRG): Since 2021, pilot Diagnosis-Intervention Packet (DIP) and Diagnosis Related Group (DRG) payment reforms have capped per-case hospital reimbursement. This creates pressure to use lower-cost drugs and devices — disproportionately affecting imported products.

Strategies for Foreign Company Success

Short answer: Successful foreign companies use a multi-pronged approach: invest in pharmacoeconomic data generation specific to the Chinese population, engage early with NHSA and provincial medical insurance bureaus, develop localized clinical evidence, and leverage pilot free trade zone policies for expedited market access.

What to know: Based on successful strategies employed by multinational pharmaceutical companies in China:

1. China-specific pharmacoeconomic data: The NHSA values cost-effectiveness studies based on Chinese real-world data — not extrapolations from Western populations. Companies should invest in Chinese clinical studies that generate local utility values, resource utilization data, and epidemiological parameters. This data can significantly strengthen NRDL negotiation positioning.
2. Early dialogue with NHSA: The NHSA has established pre-negotiation communication channels for innovative drugs. Companies that engage 12-18 months before the NRDL annual cycle, presenting early health technology assessment (HTA) dossiers, tend to achieve more favorable negotiation outcomes.
3. Provincial access strategy: Given the variation in provincial reimbursement catalogues and hospital procurement, foreign companies should prioritize provinces with the largest addressable patient populations (Guangdong, Jiangsu, Zhejiang, Shandong, Beijing, Shanghai) and develop province-specific market access plans.
4. Real-world evidence programs: Foreign companies with post-launch studies generating Chinese real-world evidence can use this data to support NRDL re-negotiations (price adjustments are possible in subsequent years) and to demonstrate value to hospital formulary committees.
5. MAH (Marketing Authorization Holder) optimization: The drug marketing authorization holder system, fully implemented in 2020, allows foreign companies to designate a Chinese subsidiary or partner as the MAH. This creates flexibility for distribution and pricing strategies across provinces.

Recent Policy Trends and Outlook

Short answer: Recent policy trends suggest continued expansion of medical insurance coverage for innovative drugs (including foreign-developed products), but with increasing pressure on pricing through NRDL negotiations, VBP expansion, and DIP/DRG payment reforms. Foreign companies should expect both expanded access opportunities and intensified pricing pressure through 2027.

What to know: Five policy trends are shaping foreign company participation in China’s medical insurance system:

1. NRDL expansion: The NHSA has committed to including a minimum of 20 innovative drugs per year in the NRDL. Foreign-developed drugs have consistently represented 40-50% of new inclusions since 2021.
2. Dual-channel policy (双通道): Introduced in 2021, this policy allows NRDL-negotiated drugs to be prescribed at hospitals and dispensed at designated retail pharmacies — reducing the hospital formulary bottleneck. As of 2025, over 400 NRDL drugs are covered under the dual-channel system.
3. Commercial insurance supplementation: A parallel tier of commercial health insurance (惠民保) has grown rapidly since 2020, covering over 150 million people. These products cover NRDL-excluded drugs (including some high-priced imports) and provide an alternative access route for foreign drugs that cannot achieve viable NRDL pricing.
4. VBP expansion to biopharmaceuticals: The NHSA has signaled plans to expand VBP to include a broader range of biologics (including imported biosimilars and innovator biologics) in 2025-2027, following the successful insulin VBP round in 2021.
5. HTA capacity building: The NHSA is investing in its internal health technology assessment capacity, with plans to issue formal HTA guidelines (aligned with ISPOR standards) by 2026. This will increase the technical requirements for NRDL submissions but also create a more predictable, evidence-based evaluation process.

Where to Go From Here

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