Chat with GPT: How fair is the Chinese pharmaceutical system for patients and the pharmaceutical industry?

China has profoundly reformed its pharmaceutical system in recent years to improve access to medicines for the population and to adapt the pharmaceutical industry. This raises the question of how fair this system can be considered for patients on the one hand and pharmaceutical companies on the other.

Disclaimer

In this blog series, I ask ChatGPT on a variety of topics, from world politics to everyday issues, to get concise summaries and answers. The answers provided by ChatGPT are generated from large datasets, which may include biases, for example from Western perspectives. While the model strives for accuracy, it can sometimes produce incorrect or misleading information. I do not take responsibility for the validity of the content. Though I aim to ensure that the answers reflect common sense, I encourage you to cross-check facts and verify information through trusted sources. You are also welcome to reach out to me with suggestions for improvement.

ChatGPT’s answer

The following article analyzes structural factors (such as price regulation, access to care, government control, and market conditions) as well as the practical effects of these frameworks on patients and pharmaceutical companies.

Structural Factors in the Chinese Pharmaceutical System

Price Regulation and Cost Containment

Price regulation for medicines in China is heavily influenced by government interventions. Two key mechanisms ensure cost containment: the National Reimbursement Drug List (NRDL) with price negotiations and the centralized Volume-Based Procurement (VBP).

• National Reimbursement Drug List (NRDL): To be included on the reimbursement list, manufacturers often have to accept significant price cuts (typically 40–70% price reduction compared to the original price) (pacificbridgemedical.com). These price negotiations, led by the National Healthcare Security Administration (NHSA), take place annually and aim to make expensive, often patented, drugs more affordable. Studies show that these negotiations have reduced drug prices by 24 to 72% (pubmed.ncbi.nlm.nih.gov). While this means a drastic reduction in margins for pharmaceutical companies, the state and insured patients benefit from significant savings and broader access to innovative therapies (pubmed.ncbi.nlm.nih.gov, pubmed.ncbi.nlm.nih.gov). Once a drug is listed, generics of the same active ingredient often become eligible for reimbursement, which increases competition and makes it difficult to maintain a price advantage (pacificbridgemedical.com, pacificbridgemedical.com). Some foreign companies therefore forgo listing altogether to maintain higher prices and instead serve only wealthy self-paying patients (pacificbridgemedical.com).

• Volume-Based Procurement (VBP): Since 2018, commonly used drugs – mainly generics and off-patent drugs – have been procured through centralized large-scale tenders. Manufacturers offer extremely low prices in exchange for guaranteed purchase volumes. This “帶量採購” (volume-linked procurement) system has lowered prices in many categories by up to 80% (pacificbridgemedical.com). This successfully reduced drug costs dramatically and lowered the financial burden on patients (linkedin.com). A positive side effect is the reduction of corruption and pharmaceutical scandals: in the past, significant marketing costs and bribes to doctors were factored into drug prices, which has now been greatly reduced through the transparent tendering process (linkedin.com). However, VBP also results in enormous price pressure on pharmaceutical companies; margins shrink and many smaller generic manufacturers have to consolidate or exit the market (pacificbridgemedical.com, investmentplattformchina.de). The government sees this as a deliberate effect, aiming to eliminate inefficient structures and redirect resources toward innovation (investmentplattformchina.de).

In addition to these mechanisms, China abolished the hospital markups on medicines (around 15%) nationwide in 2017 to curb the overprescription of expensive drugs. Since then, public hospitals are only allowed to dispense medicines at their purchase price (pmc.ncbi.nlm.nih.gov). This zero-markup policy eliminated an incentive to generate profits primarily through drug sales, further reducing medication costs for patients.

Overall, price regulation in China is highly patient-oriented, with the primary goal of making medicines affordable. This promotes cost equity for the population but poses major challenges for the industry.

