China's 20% annual growth target for innovative drugs hinges on clinical value and payment pathways: analysis

By Ran Mingdong (Zhongnan University of Economics and Law, Hubei Provincial Institute of Medical Security Reform and Development)

The recently released 15th Five-Year Plan for Pharmaceutical Industry Development (hereinafter referred to as the "Plan") sets forth several key targets: the annual growth rate of the innovative drug industry scale shall exceed 20%, the average R&D investment intensity of listed pharmaceutical companies shall exceed 10% annually, and by 2030, first-in-class innovative drugs shall account for over 25% of the global total. These indicators link industry expansion with R&D investment and original innovation capacity. With growth expectations now benchmarked, the next question is: what kind of innovation can sustain such growth?

Expected Indicators and the Foundation of Growth

The Ministry of Industry and Information Technology has classified the above targets as expected indicators, providing an overall outlook for industry development. For any individual company or product, sustained returns depend on whether clinical value can be demonstrated and whether that value can be realized in actual use. The chain from R&D investment to patient benefit, and then to corporate revenue, must function effectively for growth to have a solid foundation.

Clinical Value in Context

Clinical value must be assessed relative to existing treatment options. Specific questions include: how much longer can a drug extend a patient's life? How many adverse reactions can it reduce? How much can it improve quality of life? From the R&D stage, companies should clearly define target patient populations, comparator regimens, and expected benefits. This provides a stronger evidence base for subsequent registration, market access, and clinical application. While first-in-class drugs represent original exploration, the actual improvement experienced by patients determines the clinical significance of that exploration.

From Evidence to Access

Evidence alone is insufficient without smooth conditions for use. Market approval, inclusion in reimbursement lists, hospital stocking, and patient dispensing each involve distinct rules and procedures. The Plan proposes improvements to pricing, payment, and usage policies, with effects to be reflected in the seamless coordination of these steps. For patients, whether a suitable drug is available at a local pharmacy, how costs are settled, and whether treatment can be sustained over the full course—all affect the feasibility of therapy.

Cost Sharing and Multi-Payer Systems

Cost sharing is a critical component. The 15th Five-Year Plan for Universal Medical Security calls for complementary and differentiated development between basic medical insurance and commercial health insurance. Basic insurance bears the responsibility for essential coverage, while commercial insurance can address certain differentiated needs. The extent to which multi-payer systems reduce patient burden depends on insurance coverage rates, premium levels, benefit scope, and claims conditions. The out-of-pocket costs remaining after reimbursement are a key measure of affordability.

Balancing Two Ledgers in Payment Decisions

Payment decisions require balancing two financial calculations. The first is the additional cost required to achieve extra health benefits. The second is the increased expenditure a fund must bear over a given period. For example, a new drug may increase pharmaceutical spending while reducing hospitalization and complication management costs; evaluation must therefore consider the full treatment pathway. Even if the cost per unit of health benefit is acceptable, expanding the eligible population may still create budget pressure. Thus, clinical benefit, total treatment cost, and patient volume must be analyzed together.

Real-World Evidence and Ongoing Evaluation

These calculations become clearer in actual use. In 2025, the National Healthcare Security Administration launched a pilot program for real-world comprehensive value assessment of medical insurance drugs, focusing on whether actual clinical benefits and risks observed after use differ from the evidence submitted at market access. Questions such as which patient subgroups benefit most, how long efficacy persists, and how treatment costs evolve require continued study. Credible conclusions depend on appropriate study design, reliable data, and transparent analytical processes.

Ongoing evaluation provides a mechanism for subsequent verification of innovation value. As follow-up periods extend, patient populations shift, and alternative therapies emerge, a product's comparative advantage may change. For companies, requirements for supplementary evidence, evaluation timelines, and how results are used directly affect R&D and business expectations. For payers, updated evidence helps clarify the gap between actual benefits and initial projections. The process linking evaluation with market access and renewal gradually reduces the uncertainty affecting decision-making.

Global Market Potential

Assessing corporate return potential also requires a global perspective. The Plan sets a target of more than five products achieving annual global sales exceeding US$1 billion by 2030. This indicator provides a benchmark for evaluating products' global commercialization capabilities. For companies expanding through out-licensing, beyond upfront payments, subsequent milestone payments depend on achieving agreed R&D, regulatory, or sales targets, while royalty payments are tied to actual sales. Therefore, assessing overseas performance requires tracking product R&D progress, market access status, and sales performance—to see whether initial expectations at signing translate into sustained returns.

Shifting Criteria for Corporate Valuation

As the industry enters a new growth cycle, the criteria for valuing companies will also evolve. Products with clinical advantages require clear payment pathways and stable real-world demand. The potential of R&D pipelines must be validated by subsequent outcomes and revenue. As evidence accumulates, clinical application expands, and commercial returns materialize, the foundation for long-term corporate value will become clearer. Ultimately, whether the industry's growth potential translates into value creation for individual companies depends on specific products and operational performance.

Conclusion: Growth Backed by Real Performance

The 20% growth target must ultimately be supported by the real-world performance of individual drugs. Patients must receive verifiable treatment improvements. The payment system must purchase health benefits at affordable costs. Companies must earn returns that sustain further R&D. Only when these three elements are aligned can innovation be consistently realized.