Life Sciences and Healthcare in China

Life sciences in China: the market and the rules

Life sciences in China combine one of the world's largest healthcare markets with one of its fastest-growing sources of biomedical innovation. Hospitals, insurers and patients create demand on a vast scale; Chinese biotech companies supply a growing share of new molecules licensed by global pharmaceutical groups; and contract research and manufacturing organisations serve customers worldwide. At the same time, the sector is shaped by intense price negotiation, sustained anti-corruption enforcement, strict rules on genetic resources and health data, and geopolitical pressure from the United States and Europe.

For foreign companies the question is how to compete and partner in a market where regulators are pushing for innovation and lower prices at once. For Chinese companies going abroad, it is how to turn domestic science into global assets without stumbling over export, data or foreign regulatory rules. This page introduces the regulatory landscape, the key developments of 2025 and 2026 and the specific topics we cover in more detail. It is general information about the Chinese legal environment and international practice, not PRC legal advice.

The regulatory landscape

Regulation of life sciences in China is divided among several agencies, and understanding who controls which decision is the first step in any project. The National Medical Products Administration (NMPA) regulates drugs, medical devices and cosmetics, including clinical trials, registration, manufacturing and post-market safety. The National Healthcare Security Administration (NHSA) controls basic medical insurance, reimbursement lists, price negotiations and centralised volume-based procurement. The National Health Commission (NHC) regulates hospitals and medical practice, and also oversees human genetic resources. The National Financial Regulatory Administration (NFRA) supervises commercial health insurers.

The rules are national, but implementation is often local. Provincial authorities register Class II domestic medical devices, run procurement platforms and supervise hospitals; city governments offer incentives to biotech clusters in Shanghai, Suzhou, Beijing, Hangzhou, Guangzhou and Shenzhen; and pilot zones such as Hainan's Boao Lecheng and the Greater Bay Area allow early use of certain drugs and devices approved abroad. A project's location therefore affects its timeline and cost.

Medical devices follow a risk-based model. Class I devices are subject to filing, while Class II and Class III devices need registration; imported Class II and III devices and domestic Class III devices are registered with NMPA, and domestic Class II devices with provincial authorities. An innovative device special review procedure offers priority handling for products with core patents and significant clinical value. Software and artificial intelligence tools used for diagnosis or treatment may themselves be regulated as medical devices, which matters for digital health companies that think of themselves as technology rather than life sciences businesses.

Healthcare services and insurance add further layers. Hospitals and clinics need medical institution licences from health authorities, and internet hospitals must be linked to a physical institution. Commercial health insurers are licensed and supervised by NFRA, and their product design, sales practices and partnerships with healthcare providers or technology platforms are subject to detailed rules. The use of basic medical insurance funds by hospitals and pharmacies is policed by NHSA, which has stepped up inspections and penalties for fraudulent claims.

Key developments in 2025 and 2026

The past two years brought several changes that matter to anyone active in life sciences in China. The most important are summarised below; each is discussed in more detail on the relevant sector page.

Official announcements of the revised Implementing Regulations, the 2025 reimbursement lists and the 2024 opening pilot set out the details. These changes point in a clear direction. China is building a more complete system of incentives for innovation, comparable in structure to those in the United States and Europe, while keeping strong control over prices and spending. Companies that understand both halves of that policy can plan launches, licences and investments with much greater confidence.

Looking ahead to 2027, the points to watch include implementing rules for paediatric and rare disease market exclusivity, the second edition of the commercial health insurance innovative drug list and how insurers fund it, further extension of volume-based procurement to devices and biologics, the publication of the US list of biotechnology companies of concern and its implementing guidance, and any further opening of cell and gene therapy or hospital investment beyond the current pilot locations. Each could change the economics of specific products or deals, so businesses should build review points into their plans.

Our life sciences coverage

We cover the sector through four detailed pages, each written for decision-makers who need a clear view of the rules, the risks and the practical steps.