Access to Medical Care

Over the past decades, China has made tremendous progress in access to healthcare. The state health insurance programs (for urban employees, urban non-employees, and the rural population) have been expanded to the extent that today over 95% of the population has basic health insurance (bayer.com). This near-universal coverage is a key component in ensuring fair access to medicines. The share of out-of-pocket expenses (patients’ own contributions to healthcare costs) has been continuously reduced – the target of <30% was reached around 2020 (pubmed.ncbi.nlm.nih.gov, healtheconomicsreview.biomedcentral.com). Drugs listed in the national reimbursement catalogue are fully or partially covered by insurance (depending on category A or B), significantly reducing the financial burden for many patients (pacificbridgemedical.com).

Despite this broad coverage, inequalities remain. In particular, the rural population is disadvantaged compared to urban areas: there is still a significant urban–rural divide in healthcare access, which requires government intervention (bayer.com). In some rural regions, medical facilities or specialists are lacking, and access to new, expensive therapies is more limited. The government is trying to address this through programs such as the expansion of basic health stations and telemedicine services, but the regional equity gap has not yet been fully closed.

There were also historical delays in access to innovative medicines: many new (Western) drugs only reached China years later. Thanks to regulatory reforms (e.g., accelerated approval procedures, acceptance of foreign clinical trial data, and special programs for essential medicines), China is quickly closing this gap. Particularly important or urgently needed drugs now benefit from shortened approval paths, especially if they offer significant health advantages (bayer.com, bayer.com). Overall, the average launch rate of innovative drugs has significantly increased (e.g., in 2017 there were 39 new launches compared to an average of 5 in the years 2014–2016) (bayer.com). For patients, this means better access to modern therapies than just a few years ago.

Government Control and Regulation

The state exercises strong control in China’s pharmaceutical system. Government agencies – particularly the National Healthcare Security Administration (NHSA) for pricing and reimbursement policy, and the National Medical Products Administration (NMPA, formerly CFDA) for approvals – control large parts of the market. Pricing, tenders, reimbursement lists, and even distribution channels are governed by central regulations. For example, the “two-invoice system” in drug distribution streamlines the supply chain and reduces intermediaries to avoid inefficient markups.

Government control is also evident in its ability to intervene directly in the market to protect public interests. Examples include short-term import permits during supply shortages or emergency approvals. At the same time, the state strictly monitors safety and quality: following several scandals (e.g., involving vaccines), the NMPA tightened inspections and introduced a system for generic drug quality consistency evaluation. Since 2016, generics must prove through the Generic Consistency Evaluation that they match the original product in terms of quality and efficacy (pmc.ncbi.nlm.nih.gov). Only generics that pass this evaluation receive preferential treatment in public hospitals and tenders (westpharma.com). This is intended to ensure that cost savings do not come at the expense of quality. Nonetheless, there are occasional concerns: in early 2025, some leading physicians publicly warned that the focus on ever-cheaper domestic drugs could result in quality compromises (siii-clinical.com). This was an unusual public critique, as there is usually broad consensus on cost-saving policies. However, the authorities emphasize that all tendered medicines are subject to strict testing and must comply with safety standards.

Overall, government regulation creates a system that emphasizes equity and safety – medicines should be widely available at reasonable costs and with proven effectiveness. For the pharmaceutical industry, however, this control means strict adherence to political directives (e.g., price caps) and the need to adapt quickly to policy shifts.

Market Conditions and Competition

The market conditions in China’s pharmaceutical sector are defined by a balance between public health goals and market competition. On the one hand, China is now the second-largest pharmaceutical market in the world with enormous demand – especially due to an aging population and the rise in chronic diseases (investmentplattformchina.de, investmentplattformchina.de). On the other hand, the market is strongly influenced by political measures, which distorts traditional competition.

One characteristic is the dominance of state and public buyers: over 70% of drug spending runs through hospitals (wip-pkv.de, wip-pkv.de), which are themselves state-regulated. Free pricing only exists in niche markets (e.g., private clinics or non-reimbursed sales); otherwise, tenders and reimbursement lists determine the price. This leads to fierce competition for tender wins but offers little room for market-driven pricing.

