China’s Volume-Based Procurement program, launched for pharmaceuticals in 2018 and expanded to medical devices in 2021, represents the most significant restructuring of the country’s healthcare procurement system in decades. As of mid-2026, the program covers 12 distinct device categories, including coronary stents, hip and knee joint replacements, spinal implants, intraocular lenses, dialysis filters, pacemakers, peripheral vascular intervention devices, and more. The mechanism is straightforward but powerful: the National Healthcare Security Administration (NHSA) aggregates purchasing demand across hundreds of public hospitals, creating enormous buying leverage, then holds a reverse auction where manufacturers bid on price. The results have been dramatic—average price cuts of 55–82% across categories—forcing foreign manufacturers to fundamentally rethink their China strategy. For global medical device companies, VBP presents both an existential threat to traditional premium pricing models and an unprecedented opportunity to achieve scale in the world’s second-largest healthcare market. The program now covers approximately 25% of total hospital device procurement spending, and this share is projected to reach 35% by 2028, making VBP participation a strategic imperative rather than an optional consideration.
Why It Matters
Winning bidders in VBP rounds secure 60–80% of the pooled hospital demand for a 2–3 year contract period, effectively locking in a dominant market position that is nearly impossible to dislodge during the contract term. Losers face near-total exclusion from the public hospital segment, which accounts for 76% of China’s total medical device spending—approximately RMB 706 billion in 2025, according to IQVIA estimates, with public hospital spending on devices growing at 8% annually. This dynamic creates a high-stakes calculation: participate and accept margin compression, or stay out and forfeit the majority of the addressable market. Historically, many foreign manufacturers opted for the latter, fearing that VBP participation would dilute their premium brand positioning and erode pricing power in other markets. However, analysis of post-VBP market dynamics reveals that brand damage is often offset by volume gains, and non-participation leads to a different kind of brand erosion—irrelevance. Domestic competitors such as MicroPort, Weigao Group, and Lepu Medical have aggressively participated in successive VBP rounds, gaining both market share and manufacturing scale that further widens their cost advantage. Foreign manufacturers that hesitate risk ceding the public hospital channel permanently, as hospital procurement habits and clinician preferences shift toward the lower-priced alternatives that VBP champions.
What You Need to Know
Real-world examples demonstrate that VBP participation, while painful on price, can yield substantial strategic and financial benefits. Stryker’s orthopedic implants experienced a 62% price reduction in the 2023 VBP round—yet volume surged 230%, producing net revenue growth of 18% within 18 months. Stryker’s manufacturing localization investments in Suzhou, which reduced landed costs by approximately 22%, enabled sustainable margins at the new price points. Similarly, Medtronic’s coronary stents faced a 74% price cut but gained access to 2,200 hospitals that had previously been closed to foreign vendors, expanding their institutional customer base by over 40% and driving follow-on sales of non-VBP products in those same hospitals. Boston Scientific reported a 15% revenue increase in its VBP-covered peripheral intervention portfolio despite 58% price reductions, driven by volume growth of 210% over two years. Edwards Lifesciences, initially reluctant to participate in the heart valve VBP round, eventually joined after seeing market share drop by 12 percentage points in the first year of non-participation. These cases illustrate a clear lesson: VBP is fundamentally a volume game. The companies that win are those that restructure their cost base—through local manufacturing, supply chain optimization, and product rationalization—to remain profitable at VBP price levels. The alternative, non-participation, means gradual marginalization as domestic competitors capture the public hospital channel and build clinician loyalty that extends well beyond VBP-covered products.
One Data Point
If you can reduce manufacturing costs enough to sustain margins at VBP price points, the market access is worth the investment. The data supports a four-part strategy. First, participate in early-stage VBP rounds for your product category, even if initial pricing is uncomfortable. Early participation allows you to secure hospital relationships and volume commitments before domestic competitors achieve the scale to dominate pricing. Second, maintain a “dual-track” portfolio strategy: keep premium-priced, non-VBP devices for the self-pay and private hospital segments, which are growing at 12% annually and represent a profitable complement to VBP volume. Private hospitals now account for 12% of total device procurement spending in China, offering a viable channel for premium-brand sales without VBP price constraints. Third, invest in domestic manufacturing capacity—foreign manufacturers with production lines in China can reduce landed costs by 18–25%, directly improving their ability to bid competitively in VBP rounds while preserving margin. Companies like Siemens Healthineers and GE Healthcare have already established production hubs in Shanghai and Beijing, respectively, and report that local production not only lowers costs but also accelerates supply chain response times by 30–40%. Fourth, leverage regulatory approvals as a competitive moat: NMPA data shows China approved 287 medical device registration applications from foreign manufacturers in 2025, a 12% increase from 2024. The average review time for Class III devices has dropped from 24 months in 2020 to 18 months in 2025, reflecting sustained improvements at the Center for Medical Device Evaluation (CMDE). Foreign companies that invest in regulatory expertise and early submission planning can gain 6–12 months of lead time over competitors who delay—a critical advantage in a market where early VBP entry correlates strongly with long-term market share retention.
The Competitive Dynamics of VBP Participation
Success in VBP requires a carefully calibrated bidding strategy that balances price aggressiveness against manufacturing cost realities. Foreign manufacturers must model their break-even price point under multiple volume scenarios, factoring in the learning curve effects of scaled production. Industry analysis from Oliver Wyman indicates that winning bidders typically price 15–20% above their estimated break-even to allow for supply chain variability and post-market service costs. The NHSA’s evaluation criteria extend beyond price alone: points are awarded for product quality, manufacturing capability, and post-sales service commitments. Foreign manufacturers often score well on quality and service, partially offsetting domestic competitors’ price advantages. Another strategic consideration is the “bid grouping” mechanism, where the NHSA divides products into groups by technology tier. Higher-tier devices with documented clinical advantages can sometimes command smaller price discounts—typically 40–55% rather than 70–82%—providing a pathway for innovative products to maintain premium positioning even within VBP. Additionally, partnering with Chinese distribution companies that have established hospital networks can improve a foreign manufacturer’s ability to fulfill VBP commitments efficiently. Companies that combine localization with digital supply chain management—such as real-time inventory tracking, demand forecasting, and automated replenishment—report 30% lower logistics costs in VBP fulfillment, directly improving per-unit margins by 8–12 percentage points. Finally, foreign manufacturers should consider participating in VBP rounds for companion diagnostics and consumables that bundle with their device offerings, creating integrated solutions that enhance hospital operational efficiency and justify smaller price concessions.
The Strategic Imperative for Foreign Manufacturers
The evidence is clear: VBP is not a temporary policy experiment but a structural transformation of China’s medical device procurement landscape. With 12 device categories already covered and expansion plans targeting at least 20 categories by 2030, foreign manufacturers must view VBP as the new baseline for market access rather than an exception to be avoided. The companies that have adapted most successfully share three characteristics: they have localized production in China, they maintain differentiated premium products for non-VBP channels, and they have invested in regulatory speed to secure early category entry. Foreign manufacturers that delay participation risk not only lost revenue in the public hospital segment but also erosion of their distributor networks, as local partners gravitate toward suppliers with VBP-winning products. In a market where RMB 706 billion was spent on devices in public hospitals alone in 2025, and that figure continues to grow, the cost of non-participation far exceeds the pain of margin compression. China’s VBP program is reshaping the competitive landscape—and for foreign medical device makers, the time to act is now, with a clear-eyed strategy that embraces volume, optimizes costs, and protects premium positioning where it matters most.
— China Gateway 360 —
Remote China market entry support, built around execution.
