By Ying Yang, founder of BiG
Originally published in Chinese on February 23, 2026. This English edition preserves the author’s account of the February 2–4, 2026 leadership summits in Shanghai and Suzhou and the policy context at that time.
Who will pay for China’s innovative medicines—and what will fuel the industry’s sustainable growth? This is a defining question for China’s biotechnology sector. In this article, BiG founder Ying Yang calls on innovators, payers, policymakers, and researchers to build a constructive cycle between innovation and payment through research, sustained dialogue, and collective action.
It began with a conversation in Boston a few months ago. Peter Kolchinsky, PhD, founder of RA Capital, asked me a question that stopped me in my tracks: Who will pay for China’s innovative medicines? What will fuel the sustainable development of China’s innovative drug industry?
This question matters to everyone working in biotechnology. In the days leading up to the Lunar New Year, BiG organized three industry leadership summits in Shanghai and Suzhou from February 2–4, 2026. The meetings were co-organized with the industry publication PharmaDJ, RA Capital, and Ascentage Pharma. We focused on this fundamental question through two connected themes: global collaboration in innovation and market-based payment mechanisms.
Our discussions pointed toward a future we must build together: an industry in which science defines value and sustainable payment supports continued innovation. What follows is my reflection on those discussions, the understanding we reached, and the work ahead. The question posed in Boston calls for a shared response from Shanghai.
1. Today’s Reality: Who Is Paying for Chinese Innovation?
At the summits, Peter Kolchinsky offered a provocative perspective:
“Today, it may appear that large multinational pharmaceutical companies are paying for Chinese biotechnology. But those investment decisions are actually driven by the U.S. commercial health insurance system. By choosing among health insurance plans, American consumers send signals to the market about which kinds of innovation matter most to them, guiding the flow of investment capital. The United States is currently the only country operating a competitive commercial health insurance system. That market mechanism provides sufficient incentives for innovative research and development around the world, wherever it takes place—including China.”
After the turbulence of the last industry cycle, an important understanding is emerging within China’s biopharmaceutical sector. The stock market cannot be the ultimate payer for innovative medicines: it is a source of financing, not the endpoint of value creation. Nor can the industry rely exclusively on cash from overseas business development and licensing transactions.
Over the previous two to three years, funding shortages had forced some companies to sell core assets at low valuations. Changes in pharmaceutical pricing policy overseas had added further long-term uncertainty. These experiences made the limits of dependence on external markets painfully clear. China also needs a healthy domestic market capable of sustaining its own cycle of innovation and reinvestment.
This does not mean turning inward or closing the door to the world. Another central theme of the summits was that disease knows no borders. China’s and America’s biotechnology communities should strengthen global collaboration, use complementary efficiency advantages, and climb toward better human health together—making innovation faster and effective medicines more accessible.
As Peter asked:
“As China grows, and its GDP eventually approaches that of the United States, might its willingness to pay for innovative medicines also approach the U.S. level of 1.4% of GDP? Could that provide a comparable incentive for Chinese innovators and help protect against the risk of losing access to the U.S. market in the future?”
2. Redefining Value: Innovation Goes Beyond First-in-Class Medicines
Before discussing payment, we need to clarify what we mean by an innovative medicine. Innovation has several dimensions: scientific innovation, including new mechanisms, new molecular entities, and new technology platforms; clinical innovation that addresses unmet medical needs; and regulatory classifications, such as China’s Category 1 new drugs.
First-in-class medicines, fast followers, and “me-better” therapies all belong within the broader landscape of pharmaceutical innovation, although their development challenges differ. Many globally successful medicines are fast followers or me-better products. Fast-following development is itself a goal for many multinational pharmaceutical companies because the risks can be more manageable and the clinical value clearer.
Here, “fast followers” refers to medicines developed against established targets, following leading international drugs, but reaching the Chinese market among the first domestic entrants. Such medicines can fill treatment gaps, help lower domestic drug prices, and, in some cases, improve on the limitations of existing therapies.