For pharmaceutical companies – both domestic and international – the market conditions in China offer huge opportunities (high sales volumes, growing middle class, government support for innovation), but also significant challenges. Foreign firms traditionally had to enter into joint ventures to access the market (investmentplattformchina.de). This policy has recently been eased (e.g., in 2020 the requirement for local JV partners to approve all business matters was lifted) (investmentplattformchina.de). Nevertheless, market entry remains complex: there are extensive registration and certification requirements for each drug, and cultural barriers (relationships and local networks are often crucial) (investmentplattformchina.de). Local pharmaceutical firms enjoy a certain level of support – for instance, the government is promoting the domestic biotech industry, and local manufacturers often have a cost advantage in tenders.

Competition in the generics market has recently intensified, leading to consolidation: many small generics manufacturers cannot withstand the price pressure, causing the market to consolidate (investmentplattformchina.de). At the same time, larger Chinese pharmaceutical companies (often with state support) are investing more in research to develop their own innovative medicines (investmentplattformchina.de). Thus, China’s industry is transforming from the “world’s pharmacy” for APIs and generics into an innovation hub. For international corporations, this means growing local competition in areas such as biologics and cancer treatments – but also opportunities for cooperation and licensing.

In summary, China’s market conditions are shaped by strong state influence aimed at affordable care, which limits unrestrained profit-seeking by companies. At the same time, reforms are gradually opening the market, promoting innovation, and enhancing the quality of competition. Fairness in terms of equal market opportunities is the goal, but companies must be flexible and often willing to compromise to succeed in this system.

Practical Impact on Patients

The structures described above lead to tangible practical consequences for patients in China, encompassing both positive developments and remaining challenges:

• Access to medications: Patients today have broader access to essential medicines than in the past. Key drugs are available across China through the Essential Medicines Lists and public health insurance (pacificbridgemedical.com). The inclusion of new, effective therapies (e.g., for cancer or rare diseases) into the reimbursement catalogue means that even innovative medicines are increasingly becoming accessible to many people—often shortly after their global market launch, thanks to accelerated approval processes and swift price negotiations (bayer.com, bayer.com). A 2025 study confirms that national price negotiations have increased the availability and use of innovative medicines, and reduced regional disparities in access (pubmed.ncbi.nlm.nih.govpubmed.ncbi.nlm.nih.gov). However, top-tier medications not (yet) covered by insurance can still be unaffordable for uninsured individuals or those purchasing outside the reimbursement list—creating advantages for the wealthy, and thus reflecting a degree of inequality.

• Affordability and financial burden: For most patients, the affordability of medicines has significantly improved. Thanks to massive price cuts—e.g., an average of 50–60% in recent reimbursement rounds (gtlaw.com)—and the removal of hospital markups, out-of-pocket costs have decreased. Empirical analyses show that, for instance, due to the zero-markup policy, inpatient drug expenses dropped by around 20% (sciencedirect.com). Furthermore, centralized procurement often resulted in expensive branded drugs being replaced by affordable generics: e.g., after successful negotiations, the prices of cancer drugs dropped by more than half (examples: Avastin −61%, Herceptin −65%) (evidera.com). This relieves patients and their families considerably and reduces the risk of falling into poverty due to illness. A potential downside is that patients may only receive the preferred drug at the hospital (the winning generic), and alternative brands are only available at private cost. This can limit the sense of freedom of choice, even if the substitutes are medically equivalent.

• Therapy quality and safety: Government measures place strong emphasis on maintaining quality despite cost pressure. Stricter approval and follow-up procedures (e.g., the mentioned generic consistency evaluations) have increased trust in domestic generics. Many patients now benefit from safe, locally produced drugs at lower prices. Nevertheless, there are occasional concerns: reports about worries among leading doctors that the cheapest suppliers may pose quality issues sparked public attention in early 2025 (siii-clinical.com). Although officials emphasize that all tendered drugs undergo review, such criticism can affect the confidence of some patients. It’s a balancing act: On one hand, the system gives millions access to affordable medication and clearly improves healthcare equity (pubmed.ncbi.nlm.nih.gov, pubmed.ncbi.nlm.nih.gov). On the other, long-term quality assurance must remain a priority to ensure that lower prices are not paid for with reduced efficacy.

