Explosive growth of innovative drugs, top-level design reform of pricing mechanisms—who will be the biggest winner?

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China's pharmaceutical pricing sector is experiencing a systemic reform, with high-level innovative drugs expected to receive a "price protection period" in the early stage of market launch, marking the official implementation of a top-level policy design that shifts pricing power towards enterprises.

On the 15th, A-share innovative drug and chemical pharmaceutical sectors continued to strengthen in the afternoon, with Beida Pharmaceutical, Shuanglu Pharmaceutical, Hayao Co., Haizheng Pharmaceutical and other stocks hitting their daily limit, Huiseng Bio rising over 10%, and Yuekang Pharmaceutical and Shutaishen also climbing.

On the news front, on April 14, the State Council officially released “Several Opinions on Improving the Drug Price Formation Mechanism” (State Office Document [2026] No. 9, referred to as “Opinions”), which was issued on March 30. The “Opinions” propose 14 measures around the core dimensions of drug listing cycles, distribution channels, categories, and price governance, clearly supporting high-level innovative drugs with high innovation and significant clinical value to set prices matching high investment and high risk in the initial market stage, and maintain relative stability for a certain period. On April 15, Wang Xiaoning, Director of the National Healthcare Security Administration's Department of Drug Pricing and Tender Procurement, gave a detailed interpretation of these measures at a State Council briefing.

Several securities firms pointed out that the innovative drug segment is now in a favorable phase of “performance realization, valuation recovery, conference catalysts,” and the implementation of this policy is expected to be an important driver of a new market rally.

Pricing power returns to companies, “price protection period” is the core breakthrough

The most notable breakthrough of the “Opinions” is the limited return of pricing power to enterprises.

According to the degree of innovation, the “Opinions” categorize drugs into three groups: high-level innovative drugs, improved drugs, and generic drugs, with differentiated policy guidance for each. For high-level innovative drugs, support is given to set a price reflecting their value upon initial launch and maintain relative stability for a period; for improved drugs, pricing is encouraged to match patient benefits, but the price stability period is shorter; for generic drugs, pricing should refer to similar drugs reasonably, with no stability period, and can directly participate in group purchasing.

Jin Chunlin, Director of the Shanghai Health Development Research Center, told 21st Century Business Herald that the key difference among the three types lies in the length of the price stability period. He noted the core breakthrough of the “Opinions” is “giving limited pricing power to enterprises, implementing enterprise self-evaluation along with self-pricing, with the government shifting from direct price setter to rule maker.”

The “Opinions” also clarify "innovation is not for group purchases, group purchases are not for innovation," meaning group purchases only apply to drugs with diversified supply and many years on market, excluding innovative drugs, further defining the boundaries between the two policy tools.

First launch price mechanism restructured, dynamic adjustment introduces real-world studies

At the initial pricing stage, the “Opinions” introduce an enterprise self-evaluation system, encouraging companies to assess clinical value and innovation level themselves, supplemented by peer review and social supervision.

Jin Chunlin believes the first launch price of exclusive innovative drugs will become a key factor in future insurance negotiations, “The launch price of innovative drugs can theoretically be set by enterprise self-evaluation, then supplemented by peer review, which is a major boon for innovative drugs,” and could change the previous model of setting high prices and then cutting them drastically.

The “Opinions” also stipulate for the first time that enterprises can appropriately adjust price levels based on real-world research and actual clinical use, building a dynamic validation mechanism. Zhong Chongming, former Associate Researcher of the National Healthcare Security Institute of Capital Medical University, pointed out that with sufficient real-world research evidence, enterprises will be able to secure more favorable and precise pricing for related products, especially when negotiating for inclusion in insurance catalogs.

To prevent minor innovation from seeking high prices, the “Opinions” simultaneously set up a constraint system: enterprise self-pricing must accept social supervision and peer review, high-level innovative drugs must demonstrate high innovation and significant clinical value, and improved drugs must show real clinical advantages, rather than merely changing formulations or specifications.

Diverse payment systems expand policy space, commercial insurance role expected to rise

On the payment side, the “Opinions” establish a multi-channel payment system combining basic medical insurance, commercial insurance, and charitable donations, providing channels for high-priced innovative drugs beyond the capacity of basic insurance.

For basic medical insurance, the “Opinions” specify that pharmaceutical enterprises supplying negotiated drugs to designated insurance institutions must execute prices no higher than the reimbursement standard, but for non-designated institutions, market prices are not bound by reimbursement standards, establishing a dual-track price management system. Zhong Chongming noted this approach could theoretically create new price arbitrage space and regulatory challenges, and that clarifying standards and promoting healthy industry development will remain a substantial task.

For commercial insurance, the “Opinions” call for speeding up the implementation of commercial health insurance catalogs for innovative drugs. The National Healthcare Security Administration released its first commercial insurance innovative drug catalog in 2025, which was implemented in January this year, including 19 innovative drugs from 18 companies. Jin Chunlin believes that in the long term, commercial insurance’s role will grow, as basic insurance cannot include all high-priced innovative drugs; its share in payment will gradually rise, and after innovative drugs enter commercial insurance, increased coverage will create a positive catalytic loop.

However, Jin Chunlin also noted that in the short term, commercial insurance and charity still cannot massively cover high-priced innovative drugs, mostly serving as a supplement rather than a substitute for insurance. “The value of the ‘Opinions’ is in opening policy space, but boosting payment capacity requires multiple supporting reforms to progress gradually.”

Sector valuation recovery and policy catalyst, performance realization is key variable

In the capital markets, the innovative drug sector showed signs of breakout since early April, reversing the continued volatility and adjustment since September 2025.

Many securities firms state the sector is now in a favorable period for “performance realization, valuation recovery, conference catalysts.” Leading pharmaceutical firms had outstanding 2025 annual reports, with Hengrui Pharma, BeiGene and others increasing their share of innovative drug revenue, multiple biopharma companies like InnoCare Pharma and Rongchang Bio achieving historic turnaround profitability. Shenwan Hongyuan Securities reported in its March 29 pharma weekly; as of March 29, 71 listed pharma firms have published their 2025 annual reports, 32 achieved positive parent net profit growth, and 10 had growth rates of 40% or above.

Huaxin Securities pointed out the innovative drug development model has shifted from relying solely on financing to a comprehensive approach combining product commercialization, international licensing, and financing—making configuration timing apparent. The firm believes the segment has undergone over half a year's adjustment since the third quarter of last year, valuation risks have been sufficiently released, and short-term sentiment suppression does not alter the long-term fundamental logic for the industry.

Additionally, the upcoming AACR conference in April and the ASCO conference from May to June will feature intensive clinical data release, providing sustainable momentum for valuation recovery. With top-level policy implementation, upward performance cycle, and conference catalysts resonating, truly high-clinical-value, innovative drug firms capable of dual self-evaluation and peer review are likely to be the direct beneficiaries of this wave of reform.

Risk Warning and DisclaimerThe market carries risk; investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular situation. Invest accordingly, and you assume the responsibility. ```