Several health economists at the meetings made the following point:
“China’s early innovation has largely involved fast-following, me-better, or me-too development against known targets. This fits China’s circumstances. As long as innovation delivers clinical benefits at an appropriate cost, China has substantial potential to deliver affordable innovation.”
Fast-following innovation that saves money for health insurance funds and gives patients earlier access to the latest, most cost-effective treatments can create tremendous social value.
China’s capacity for fast-following innovation has also drawn global attention to its development efficiency. Its ability to move from an initial breakthrough to development at scale rests on advantages across the system. A McKinsey report cited in these discussions found that Chinese innovative drug companies could move two to three times as quickly as international peers from target identification to an investigational new drug application, or IND. For fast-following small-molecule drugs, the combined acceleration could reach 50%–70%. Put another way, in the time a U.S. peer takes to complete one IND submission, a Chinese company may be able to complete two and a half.
In clinical development, the same comparison indicated that Chinese companies could recruit patients two to five times faster, at approximately half the per-patient cost of their European and American peers. These system-wide advantages were built in little more than a decade through sustained government investment in basic life science research and biotechnology, China’s clinical research capabilities and policy flexibility, and internationally experienced returnee leaders working with exceptionally diligent, rapidly iterating teams of Chinese scientists.
The “80/20” principle also plays a role. A large base of fast-following development builds talent and supply-chain capabilities. Investment returns from those programs can, in turn, give venture investors the confidence to fund riskier first-in-class work. This helps explain why Chinese companies have begun matching—and in some fields leading—their international peers. For certain targets, an efficient fast follower may even generate clinical data first, moving from follower to leader. Fast-following innovation is both a foundation of China’s biopharmaceutical industry and an incubator for first-in-class discovery.
Yet the central difficulty remains: returns from fast-following medicines in China’s domestic market are not sufficient to support a self-sustaining industry. As one investor put it, “Fast followers carry more manageable risks and should not command first-in-class prices—but their prices should not be as low as they are today.”
Part of the problem stems from intense competition around similar programs. In earlier years, large inflows of capital crowded into popular targets, lowering price expectations. These are growing pains for a young industry, and companies are actively reassessing their choices. At the same time, affordability is constrained by per-capita GDP and by the basic medical insurance system’s mandate to cover essential needs. Current reimbursement prices have not yet provided an innovation premium sufficient to sustain much of the industry.
At the time of these discussions, industry leader BeOne Medicines, formerly BeiGene, was only beginning to become profitable after nearly two decades of development, primarily because of strong U.S. sales of its BTK inhibitor. Most innovative drug companies at the commercialization stage were still operating at a loss, and many continued to sell assets before they could realize their full value.
Developing a me-better or fast-following medicine still involves substantial risk: it can take more than ten programs to produce one successful outcome. At prevailing domestic prices, the potential return often fails to match that risk. Some investors therefore assign little or no value to the Chinese market when evaluating a new drug investment.
This creates a dangerous cycle. If domestic payment cannot adequately reward innovation, investors discount the Chinese market and companies continue relying on overseas markets to survive. What happens if those international markets become less open to Chinese assets?
At the 2026 J.P. Morgan Healthcare Conference, representatives of the U.S. biotechnology industry expressed concerns along these lines: “We welcome competition, but it must be healthy competition,” and, “U.S. commercial health insurance appears to be the only place paying an innovation premium for the world. Chinese assets are pouring into the U.S. market, with a major impact on our biotechnology ecosystem.”
In my view, the risk of a policy response is not remote. If Chinese assets reach a certain share of the U.S. market, political resistance could follow. Would China’s still-young biopharmaceutical industry then have a sufficiently strong domestic market to cushion the impact? The strength of that cushion depends on the payment system we build today.
