China’s deepening healthcare reform is accelerating despite some provincial outbreaks in H2 2021 that have interrupted plans to expand interprovincial treatments. The government’s 2021–2025 healthcare strategic policies propose targets that will intensify cost containment activities, such as volume-based purchasing (VBP) and value-based pricing (DRG/DIP), in the short term. However, not all products will be vulnerable to the price competition, as China remains dependent on foreign technology to improve the quality of its healthcare system. Firms can expect continued expansion of volume-based purchasing, in both scope and size, in the long term.

Our analysts are constantly evaluating changing market trends to ensure you have the most updated and relevant information for your strategic decisions. Keep reading for our analysis of the key healthcare trends in China that you need to pay attention to.

New policies from Sanming City shed light on future deepening healthcare reform goals

Impacts: New guidelines were released on healthcare reform plans in Sanming city, requiring all hospitals to keep their annual increases in revenue from medicine within 9%. Pricing pressures driven at the hospital level will further encourage their participation in provincial and national VBP. In the medium term, multiple reform policies indicate that hospitals will face a tighter budget for drugs and medical consumables and thus will be pressured to increase sourcing of medical supplies from government VBP.

Volume-based purchasing show consistencies in scale and pricing power

Impacts: Public procurements in China are heading toward large-scale, volume-based purchasing (VBP). The scale of procurements has been shifting toward large-scale, regional, or provincial alliance purchasing, apart from annual national VBP. However, pricing power remains in products with low import substitutability. A 13-member provincial-alliance volume-based purchase for pacemakers experienced a 15% to 30% price cut due to the small market of domestic companies in the Chinese market. Companies should evaluate their China product portfolio in the short to medium term.

National Health Commission lays out plans to build “high-quality hospitals” by 2025

Healthcare infrastructure is an important element as China enters the next development phase and drives its “common prosperity” agenda. A recurring objective of this agenda is to improve social equality, and the healthcare sector is an essential component of the social welfare system. By 2025, China envisions a broad-based primary care service and an integrated medical system within municipalities, provinces, and regions. Companies can expect growing healthcare infrastructure projects in the short to medium term.

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