The Shanghai municipal government released its "15th Five-Year Plan for Health Development" on July 30, which includes measures to boost the research and development of innovative drugs and medical devices. The plan emphasizes enhancing data sharing among healthcare, medical insurance, and pharmaceutical sectors, and leveraging data for applications in innovative drug R&D, clinical diagnosis, and commercial health insurance product development. It also promotes the construction and application of a medical insurance traceability code and imaging cloud platform. The plan deepens the mechanism for medical insurance to support innovative drug devices, including supporting the inclusion of innovative drugs in the national medical insurance drug catalog and implementing an exemption mechanism for DRG (Diagnosis-Related Groups) and DIP (Diagnosis-Intervention Packet) payment limits for these drugs.
Analysts believe that the DRG/DIP payment limit exemption mechanism could allow eligible innovative drugs to be partially or fully excluded from the per-disease payment limit assessment. This may help alleviate hospitals' concerns about using high-cost innovative drugs due to cost-control pressures. From an industry perspective, the mechanism directly impacts three parties: innovative drug companies, health insurance payers, and medical institutions. For pharmaceutical companies, the pathway for in-hospital sales after inclusion in the medical insurance catalog could broaden. For medical institutions, the cost-control constraints on using innovative drugs are marginally loosened. For the medical insurance fund, the exemption mechanism still operates within a limit management framework, meaning it does not eliminate DRG/DIP cost control; the actual impact on the fund depends on future implementation details and coverage scope.
In recent years, policies have formed a comprehensive support system across review and approval, clinical application, and medical insurance payment, laying a long-term foundation for the large-scale development of the innovative drug industry. In July 2026, the National Medical Products Administration issued a document proposing to include eligible cell and gene therapy drugs in a 30-day fast-track review and approval channel for innovative drug clinical trials, while also optimizing review and approval to support key innovative products. In April 2026, the State Council's General Office released the "Opinions on Improving the Drug Price Formation Mechanism," clearly proposing to optimize the initial pricing mechanism for innovative drugs. This supports an initial pricing system that aligns with R&D investment and clinical value, and encourages the coordinated development of a multi-payment system. The new pricing mechanism is expected to provide more reasonable initial pricing space for innovative drugs with differentiated advantages, supporting companies in increasing innovation investment and realizing product value in the early commercialization stage. In March 2026, the "Government Work Report" designated biomedicine as an "emerging pillar industry," further strengthening the sector's strategic position from a national industrial perspective, which is beneficial for the medium-to-long-term development of the innovative drug industry.
In July 2025, the National Healthcare Security Administration released a plan to adjust the catalog for commercial insurance to support innovative drugs, determining the medical insurance negotiation plan and establishing the first declaration plan for the commercial insurance catalog. This introduces a multi-payment system for high-value innovative drugs. The November 2025 national medical insurance negotiations concluded successfully, and the official release of the new national medical insurance and commercial insurance catalogs in December marked the initial formation of a "medical insurance + commercial insurance" dual-layer payment system. This catalog includes some high-value innovative drugs not covered by basic medical insurance (such as CAR-T therapies) in the scope recommended and guided for coverage by commercial insurance institutions.
Data from the Ministry of Industry and Information Technology shows that in the first half of this year, 38 innovative drugs were approved for market, with 31 being domestic innovative drugs, accounting for over 80%. China's innovative drug industry is seeing a continuous emergence of high-quality achievements, including the world's first anti-hepatitis D antibody drug, the first solid tumor CAR-T therapy, the first rabies dual antibody, and the first invasive brain-computer interface medical device, all of which have been approved for market. Song Ruilin, chief expert at the China Pharmaceutical Innovation and Research Development Association, stated that China's innovative drugs are in a historic rise phase, transitioning from a "follower" to a "parallel runner" and now leading in some areas like large-molecule biologics and cell therapies. Additionally, the volume and value of China's innovative drug out-licensing deals are increasing rapidly. According to the National Medical Products Administration, from January to June this year, Chinese innovative drugs completed 81 out-licensing deals with a total transaction value of approximately $110 billion, reaching 80% of the total for the entire 2025 year and setting a new record. The deals cover 10 mainstream therapeutic areas, including oncology, metabolism, immunology, and neurology, with major overseas acquirers from 20 countries and regions, such as the US, UK, France, and Italy.
Industry insiders say that the rapid growth in deal volume reflects the improving efficiency and capabilities of China's innovative drug R&D. International cooperation is also advancing from single-product licensing to deeper collaborations like joint R&D and value sharing. A research report from Huafu Securities notes that the overall valuation of innovative drug sectors on the A-share and Hong Kong stock markets remains at historical lows, but factors such as continued breakthroughs in internationalization and rising industry capacity are driving valuation recovery. ICBC Credit Suisse Fund believes that domestic innovative drugs are about to enter an "overseas revenue harvest period." Starting next year, some companies are expected to receive most of the sales milestones and royalties, while substantial sales revenue from the "large-scale" launch of domestic innovative drugs in the US market is projected to materialize gradually between 2028 and 2030. Industrial Securities states that "innovation + internationalization" remains the core theme for the pharmaceutical industry in 2026. For innovative drugs, China's global competitiveness is strengthening, the logic of policy support and commercial profitability remains intact, and BD (business development) out-licensing will continue to be a key way for companies to expand globally before their overseas sales capabilities are fully developed. The increasing number of Co-Co (co-development and co-commercialization) models reflects the growing competitiveness and bargaining power of Chinese companies.
Related concepts: BEIGENE (06160): China's most globalized oncology innovative drug company, driven by both self-developed and introduced products, with global commercialization capabilities. Core marketed products include: Zanubrutinib (BTK inhibitor), Tislelizumab (PD-1), and Sonrotoclax (BCL-2 inhibitor).
INNOVENT BIO (01801): A mature domestic biopharma company with commercial capabilities, achieving product revenue exceeding RMB 10 billion and full-year profitability. Core marketed products include: Sintilimab (PD-1, Tyvyt), Bevacizumab, Rituximab, Adalimumab biosimilars, Pikunimab (autoimmune), and Mardutide (GLP-1/GCGR dual-target weight loss and diabetes drug).
ZAI LAB (09688): A benchmark for the License-in model, introducing global innovative drugs and responsible for their commercialization in Greater China. Core marketed products include: Niraparib (ovarian cancer PARP inhibitor), Ripretinib (gastrointestinal stromal tumor), Tumor Treating Fields (TTFields), and Margetuximab.
AKESO (09926): A global leader in bispecific antibodies, with significant First-in-Class (FIC) and Best-in-Class (BIC) potential. Core marketed products include: Cadonilimab (PD-1/CTLA-4 bispecific antibody, the world's first approved tumor bispecific antibody); Ivonescimab (PD-1/VEGF bispecific antibody, with a total overseas licensing deal value of up to $5 billion).
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