• Pharmaceuticals: clinical trials and registration, the 30-working-day trial review channel, patent term compensation, patent linkage and data protection, NRDL negotiation and volume-based procurement, the commercial insurance list, anti-bribery compliance and foreign investment in drug manufacturing and cell and gene therapy.
• Biotech licensing and business development: out-licences, co-development, options, NewCo and acquisition structures; technology export, human genetic resources, data and outbound investment filings; diligence and key terms; BIOSECURE and other US measures; tax and disputes.
• Medical devices: device classification, filing and registration, the innovative device special review procedure, clinical evaluation, procurement of high-value consumables, distributor arrangements, software and AI as a medical device, and post-market obligations.
• Healthcare services and health insurance: foreign investment in hospitals and clinics, the wholly foreign-owned hospital pilot, internet hospitals, medical insurance fund supervision, and commercial health insurance products, partnerships and regulation.

Each page explains the Chinese regulatory environment and the cross-border angle, and links to related practice pages on data, IP, compliance, competition and transactions.

Taken together, these pages reflect how decisions about life sciences in China are actually made. A pharmaceutical launch involves registration, exclusivity, pricing and compliance; a licence involves IP, export and data rules; a device business involves classification, procurement and distributor management; and a hospital or insurance venture involves licensing, ownership limits and insurance regulation. Readers can start with the page closest to their project and follow the links to the specialist practice areas that apply.

Cross-cutting issues for life sciences in China

Several issues cut across drugs, devices, services and insurance. They are usually where projects go wrong.

Compliance and anti-corruption. Since 2023 a national campaign against corruption in healthcare has targeted hospital managers, doctors, distributors and manufacturers. Enforcement draws on the Anti-Unfair Competition Law, the Criminal Law, medical insurance fund rules and hospital procurement rules, and foreign companies also face the US Foreign Corrupt Practices Act and the UK Bribery Act. Programmes must cover speaker fees, sponsorships, research grants, distributors and patient programmes. See anti-bribery and corruption.

Human genetic resources and health data. Foreign organisations and the entities they control may not collect or preserve Chinese human genetic resources in China, and international research using them needs approval or filing. Health data is sensitive personal information, and exporting it, or data classified as important, triggers the cross-border data regime. A transfer can be lawful under one regime and blocked under the other. See health and medical data.

Intellectual property. Patent term compensation, patent linkage and the new data protection periods give originators a fuller set of tools, but each has strict deadlines. See pharmaceutical patents and patent linkage.

Competition. SAMR has published antitrust guidelines for active pharmaceutical ingredients and penalised cartels and excessive pricing. Licensing, distribution and patent settlement terms can raise antitrust risk, and acquisitions meeting the 2024 thresholds need clearance before closing. See antitrust and competition.

Pricing and procurement. Centralised volume-based procurement now covers many generic drugs and a growing range of high-value medical consumables, and provincial alliances run their own rounds. Winning bids secure volume at much lower prices; losing bids can mean rapid loss of hospital sales. Strategies for life sciences in China therefore need a pricing plan for every stage of the product life cycle, including how to respond to procurement rounds and whether to compete on price or shift to channels outside the public hospital system.

Promotion and advertising. Prescription drugs may not be advertised to the public, and advertising for over-the-counter drugs, medical devices and health foods requires prior review. Online content, patient education and social media campaigns are frequent sources of enforcement, especially where they blur the line between education and promotion.

Foreign investment and going global

Most of the sector is open to foreign investment. Drug and device manufacturing, distribution and research and development can be wholly foreign-owned. Remaining restrictions include traditional Chinese medicine decoction pieces and confidential formulas, and, outside the 2024 pilots, human stem cell and gene diagnosis and treatment technologies. Medical institutions have historically required joint ventures, though the 2024 pilot permits wholly foreign-owned hospitals, excluding traditional Chinese medicine hospitals and acquisitions of public hospitals, in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, Shenzhen and across Hainan. Investments touching sensitive technology or data may also need foreign investment security review.

