Magnesium Health CEO calls for diversified payment system for rare disease drugs as personal payments hit 893 bln yuan

Policy Direction Set for Rare Disease Treatment and Innovation

The Ministry of Industry and Information Technology, together with nine other Chinese government departments, has jointly issued the "15th Five-Year Plan for the Pharmaceutical Industry." The document explicitly calls for advancing cutting-edge technologies—including cell therapy, gene therapy, small nucleic acid drugs, and peptide drugs (such as somatostatin analogs)—to accelerate the innovation, R&D, and clinical translation of treatments for rare diseases such as hemophilia, albinism, and amyotrophic lateral sclerosis (ALS).

This marks a critical direction for China's rare disease prevention and treatment efforts and the pharmaceutical innovation industry during the 15th Five-Year Plan period (2026–2030), while also charting a path for deepening innovation in the rare disease field.

Rare diseases are complex, difficult to treat, and face significant clinical medication gaps. Nearly half of all rare disease cases manifest in childhood, making this a key area concerning public welfare, healthcare, and industrial innovation.

The Core Challenge: Who Pays?

R&D addresses whether a drug can be developed; clinical trials verify whether it is effective; regulatory approval determines whether it can enter the market. But beyond these steps lies a more pressing question: Who will pay?

As China's innovative drug industry enters a phase of accelerated commercialization, payment has become the "last mile" connecting innovation with patients and determining whether market value can be realized.

The Payment Dilemma

Zhang Xiaodong, Founder and CEO of Meditrust Health, recently stated at an industry forum during the 2026 Zhangjiang Pharma Conference and Shanghai International Biomedical Industry Week that China's innovative drug market has sufficient scale, but its potential market value has not yet been fully released. Payment is the key link between innovative drugs and patients, and AI will continue to enhance payment capacity, improve market assessment, upgrade patient services, and drive larger-scale commercialization of innovative drugs.

Over the past decade, China's innovative drug industry has experienced rapid development. From improved R&D capabilities and accelerated review and approval processes to the continuous improvement of capital markets, clinical resources, and industrial policies, a number of Chinese innovative drug companies have transitioned from followers to active participants in the global innovation chain. License-out deals remain active, and more Chinese innovative drugs are entering overseas clinical trials and international markets. "Going West" (overseas expansion) has become a frequently mentioned industry direction.

According to Zhang, China's innovative drugs should not focus solely on overseas markets. The domestic market itself holds enormous growth potential. China has a large patient population, genuine demand for innovative drugs, and rapidly increasing supply. In the next phase, a key task for China's innovative drugs is not only to go global but also to truly expand the domestic market.

This assessment is supported by solid data. Latest industry figures show:

• The domestic biomedical market reached 6.55 trillion yuan in 2025, up 11.2% year-on-year.
• In the first half of 2026, the value-added output of the pharmaceutical industry above designated size grew 4.6% year-on-year, maintaining steady and high growth.

A landmark industrial transformation has already taken place: China's innovative drugs have completely shifted from "technology import" to "technology export." In 2025, the total value of China's innovative drug BD (business development) outbound transactions reached approximately $130 billion; in the first half of 2026, this figure was about $110 billion. Among the global top 10 out-licensing deals, 8 came from Chinese companies.

The Payment Gap: Data and Reality

According to the "China Innovative Drugs and Medical Devices Multi-Payer White Paper (2026)" :

• The estimated sales scale of China's innovative drug market in 2025 is 195 billion yuan.
• Basic medical insurance expenditure: approximately 90.5 billion yuan.
• Individual out-of-pocket payments: approximately 89.3 billion yuan.
• Commercial health insurance payments: approximately 15.2 billion yuan.

The data shows that individual out-of-pocket payments remain a significant component of innovative drug spending, and the financial burden on patients is still heavy.

Zhang Xiaodong noted that the market still needs a more comprehensive multi-payer system. Payment is not a single link in the commercialization chain but a crucial bridge connecting pharmaceutical companies, patients, and the healthcare security system. The combination of different payment sources—medical insurance, commercial insurance, patient self-pay, and patient assistance programs—determines the threshold for patients to access treatment and ultimately affects how many people a drug can reach.

Rare Disease Payment Challenges

Returning to the rare disease field, the payment contradiction is even more acute.