In summary, most patients today feel financially relieved and better cared for. The reforms have significantly increased fairness for patients—evident in higher usage of key medications and lower medical bills (pubmed.ncbi.nlm.nih.gov, pubmed.ncbi.nlm.nih.gov). Remaining inequities (e.g., regional disparities or limited access to cutting-edge treatments) are recognized and being addressed by the government. Overall, from the patient perspective, the benefits of a more regulated, public-good-oriented pharmaceutical system outweigh the drawbacks.

Practical Impact on Pharmaceutical Companies

The reforms and structures described also have two-sided consequences for pharmaceutical companies—both Chinese and international. In terms of market access, pricing pressure, and patent protection, the situation is as follows:

Market Access and Competition

On the one hand, market access to China is now more open than in the past, representing an opportunity for companies. Approval processes have been streamlined: China now increasingly accepts international clinical trial data, has shortened processing times, and introduced mechanisms such as accelerated approval, priority review, and orphan-drug regulations (bayer.combayer.com). For innovative pharma companies, this means new drugs can now be launched in China almost simultaneously with global markets—making the country more attractive due to early revenue potential. Barriers to foreign investment have also been somewhat eased: While joint ventures or local partnerships are still often required according to industry analyses, obstructive rules (e.g., local directors’ veto rights) have been relaxed (investmentplattformchina.de). A local presence and cooperation with Chinese firms also significantly facilitate market access (investmentplattformchina.de). In total, pharmaceutical companies can now enter the Chinese market more easily, provided they are willing to adapt to local conditions.

On the other hand, China remains a highly competitive and regulated market, which also poses risks for companies. Foreign competitors face strengthening domestic firms: Large Chinese pharma companies (some state-supported) are entering innovative fields like biopharmaceuticals, increasing competitive pressure. Furthermore, the distribution market is heavily state-controlled—public hospitals via tenders are the largest buyers. Market access often means winning a tender or being listed for reimbursement; otherwise, only a small private out-of-pocket market remains. A product that loses a national tender (because a competitor underbids) practically loses access to the mass market in the public sector. For a company, this can spell the end for what was once a profitable product. Some companies therefore shift to niche segments (private clinics, online distribution, or export)—but in the largest, state-controlled sector, those who adapt to the system dominate. In general, competitive, adaptable companies (often larger firms with pricing flexibility or innovative portfolios) benefit, while rigid players struggle. From a business perspective, the market environment can thus be seen as conditionally fair: The rules apply to all, but domestic companies often have cost and relationship advantages, and the state as the dominant purchaser sets many of the rules.

Pricing Pressure and Profitability

Perhaps the most significant issue for pharmaceutical companies in China is high pricing pressure. The mechanisms described above (NRDL price negotiations, VBP tenders) mean drastic limitations in pricing for manufacturers. Profit margins are under pressure: In central volume-based tenders, price reductions of 50–80% were not uncommon (pacificbridgemedical.com). In recent rounds, prices in nearly 100 active ingredient categories dropped by an average of about 50–60% (gtlaw.com, pacificbridgemedical.com). For a pharmaceutical company, such a price drop can mean a product is barely profitable—despite high sales volumes. Long-term profitability becomes a challenge, especially for R&D-focused companies that need to recoup high research costs. Some international pharmaceutical firms have therefore, in individual cases, decided to reject NHSA price demands, even if it means their drugs are not (or no longer) reimbursed. While the system formally allows voluntary negotiation, bargaining power clearly lies with the state insurer, and refusal often means loss of market share (pacificbridgemedical.com).

For generic manufacturers, the pricing pressure results in market consolidation: Many companies can only survive if they are among the few winners of a tender—otherwise, they lose volume to competitors. This has triggered a wave of consolidation in the generics sector (investmentplattformchina.de). For those remaining, this can bring advantages in the medium term (larger market share, higher efficiency), but in the short term, they must operate with significantly reduced prices. Investors view the Chinese pharma market ambivalently—huge volume, but limited margins in the state-controlled segment. Some companies are shifting their focus to high-priced niche drugs or private market offerings, where they can enforce higher prices (e.g., the latest biologics initially offered for self-pay). However, only a small portion of patients is reached this way.