3. Can Commercial Insurance Unlock a Sustainable Chinese Market?
Building a domestic market that can sustain biopharmaceutical innovation presents serious challenges. Basic medical insurance must first meet its obligation to cover essential healthcare. On its own, it may struggle to support a reasonable innovation premium across the industry. Commercial health insurance, as a complementary part of a multilayered healthcare financing system, therefore carries high expectations.
At our February 2 closed-door meeting, participants reviewed the evolution of China’s medical insurance policies and their latest developments. Commercial insurers also shared their progress and plans. Several health economists cautioned that the U.S. model of high investment and high returns may not fit China’s circumstances. China differs in per-capita GDP, stage of development, and institutional structure, with social insurance playing the dominant role. Truly high-end commercial insurance covers only a few million people. Broader progress may come from developing multiple tiers of midmarket commercial coverage, including inclusive insurance products.
Policy support is beginning to take shape. In December 2025, China’s National Healthcare Security Administration, or NHSA, introduced the first national Commercial Health Insurance Innovative Drug List, updated and released alongside the basic medical insurance drug list. It was China’s first national drug list designed specifically for commercial health insurance, marking an important step toward a multilayered healthcare financing system.
Inclusion in the commercial insurance list does not mean these medicines are paid for by the basic medical insurance fund. The policy foundation was the June 2025 Measures to Support the High-Quality Development of Innovative Drugs, jointly issued by the NHSA and the National Health Commission under document No. 16 of 2025. The measures called for a commercial insurance list focusing on highly innovative medicines with substantial clinical value and significant patient benefits that fall outside the coverage of basic medical insurance.
Three accompanying exemptions were intended to remove major institutional barriers to hospital access. Hospital performance assessments and payment rules can otherwise discourage the use of innovative medicines. For drugs on the commercial insurance list, the supporting policies provided that:
- They would not count toward the basic medical insurance self-pay ratio indicator. Stocking these medicines would therefore not adversely affect a hospital’s performance on that cost-control measure.
- They would be excluded from monitoring of alternatives to products selected through centralized procurement. Their use would not be linked to that substitution-monitoring requirement.
- Eligible cases covered by commercial insurance could be excluded from diagnosis-based bundled payment. Following review, such cases could be paid on a fee-for-service basis or through separate payment arrangements.
Participants nevertheless identified substantial obstacles:
- Decision-making and payment responsibility are separated. The public medical insurance authorities establish the list, while commercial insurers pay the bills. One expert described the arrangement as “public insurance doing the cooking and commercial insurance picking up the check.”
- The source of funding remains a challenge. Public willingness to pay for additional commercial coverage is limited, partly because people have traditionally relied on basic medical insurance as their safety net.
- Hospitals still lack sufficient incentives to use the medicines. As one expert observed, establishing the list is only the first step. Hospital access and other implementation problems must be worked through as market practices and institutional rules evolve.
Despite these challenges, participants saw considerable potential. The payment shares cited were approximately 44% from basic medical insurance, 7.7% from commercial insurance, and 49% from patients’ own pockets. These reported estimates are not an exact 100% breakdown. Even so, the contrast between high out-of-pocket spending and the small commercial insurance share highlights the opportunity. Removing policy barriers and helping shift individual financial burdens toward pooled insurance coverage is both urgent and important.
Commercial insurers need a place at the table when the menu is being designed. In practical terms, they should participate in future list reviews and pricing discussions. The NHSA’s 2025 list-adjustment announcement encouraged insurers and pharmaceutical companies to negotiate prices together—a positive signal and a basis for closer collaboration.
How, then, should payment be determined? Current basic medical insurance pricing combines pharmacoeconomic evaluation with reference pricing. Economists and insurers at the meetings presented different models, assumptions, and approaches. Encouragingly, they recognized several forms of value: better population health; direct commercial returns, including those generated through multinational partnerships; the effect of internationally competitive industries on local development, manufacturing, sales, and employment; and the lasting benefits of generic medicines after patent protection expires.