At the 2026 Rare Disease Public Welfare Care and Innovation Development Exchange, hosted by the Shanghai Soong Ching Ling Foundation and guided by the Shanghai International Biomedical Industry Week Organizing Committee, Wang Peng, Consulting Director of Frost & Sullivan China, pointed out:

• There are numerous known rare diseases globally, with individual disease populations ranging from tens of thousands to hundreds of thousands.
• The total number of rare disease patients worldwide exceeds 300 million.
• 90% of rare diseases lack effective treatments.
• China has identified over 4,000 rare diseases, with more than 20 million patients—a large population that deserves public attention.

From a traditional perspective, gene therapy drugs can cost millions or even tens of millions of yuan per dose, making them unaffordable for ordinary people. Additionally, diagnosis remains a major challenge. Many patients report traveling from county-level hospitals to city hospitals and finally to top-tier institutions like Shanghai Ruijin Hospital or Xinhua Hospital before discovering their child has a rare disease. On average, it takes at least 4 years to obtain a confirmed diagnosis.

Even more challenging is that some cutting-edge gene-editing therapies cost up to $10 million per patient. Due to the highly personalized nature of single-disease treatments, the first gene-editing therapy for a single patient can cost tens of millions of dollars, placing it beyond the reach of most patients. In recent years, with the inclusion of city-customized supplemental insurance (Huiminbao) and foundations into the security system, the payment pressure on Chinese patients has eased somewhat, but overall, payment difficulties persist.

Policy Actions and Gaps

Li Linkang, Executive Director of the China Rare Disease Alliance, stated that the survival and security of over 300 million rare disease patients worldwide have become a common public health issue for the international community. In recent years, China has increased its attention and management efforts on rare diseases:

• The National Health Commission has established a Rare Disease Diagnosis and Treatment Collaboration Network Office and expanded the rare disease catalog. The third batch of the rare disease catalog is being accelerated.
• The National Medical Products Administration (NMPA) has established a green channel for rare disease drugs.
• The National Healthcare Security Administration (NHSA) includes eligible drugs in the medical insurance reimbursement catalog annually.

However, significant gaps remain between policy implementation and actual payment realization.

Kang Qi, Deputy Director of the Health Policy Research Department at the Shanghai Health Development Research Center, noted:

• China conducted nearly 1,500 rare disease clinical trials in 2024 and 2025, ranking first globally.
• As of the first half of this year, over 200 rare disease drugs have been launched in China, covering about half of the diseases in the first two batches of the rare disease catalog.
• Among 33 Category 1 new drugs, 20 are from domestic companies.
• However, overall payment scale remains limited. The core issue is that management functions are still confined to three departments—health, medical insurance, and drug regulation—and urgently require high-level coordination among science and technology, industry, finance, and civil affairs departments.

The Case for Rare Disease Legislation

Industry insiders point out that for rare disease patients, R&D is waiting for people, and people are waiting for drugs. This is not only a medical challenge but also a social issue requiring the mobilization of social resources—which is precisely the original intent behind rare disease legislation.

Legislation aims to address two key areas:

1. R&D and Innovation:

• Standardize R&D, production, market access, and medical conditions.
• Establish multi-departmental integration and multi-disciplinary joint research mechanisms.
• Leverage Shanghai's high-quality medical resources to build two platforms:
• A patient information platform to identify and integrate scattered patient data.
• A diagnosis and treatment collaboration platform for timely diagnosis and treatment, feeding back into front-end R&D.

2. Security and Payment:

• On the basis of basic medical insurance, build a multi-tiered, sustainable payment system.
• Continue to expand basic medical insurance coverage.
• Commercial insurance needs diversified development. Shanghai's Huiminbao has pioneered this, but there is room for improvement in product variety and payment convenience.
• Shanghai has established special funding, but policies across departments are fragmented. A lead department should coordinate multi-party participation and social donations to form a special fund, filling gaps in existing assistance policies and providing a safety net.
• Once patient security is improved, it will feed back into R&D, driving a virtuous cycle across the entire ecosystem.

Commercial Insurance Challenges

Liu Suiyu, Assistant General Manager of the Health Insurance Business Department at China Pacific Property Insurance Co., Ltd., pointed out that insurable risks must meet the condition of "large numbers of homogeneous risks," which rare diseases do not satisfy. Huiminbao participation rates are declining, and pre-existing condition issues are prominent, making it difficult to establish separate funding pools. Some regions have adjusted rare disease drug catalogs due to payment pressure.

