In recent years, China has taken bold steps to make
healthcare more affordable and equitable. One of the most impactful moves in
this direction is the inclusion of medical devices under insurance
reimbursement schemes, driven by mandates from the country’s central health
authorities.
By aligning device coverage with public health priorities,
China is not only reducing out-of-pocket costs for patients but also reshaping
how medical technology companies operate in its vast and complex healthcare
market.
Reimbursement Reform Backed by Strong Policy
The foundation for this shift comes from China’s 14th
Five-Year Plan (2021–2025), which outlines a national strategy to improve
access to essential health services under the Healthy China initiative. A key
part of this plan is the requirement that a growing share of high-value medical
devices be included in insurance reimbursement mechanisms—with a target of 80%
of hospital device expenditure to go through volume-based tenders by 2025.
At the heart of this policy is the dual objective of:
- Making
essential medical technologies more accessible and affordable
- Controlling
public healthcare expenditure through centralized procurement and
reimbursement alignment
Volume-Based Procurement (VBP): Driving Down Prices
China’s Volume-Based Procurement (VBP) system, introduced
for medical devices in 2019, has dramatically changed the reimbursement and
procurement landscape.
Here’s how it works:
- Devices
are tendered in bulk across provinces or nationally.
- Companies
winning tenders are assured high sales volumes, but must offer significantly
reduced prices.
- Once
awarded, these devices are included in the reimbursed product list,
allowing hospitals to claim costs through public health insurance.
Examples of price reductions under VBP tenders:
- Coronary
stents: Up to 95% price drop
- Joint
replacement systems: ~82% reduction
- Spinal
and orthopedic implants: Over 80% cut in price
Once these devices are awarded under VBP, they become eligible
for reimbursement through China’s public insurance system, such as the Basic
Medical Insurance (BMI). This means patients pay significantly less, and
hospitals are reimbursed based on standardized prices.
Health Authorities Take the Lead
China’s National Healthcare Security Administration (NHSA)
has played a central role in this transformation. Acting as both the payer and policy-maker,
the NHSA ensures that medical devices procured under VBP are also
reimbursable—bridging the gap between procurement policy and patient access.
By linking reimbursement eligibility to VBP inclusion, the
NHSA ensures:
- Devices
meet clinical effectiveness and cost-efficiency thresholds
- Pricing
is transparent and consistent
- Hospitals
are incentivized to use listed, reimbursed devices
This has created a highly coordinated system where
procurement, pricing, and insurance are fully aligned.
Challenges for Medtech Companies
For medical device manufacturers—especially global
companies—this policy shift hasn’t come without challenges.
- Revenue
Pressure: Massive price reductions under VBP have significantly reduced
profit margins.
- Operational
Strain: Tenders are fast-moving, and companies must be ready with
resources and documentation at short notice.
- Strategic
Realignment: Many companies are adjusting their business models by:
- Partnering
with local manufacturers to reduce production costs
- Outsourcing
non-core components
- Focusing
on post-sale service instead of aggressive sales models
Some companies, such as Medtronic and Alcon, have reported
notable declines in their China sales due to VBP. In some cases, companies have
even exited certain segments of the Chinese market altogether.
The Opportunity in Compliance
While VBP and reimbursement mandates pose challenges, they
also open doors for companies that can:
- Demonstrate
cost-effectiveness
- Offer
localized production
- Provide
clinical value at reduced prices
- Respond
quickly to tender timelines
Importantly, Chinese patients continue to show preference
for international medical devices, especially if they are affordable and
reimbursed. This gives global medtech players an opportunity to retain trust
while adapting to the new market dynamics.
What’s Ahead
As China moves closer to its 2025 target, we can expect:
- More
device categories added to VBP and insurance coverage (e.g., diagnostics,
electrophysiology)
- Increased
use of Health Technology Assessment (HTA) in reimbursement decisions
- Closer
alignment between regulatory approvals and insurance listing eligibility
The message is clear: To succeed in China, reimbursement
strategy is just as critical as regulatory compliance.
Conclusion
China’s healthcare reforms are pushing the boundaries of how
medical devices are priced, procured, and reimbursed. By mandating that
insurers cover devices selected through VBP, the government is ensuring that
cost-effective technology reaches patients—not just in big cities, but across
the entire country.
For medical device companies, this means adapting fast, thinking
locally, and aligning with public health goals. It’s a challenge, yes—but also
a major opportunity in one of the world’s largest medtech markets.
For more information or tailored guidance, contact Titans
Medical Consulting.