Some researchers therefore include long-term health benefits, broader social value, and an innovation premium in their models. Today’s prices send tomorrow’s value signals to innovators. If China wants more first-in-class breakthroughs, public and commercial payers can do more to recognize the wider social value of medicines, including from the patient’s perspective. Applying those models, however, remains difficult in a young industry and a market where foundational data are still scarce.
Peter Kolchinsky also explained how market competition shapes pricing within the U.S. commercial insurance system. He asked how China, as its own commercial insurance market develops, might decide which medicines are worth paying for. Could it learn from the strengths of the U.S. approach while avoiding its weaknesses, allowing competition to reveal what people value?
Would people pay RMB 100, 200, 300, 400, or more each month for access to hundreds or thousands of new medicines? Lower-cost plans with narrower coverage could compete with more expensive plans offering broader coverage. Individuals would choose according to their needs and priorities. Those choices could send signals to innovators about the kinds of medicines people want more—or less—of.
Such market-based experimentation is only beginning in China. One emerging pharmacoeconomics researcher asked whether newer international approaches to value assessment could help: “Can we recognize a greater willingness to pay for patients with severe illnesses while appropriately incorporating values that reflect society’s broader preferences? Can we establish payment standards that both improve today’s allocation of resources and encourage tomorrow’s medical innovation?”
A representative of Cigna & CMB Life Insurance shared that China Merchants Bank had enrolled its entire workforce in the insurer’s commercial coverage that year. The 40,000 employees across China, representing a range of income levels, offered a valuable dataset for assessing benefits and risks and designing differentiated coverage.
During the discussion, the founder and CEO of a biotechnology company expressed interest in arranging commercial insurance for employees—not only as a benefit, but also as a constructive contribution to the development of insurance pricing. This raises a question for every innovator: when we purchase commercial coverage for our own employees, what kind of precedent are we helping establish? Imagine a future in which Chinese biotechnology companies think first of the opportunities in their own domestic market.
4. Medical Insurance 2.0: From Price Negotiation to Value Discovery
Commercial health insurance remains too small to carry this burden on its own. For the foreseeable future, the industry will continue watching whether basic medical insurance can strengthen its support for innovative medicines.
Participants agreed that innovators and payers need deeper discussions about how value is recognized. They also emphasized that China’s system-wide fast-following capabilities—and its ability to match or lead international peers in selected fields—owe much to sustained public investment.
That support ranges from early research grants to local government-guided funds, venture investment by state-owned capital, and continuing reform of drug review and approval. Ultimately, the state has borne a substantial share of the risk of failed research and development projects. China’s planned, sustained investment in research infrastructure, talent, and entrepreneurial ventures at the beginning of the development process differs markedly from the U.S. approach, in which commercial insurance payments for successful products help pull innovation through the system.
If those long-term public investments are to generate healthy, sustainable returns, the industry believes medical insurance should also recognize an innovation premium. Doing so would help preserve the capabilities China has worked hard to establish and support their continued development.
At the end of 2025, the NHSA set out a direction of “supporting genuine innovation, genuinely supporting innovation, and supporting differentiated innovation.” This encouraged hopes for stronger support. By the end of October 2025, medical insurance funds had cumulatively paid more than RMB 460 billion for negotiated medicines within their agreement periods, benefiting patients on more than one billion occasions. Of the 114 medicines added to the 2025 national reimbursement drug list, 50 were Category 1 innovative drugs—a record number.
These actions suggest that medical insurance can serve as a discoverer of value, not simply a negotiator of prices. Innovators welcome stronger support and are ready to contribute ideas and genuinely innovative products. Together, we need to determine what sustainable, affordable innovation looks like in practice: a dynamic balance between patient access and the ability of biopharmaceutical companies to keep developing medicines.
5. A New Year, a New Journey: BiG Idea—Turning Shared Understanding Into Action
Many biotechnology founders may feel that payment questions are far removed from their work as scientist-entrepreneurs. As a nonprofit community focused on biopharmaceutical research and innovation, BiG initially wondered whether this topic was too distant from the concerns of early-stage innovators.