Industry experts suggest three breakthrough paths:

1. Expand the group scale: Include rare disease coverage in the mutual aid pool of healthy individuals, and incorporate rare disease protection when raising funds for student insurance and hospitalization mutual aid funds.
2. Move the intervention point forward: Add genetic screening items to maternity insurance.
3. Extend the coverage backward: Cover special medical foods, psychological services, and long-term care.

Industry Voices and Ongoing Explorations

Hu Yiqing, Head of the Rare Disease Industry Alliance and Vice President of AstraZeneca China and Head of the Rare Disease Business Unit, called for further improvement of multi-tiered security mechanisms tailored to the characteristics of rare diseases, including:

• Optimizing medical insurance access evaluation rules.
• Breaking through existing payment caps.
• Establishing long-term price protection mechanisms to reduce price reductions triggered by new indications.
• Reducing patient out-of-pocket burdens through regional special funds and commercial health insurance.

"We also look forward to the leadership of the Shanghai Soong Ching Ling Foundation in forming a special working group involving government departments, policy experts, public welfare organizations, and the rare disease industry alliance. Based on the 'Blue Book on the Coordinated Development of China's Rare Disease Security and Pharmaceutical Industry,' we aim to study policies supporting rare disease companies innovating in Shanghai and explore multi-source financing mechanisms for rare disease special security. On this basis, we will further promote local legislation and institutional innovation for rare diseases, establish a regular communication and collaboration mechanism for the alliance in Shanghai, and gradually form a 'Shanghai model' of coordinated industrial innovation and security system development, providing replicable and scalable practical experience for the whole country," Hu said.

Gao Suya, General Manager of北海康成 (CANbridge Pharmaceuticals) China, elaborated on Shanghai's multiple advantages from a local enterprise perspective:

• Strong principal investigators (PIs) at top-tier institutions like Xinhua Hospital and Children's Hospital of Fudan University, attracting difficult pediatric cases from across the country and ensuring patient recruitment.
• The Yangtze River Delta sub-center of the Drug Evaluation Center provides pre-application guidance, enabling breakthroughs like "one-day successful submission" for Gaucher disease enzyme replacement therapy.
• The first cross-provincial segmented production project was successfully implemented in Shanghai.
• Drug approval cycles have been shortened to 90 days.
• Proactive professional guidance from municipal science commissions and Pudong New Area authorities.

However, commercialization still faces challenges. "After this year's Huiminbao policy adjustments, PIs find it difficult to obtain real-world usage data, and companies lack domestic data support when going overseas. We urgently need special funds and payment security system support," Gao added.

Huang Lei, Business Director of the Biomedical Team at Shanghai Guotou Guidance Fund, noted that the ceiling for individual rare disease products is not low. Companies can achieve first-to-market with small samples and fast approvals. On the exit side, she is optimistic about license-out, NewCo, and BD transactions seen at companies like CANbridge, but the pain point remains commercialization.

"Shanghai's first approved AAV (Adeno-Associated Virus) product took a long time from approval to the first order. Some multinational pharmaceutical companies' products were added to the Huiminbao special drug list but later removed. We hope industry, capital, and government can connect the dots across R&D, translation, internationalization, and medical insurance communication," Huang said.

Ecosystem Building and AI's Role

Ecosystem development also requires support from industry organizations and institutional frameworks. According to reports, the Rare Disease Industry Alliance was established on August 28, 2024, at the 5th Qingdao Summit of Multinational Corporation Leaders. It held its first meeting in Shandong in June 2025, subsequently established an industry branch in the province, and recently exchanged views with the Shanghai Soong Ching Ling Foundation. Its mission is to benefit patients, drive industrial innovation, and unite government, R&D, clinical, and industry forces to help build China's rare disease diagnosis, treatment, and security system.

On the AI front, Zhang Xiaodong believes that AI's deeper value for innovative drug commercialization lies in helping payers more accurately assess risk and payment capacity, increasing their willingness and ability to cover innovative drugs, thereby expanding the domestic market and transforming China's innovative drugs from "world factory" to "world market."

Kang Qi proposed:

• Promoting national action plans toward legislation.
• Establishing a national-level special fund.
• Building a multi-tiered security system combining basic medical insurance, special funds, commercial insurance, and charity.
• Updating catalogs in real time.
• Conducting real-world data registration.
• Strengthening domestic and international collaboration.
• Emphasizing five key synergies: concept, department, society, technological innovation, and institutional innovation.