In summary, many pharmaceutical companies in China feel subjected to severe cost pressure. The fairness issue arises in that the system is indeed transparent (everyone goes through the same negotiations/tenders) and predictable, but it takes little account of individual business needs. Large companies may offset price drops through economies of scale or cross-financing; smaller firms often find the environment harsh and risky. In the long run, the government hopes this pricing policy will lead to more efficiency and consolidation in the industry—potentially resulting in more sustainable business models. In the short term, however, profitability is significantly curtailed, which can call fairness into question from a business perspective, especially since R&D investments are harder to recover.

Innovation Climate and Patent Protection

A key aspect of fairness toward pharmaceutical companies is the handling of innovation and intellectual property (IP). In recent years, China has implemented notable improvements in this area, which many see as a counterbalance to pricing pressure. In 2021, significant patent law reforms came into effect, including the introduction of patent term extensions and a patent linkage system to provide innovative drugs with better protection against premature generic competition (europeanpharmaceuticalreview.com, bayer.com). Specifically, patent terms can now be extended (e.g., for time lost during the approval process), and generic approvals are linked to existing patents to detect infringements early (bayer.com). In addition, data exclusivity for clinical trial data of new drugs has been proposed (6 years for chemical drugs, 10 years for biologics and orphan drugs) (bayer.com). Market analysts have welcomed these steps, expecting them to make the Chinese market more attractive and predictable for innovation-driven companies (europeanpharmaceuticalreview.com, europeanpharmaceuticalreview.com). International manufacturers can increasingly trust that their intellectual property will be better protected against copying, and that R&D investments will also pay off in China (bayer.com, bayer.com).

The Chinese government also actively promotes an innovation-friendly environment: As part of Healthy China 2030 and other initiatives, funding is directed toward research into urgently needed therapies (e.g., for cancer, genetic diseases) (investmentplattformchina.de). Startups and biotech companies are supported, and international knowledge exchange is encouraged. This has led to a boom in patent activity—China is now among the global leaders in pharmaceutical patent filings (vfa.de). For companies, this means that innovation is rewarded: Those bringing novel drugs to market now have better chances of rapid approval and an initial period of market exclusivity before generics appear. In reimbursement negotiations, the government also shows some willingness to compromise for breakthrough drugs—although price discounts are still expected, being listed in the reimbursement catalogue often brings large sales volumes. For example, modern hepatitis C drugs, HIV therapies, and cancer immunotherapies reached millions of patients relatively quickly—benefiting manufacturers through volume effects (pubmed.ncbi.nlm.nih.gov, pubmed.ncbi.nlm.nih.gov).

Nevertheless, challenges remain even in the innovation climate: Strengthened IP protection must still prove its reliability—some foreign firms continue to closely monitor how reliably Chinese courts handle patent disputes. There have been cases in which patents from foreign companies were challenged and invalidated in China when deemed strategically obstructive (selendygay.com). This fuels concerns that the state could, in critical cases, favor local generics. However, a recent White Paper by the Chinese government emphasizes that IP protection is being continuously improved and that forced technology transfers are prohibited (natlawreview.com)—a signal of China’s intention to comply with international rules. From a fairness perspective for companies, this means that China has—on paper and in many respects—moved closer to protecting innovators, giving businesses more predictability and enhancing fair competition (i.e., innovations are not immediately copied but enjoy a deserved market advantage). However, real-world implementation requires trust and experience that can only grow over time.

In summary, the business climate for pharmaceutical companies in China has both worsened and improved: worsened in terms of short-term pricing and margins, but improved in regulatory efficiency and IP protection. Companies with a long-term strategy see opportunities in the reforms—the huge market is becoming more accessible and rewards true innovation more than in the past. Firms focused primarily on short-term profit, however, often view the system as harsh and overly state-regulated. From a business perspective, fairness can thus be evaluated ambivalently: While China has created clear rules and new incentives, companies must hand over a large part of the financial benefit to the system (and ultimately, the patients). This is a conscious political trade-off in favor of public health.

Advantages and Disadvantages for Patients

Advantages

• Affordable medications: Significantly reduced prices through negotiations and tenders ease financial burdens on households (pubmed.ncbi.nlm.nih.gov, pubmed.ncbi.nlm.nih.gov).

• Broader access: High insurance coverage (≈95% of the population) and an expanded reimbursement list allow more people to access modern therapies (bayer.com, pubmed.ncbi.nlm.nih.gov).