Recent conversations changed our perspective. If innovators do not engage with payers to define the value of innovation, and if the two sides remain at opposite ends of a price negotiation rather than working together to discover value and build a healthy ecosystem, a mutually beneficial industry cannot emerge.
Insurance payment and innovative drug development are interdependent. Without innovative medicines, health insurers lose an essential means of delivering value. Without insurance support, innovative medicines lack a dependable source of returns to sustain future development.
Action is already underway. Several participants approached us about contributing to white papers or creating more channels for dialogue with senior policymakers. One biotechnology founder passed the Chinese edition of Peter Kolchinsky’s book, The Great American Drug Deal (Chinese title: 《药超所值》), to relevant leaders at the healthcare security administration and offered to help facilitate future exchanges.
The central purpose of BiG’s Lunar New Year leadership summits was to break down barriers in understanding and create effective channels for dialogue: helping policymakers hear directly from Chinese innovators, helping insurance designers understand the clinical and commercial value of new medicines, and helping every biotechnology practitioner recognize that we are not only creators of innovation—we are also advocates for its value and builders of the ecosystem that sustains it.
As the Year of the Horse begins, so does a new round of conversation and action. We look forward to working together in several areas:
- Innovators can explain their value more actively, helping payers understand the clinical and social benefits of new medicines. They can also help commercial insurers show the public how new treatments change lives and bring hope, strengthening people’s willingness to invest in their health.
- Payers can assess Chinese innovation with a more open mind. They can explore pricing approaches that recognize an innovation premium within a system grounded in basic medical insurance, complemented by market-driven, multilayered commercial coverage and shared payment responsibility.
- Policymakers and researchers can work with industry to design incentives for future innovation and give more complete recognition to medicines with clear clinical value.
BiG’s next step is to work with PharmaDJ and participating experts on a questionnaire-based study involving more than ten biopharmaceutical companies as well as payers. We aim to systematically collect their views on how innovative medicines should be defined and how their value should be measured. We also plan to facilitate focused, closed-door discussions among stakeholders.
Working with RA Capital, we hope to learn more about the operation of the U.S. market-driven, multilayered commercial insurance system—adapting its strengths to China’s circumstances and improving upon its limitations. We intend to bring these findings together in a series of white papers, creating a foundation for translating industry understanding into policy recommendations and practical guidance for insurance design.
Only through this work can the constructive cycle of innovation and payment we envision become a reality: through market-based exploration in high-end commercial insurance, progress in inclusive midmarket coverage, and stronger support from basic medical insurance for China’s own path toward affordable innovation.
Let us work together to build a sustainable future for China’s innovative drug industry.
About the Author
Ying Yang is a serial entrepreneur and an active community builder in China’s biopharmaceutical sector. As founder and CEO of Lab Direct (泉心泉意), she has led the development of a cloud-based intelligent supply-chain platform serving innovative pharmaceutical companies throughout research and development, chemistry, manufacturing and controls (CMC), clinical trials, and commercial production.
Over the preceding sixteen years, she founded LBD Life Sciences (Tengquan), focused on automation equipment and solutions for innovative drug research and development; the company was later acquired by the EQT-backed SPT group in Cambridge, United Kingdom. She also co-founded Heyuan Medical Devices (合源医疗器械), working in Class III innovative active cardiovascular interventional devices.
In 2014, Ying founded BiG, a nonprofit community supporting biopharmaceutical innovation. She served two terms on the BayHelix board and initiated the “BayHelix Responsibility in Action” initiative (百华担当者行动), connecting industry community leadership with rural charitable work. She holds an MBA from the University of Cambridge.
Source: English translation of Ying Yang’s article, originally published by BiG on February 23, 2026. Read the original Chinese article. Quotations are translated from that article; the views and estimates retain their original context.