Outbound, Chinese companies are licensing assets, forming NewCos, listing in Hong Kong under Chapter 18A and building manufacturing and clinical operations in the United States, Europe, the Middle East and Southeast Asia. That expansion brings exposure to US national security tools, including BIOSECURE, CFIUS and export controls, and to European rules on foreign subsidies, investment screening and data protection. Chinese law, in turn, regulates technology exports, outbound investment and data transfers. Our pages on US-China cross-border issues and HKEX Chapter 18A and 18C listings explain these issues.

Contract research and manufacturing organisations face particular pressure. Many international biotech companies rely on Chinese service providers for discovery chemistry, biologics development and manufacturing because of their speed and cost. BIOSECURE does not ban those relationships, but once designations are made, US government-funded customers may need to move work away from designated providers within transition periods. Service providers are responding by expanding capacity outside China, separating data and operations for different customer groups and offering contractual assurances. Customers should review their supplier base, the transferability of processes and data, and the cost of qualifying alternative sites.

Chinese companies building overseas operations should also plan for local regulation in each target market: clinical trial rules and inspections, good manufacturing practice certification, pricing and reimbursement, data protection and, increasingly, foreign investment screening of acquisitions of local biotech or manufacturing assets.

A typical cross-border life sciences transaction now involves several regimes at once. An acquisition of a Chinese biotech by a multinational, for example, might require SAMR merger clearance, foreign investment information reporting, assessment of any variable interest entity structure, human genetic resources and data compliance for the transferred clinical datasets, employee incentive plan unwinding, and US and European regulatory analysis of the target's supply chain. Mapping these workstreams early, and agreeing who bears the risk of each, is the most effective way to protect timetable and value.

For a foreign company entering or expanding in the market, a practical roadmap for life sciences in China usually looks like this:

1. Confirm the regulatory classification of each product and the approval pathway, including whether overseas data can be used.
2. Choose the market entry vehicle: a wholly foreign-owned subsidiary, a distributor or agent, a licence to a Chinese partner, or a joint venture.
3. Map data, genetic resources and export control issues for research, clinical and commercial activities.
4. Plan exclusivity, pricing and reimbursement strategy before approval.
5. Build a compliance programme suited to Chinese enforcement priorities and home-country anti-bribery laws.
6. Review supply chain exposure to US, EU and Chinese trade and national security measures.

Common mistakes to avoid

• Treating approval as access. In life sciences in China, reimbursement, procurement and hospital listing often matter more than registration for revenue.
• Underestimating price pressure. Volume-based procurement can cut off-patent prices sharply, and NRDL prices become long-term reference points.
• Missing exclusivity deadlines. Patent term compensation, linkage and data protection all have short windows that cannot be restored.
• Ignoring genetic resources rules in trials and licences. These rules apply independently of data protection law.
• Weak third-party controls. Distributors and service providers are the most common source of bribery findings.
• Not planning for geopolitics. Supply and licensing agreements need change-in-law, second-source and termination provisions that reflect US and Chinese measures.
• Overlooking local rules. Provincial procurement, registration and hospital practices can differ materially from national policy, so plans should be tested city by city.

Avoiding these mistakes rarely requires dramatic changes. It usually means involving regulatory, compliance and legal teams earlier, building clear checklists for each transaction type, and revisiting assumptions each year as rules change.

How TRW & Co helps

We work with international pharmaceutical, biotech, device, healthcare and insurance companies, investors and Chinese life sciences businesses going abroad. Our team structures and negotiates licences, collaborations, NewCos, acquisitions, joint ventures and supply agreements under English, Hong Kong, New York and other non-PRC laws; builds international compliance programmes; analyses US, EU and other foreign regulatory and national security exposure; and plans arbitration and dispute strategy. We provide information on how Chinese rules on drugs, devices, pricing, data and genetic resources affect each project, manage cross-border workstreams and coordinate with licensed PRC law firms for PRC legal opinions, regulatory filings and proceedings. To discuss your plans, please contact us.