• Quality assurance: Government regulation (GMP standards, generic bioequivalence) protects against unsafe medications; corruption in hospitals has been curbed (linkedin.com).

• Equality: Disparities in healthcare provision between regions are gradually narrowing due to public programs and price regulation (pubmed.ncbi.nlm.nih.gov).

Disadvantages

• Remaining inequalities: Rural areas and low-income groups still have poorer access to specialized medicines in some cases (urban-rural gap) (bayer.com).

• Limited choice: Tenders often result in only one winning supplier—patients in public hospitals mainly receive this drug; those preferring specific brands may need to pay privately.

• Quality concerns: Some fears remain that extreme price cuts may impact drug effectiveness/quality (trust issues with certain generic products) (siii-clinical.com).

• Innovative therapies: Cutting-edge (expensive) drugs are often only available after price negotiations; if the manufacturer declines, patients must wait or pay privately.

Advantages and Disadvantages for Pharmaceutical Companies

Advantages

• Large growth market: China offers access to a huge patient pool and growing demand (aging population, lifestyle diseases) (investmentplattformchina.de).

• Faster approval: Reformed regulatory processes, accelerated approvals, and harmonization with global standards enable faster market entry of new products (bayer.com).

• IP and innovation promotion: Improved patent protection (patent extensions, data exclusivity) and public R&D initiatives make the market more attractive for innovative drug developers (europeanpharmaceuticalreview.com, europeanpharmaceuticalreview.com).

• Consolidation opportunities: Less efficient competitors are pushed out by price pressure; remaining firms can gain market share and benefit long term from more efficient structures (investmentplattformchina.de).

Disadvantages

• Extreme pricing pressure: Forced discounts of 40–80% for reimbursement drastically reduce margins (pacificbridgemedical.com, pacificbridgemedical.com); profitability of off-patent drugs especially is called into question.

• Regulatory complexity: Despite improvements, market access and distribution remain highly regulated (reimbursement, tenders, joint venture requirements) (investmentplattformchina.de); high administrative effort and adaptation required.

• Unpredictability: Political interventions (e.g., new cost-containment measures, ad hoc decisions) can quickly disrupt business strategies; planning certainty remains limited.

• Local competition: Domestic firms are becoming increasingly competitive (cost and relationship advantages); foreign suppliers may lose market share, and there are ongoing concerns that patent rights may not always be consistently enforced in practice (risk of imitators) (selendygay.com).

Conclusion

The question of fairness in China’s pharmaceutical system cannot be answered with a simple “yes” or “no”—the system includes balanced elements that benefit both sides, but also areas of tension. For patients, the picture is largely positive: Reforms in recent years have made medications more affordable, extended insurance coverage to nearly the entire population, and significantly improved access to modern therapies. This has increased fairness in the healthcare system, by reducing financial barriers and narrowing regional gaps. At the same time, patients must accept limited choice and the risk of possible quality differences with some cheaper generics—areas that are still being addressed. For pharmaceutical companies, the system presents challenges: While China has eased market access and supports innovation through better IP protection and a vast sales market, profit margins are tightly constrained by aggressive price regulations. The system is fair in the sense of a public health goal—it asks companies to contribute to affordability, but in return offers planning reliability, large volumes, and IP protection.

In sum, China is attempting to strike a balance between patient welfare and industry incentives. From the patient’s perspective, fairness has progressed significantly, as health is prioritized as a public good. From the business perspective, fairness is relative: Those who accept the rules and take a long-term view will find fairer conditions than in previous years (e.g., faster approvals, IP protection), but must sacrifice short-term profits in favor of the greater good. This social compromise model has already helped many people in China (pubmed.ncbi.nlm.nih.gov), while pharmaceutical companies are learning to adapt to new realities. The development remains dynamic—future reforms (such as further insurance expansions, innovation campaigns, or international trade agreements) will show how the scales of fairness continue to shift. Even now, however, the Chinese model serves internationally as an example of how greater fairness for patients can be achieved without losing sight of pharmaceutical innovation (pubmed.ncbi.nlm.nih.gov).