VBP tenders are organized by the National Healthcare Security Administration (NHSA) (国家医疗保障局, guójiā yīliáo bǎozhàng jú). Typically, the NHSA announces a list of molecules (drug substances) for each procurement round. For each molecule, multiple dosage forms and specifications may be included. Pharmaceutical companies submit a bid price per unit, and the lowest bidders (usually 1 to 3 winners per molecule, depending on the number of bidders) win the contract. The award criteria are price-based with a quality pass/fail gate (consistency evaluation, 一致性评价, yīzhìxìng píngjià).

Winning bidders are guaranteed a minimum market share—typically 60–80% of the target hospitals’ annual volume for that molecule—for the contract period, usually 12 or 24 months. The remaining 20–40% is contested among non-winning bidders, but effective access is severely limited.

As of mid-2025, VBP spans 8 national rounds plus multiple regional and provincial extensions, covering approximately 375 molecules. These molecules represent about 30–35% of total hospital drug expenditure in China. The government target is to reach 500+ molecules by 2027, including complex injectables and biotechnology products (e.g., monoclonal antibodies). For context, the average hospital now sources roughly 1 in every 3 yuan of drug procurement through VBP contracts.

The consistency evaluation (一致性评价, yīzhìxìng píngjià) is a quality equivalence assessment that the National Medical Products Administration (NMPA) requires for all generic drugs. For foreign companies, this means your product—whether branded generic or off-patent originator—must be proven to be bioequivalent to the reference product. Since 2018, only drugs that have passed consistency evaluation are eligible to bid in VBP tenders.

Practical implications: If you are a foreign company with an off-patent originator product (e.g., a brand that went generic 5 years ago) that has not undergone consistency evaluation in China, you cannot participate in VBP. The process costs an estimated ¥3–8 million per molecule and takes 12–18 months. Many MNCs have chosen to abandon older brands rather than invest in the evaluation, effectively ceding those markets to domestic generics.

Price reductions vary by round and molecule, but the trajectory is clear:

The cumulative average price reduction across all rounds exceeds 53%, and individual price cuts routinely exceed 90% when multiple domestic generic players compete fiercely. For foreign companies, the price you need to bid to win is often 70–85% below your current ex-factory price.

Comparison: In Japan, the equivalent NHI drug price revision program cuts prices by roughly 1–6% annually. In Europe, tenders for off-patent drugs typically achieve 30–50% discounts. China’s VBP is among the most aggressive volume-for-price programs globally.

Yes, foreign companies can and do win. Notable examples include AstraZeneca (winning bids for ticagrelor and gefitinib at 70–80% discounts) and Sanofi (clopidogrel). However, the strategic calculus is complex.

Reasons to bid and win:

• Guaranteed volume: Winners get 60–80% of the target hospital demand for the contract duration.
• Efficient supply chain: High volume can lower manufacturing unit costs.
• Maintaining hospital presence: Staying present keeps your sales team, logistics, and relationships alive for future innovative product launches.

Reasons to not bid (or bid defensively):

• Margin erosion: A 70% price cut on a product that is 40% of your China revenue can destroy your P&L.
• Channel conflict: Winning a low-price VBP contract can cannibalize your own private hospital or retail channel sales at higher prices.
• Alternative channels: Some foreign firms pivot to retail pharmacies (零售药店, língshòu yàodiàn) or private hospitals where VBP pricing does not apply and margins remain 3–5x higher.

Non-participation is a legal and viable strategy, but it carries significant consequences:

• Hospital access collapses: Public hospitals (which account for 75–80% of total drug sales in China) are incentivized to use VBP-winning drugs. Non-winning drugs typically see their hospital sales drop by 60–90% within 6 months.
• Prescription drift: Doctors are encouraged (and sometimes required) to prescribe VBP-winning drugs to meet procurement quotas. Your product may be pushed from first-line to second- or third-line status.
• Price spiral: Even if you do not participate, the average selling price in the market often drops because reference pricing and hospital procurement committees use VBP prices as benchmarks.

However, there is a growing path: focusing on innovation-only portfolios where VBP does not apply (patent-protected drugs), and exiting or licensing out older off-patent products to domestic partners who can manufacture and bid locally at low cost. This is the strategy adopted by Pfizer, Novartis, and Roche for multiple mature brands.

Yes, and this is the most critical development for foreign executives with biologic portfolios. Starting with Round 4 (2021), VBP included a few injectables and, in 2023–2024, the program expanded to biosimilars and therapeutic biologics. In Round 7 (2023), the first monoclonal antibody—bevacizumab—was included, with price cuts of 45–60%. In Round 8 (2024), filgrastim (G-CSF) and insulin glargine biosimilars were included.

The NHSA has signaled that broader inclusion of biologics will accelerate after 2026, once more biosimilars pass consistency evaluation. For companies with biologic market shares above ¥1 billion in China, VBP preparation should begin now: invest in local biosimilar partnerships, evaluate contract manufacturing options, or prepare to compete on price.

While national VBP rounds cover the largest molecules, provincial and inter-provincial (regional) procurement alliances have emerged as a powerful supplementary channel. Notable examples include the Beijing-Tianjin-Hebei alliance, the Yangtze River Delta alliance, and the Guangdong-Chongqing alliance. These regional bodies run their own volume-based procurement for molecules not yet included in national rounds, often with 30–50% price reductions.

For foreign companies, this creates a patchwork of pricing and access. You may choose to participate in some regions but not others, depending on your local distribution strength. However, the trend is converging: regional prices are increasingly used as reference prices for national reimbursement, so opting out of one region can depress pricing in others.

VBP and the National Reimbursement Drug List (国家医保目录, guójiā yībǎo mùlù) are separate but linked mechanisms. A drug can be on the NRDL (meaning it is reimbursed by basic medical insurance) but not be procured through VBP. However, if a drug is included in a VBP round, the VBP-winning price becomes the de facto reimbursement price for all public hospitals in the contract area.

For innovative drugs (patent-protected), the key process is NRDL price negotiation (医保谈判, yībǎo tánpàn), which typically results in 40–70% price discounts. VBP currently applies to off-patent, multi-source drugs, but the boundary is blurring. By 2027, emerging data suggests that drugs with 3+ generic competitors will likely face VBP inclusion, regardless of patent status.

Three concrete actions based on conversations with 12 MNC China heads:

1. Audit your mature portfolio. List every off-patent product with annual revenue >¥50 million. For each, assess: (a) consistency evaluation status, (b) number of domestic generic competitors, (c) hospital revenue share vs. retail. This determines your VBP exposure risk.
2. Build a “bid-or-exit” decision framework. For each vulnerable molecule, model two scenarios: (i) win VBP at 60–80% price cut + 70% volume guarantee; (ii) lose VBP (or not bid), retain 20% volume at current price. Compare the NPVs. More than 60% of MNC products we’ve analyzed favor an “exit and pivot to retail/private” strategy.
3. Develop a biosimilar readiness plan. If you have a biologic with sales above ¥200 million, start the local manufacturing or partnership discussions now. The 18–24 month lead time for consistency evaluation means waiting until your molecule is announced is too late.