1. Overview
On 28 August 2026, the Standing Committee of the National People's Congress of the People’s Republic of China (“PRC”) adopted the Healthcare Security Law of the PRC ("Healthcare Security Law"), which will take effect on 1 January 2027.
The new Healthcare Security Law is China’s first dedicated national legislation governing its healthcare security system and establishes a unified legal framework for medical insurance, healthcare services, healthcare security funds, supervision and enforcement, in addition to the existing PRC Social Insurance Law. With China's healthcare security system covering approximately 1.33 billion people and widely regarded as the world's largest public healthcare coverage network, the Healthcare Security Law is designed as a fundamental legal framework that seeks to balance universal healthcare access, financial sustainability, healthcare quality and regulatory compliance.
2. Key Developments for the Life Sciences and Healthcare Industry
(1) Multi-tiered Healthcare Security System
Article 8 of the Healthcare Security Law provides that the State shall establish and improve a multi-tiered healthcare security system covering the entire population, with basic medical insurance as its mainstay. Article 18 of the Healthcare Security Law provides that the State shall encourage the development of commercial health insurance, healthcare-related charitable donations, medical mutual aid and other forms of healthcare security, so as to meet diversified healthcare security needs.
The new law formally recognizes a multi-tiered healthcare security system. The law expressly recognizes a broader healthcare protection architecture consisting of employee medical insurance, commercial health insurance and other levels of supplementary medical security, in order to satisfy the different needs in healthcare. By codifying this layered framework, the legislation provides greater certainty for both public and private participants in the healthcare sector and confirms the Chinese government's continued commitment to diversified healthcare financing.
(2) Basic Medical Insurance Catalogues
Article 13 of the Healthcare Security Law provides that medical expenses incurred by persons insured under basic medical insurance for drugs, medical consumables, medical service items and other items included in the relevant basic medical insurance catalogues, as well as other expenses prescribed by law or determined by the State Council, shall be paid from the basic medical insurance fund in accordance with relevant provisions.
Currently, except for drugs, for which a unified national catalogue exists, the formulation of catalogues for diagnosis and treatment, consumables, medical service facilities vary by locality. Article 13 confirms the three principal catalogues as those for drugs, medical consumables and medical service items covered by basic medical insurance, as well as other expenses. The Basic Medical and Health Promotion Law (2019) already contained analogous provisions, and the Healthcare Security Law now aligns medical and insurance frameworks on this point. Notably, China has not established a separate medical device catalogue under the medical insurance system, with only certain medical devices included within the medical consumables catalogue.
The catalogues serve both as a key market-access objective for relevant products and companies, and as an important benchmark for determining the lawfulness of reimbursement in medical insurance fraud cases. Companies should therefore pay particular attention to the restriction conditions specified in the catalogues.
(3) Commercial Insurance Innovative Drug Catalogue
On 5 December 2025 the National Healthcare Security Administration established a Commercial Insurance Innovative Drug Catalogue for the first time, together with the 2025 version State Basic Medical Insurance, Maternity Insurance and Work-Related Injury Insurance Drug Catalogue effective as of 1 January 2026. The Commercial Insurance Innovative Drug Catalogue serves as a supplement to the medical insurance catalogue, which corresponds to the principle under the Healthcare Security Law.
Drugs listed in the Commercial Insurance Innovative Drug Catalogue are not covered by the medical insurance fund and are not included in the basic medical insurance out-of-pocket rate indicators for designated medical institutions or in the scope of monitoring for alternative products selected through centralized procurement. Cases involving the use of innovative drugs from the Commercial Insurance Innovative Drug Catalogue that fall within the coverage scope of relevant commercial health insurance policies may be excluded from the medical insurance diagnosis-related group (DRG) payment system and reimbursed following a review and evaluation process.
(4) Centralized Procurement and Payment Reform
According to Article 26 of the Healthcare Security Law, the State shall establish and improve a centralized procurement system (or so-called volume-based procurement ("VBP")) for drugs and medical consumables. The State shall improve the payment mechanism for the basic medical insurance fund, implement diversified and composite medical insurance payment methods tailored to the characteristics of different medical services, and implement and improve payment methods suited to the characteristics of traditional Chinese medicine services.
The new law confirms the centralized procurement system for drugs and medical consumables as a statutory mechanism, and requires diversified, composite payment methods tailored to service characteristics, including payment methods suited to traditional Chinese medicine.
According to a State Council Information Office press conference held on 4 September 2026 on promoting high-quality development of medical insurance and better serving Chinese-style modernization, since 2018 the National Healthcare Security Administration, together with relevant departments, has advanced centralized VBP of drugs and medical consumables. Until then, 12 rounds of nationally organized drug procurement have been conducted, covering 555 drugs; 6 rounds of nationally organized procurement of high-value medical consumables have been conducted, covering 142 types of consumables across nine major categories. Provincial-level procurement has also been widely carried out, which has helped the public access to healthcare products.
By elevating centralized procurement to the legislative level, the new law provides greater legal certainty regarding the continuation and expansion of these programs.
(5) Fund Safety, Fraud and Enforcement
Administrative penalties for healthcare insurance fraud are substantially strengthened. Under Article 49, where healthcare security fund expenditures are obtained by fraud, falsification of supporting materials or other means, the administrative department of healthcare security shall order relevant parties to return the amount fraudulently obtained and impose a fine of not less than two times but not more than five times such amount.
In addition: (i) where the offending entity is a healthcare security administrative agency, its responsible leaders and directly responsible personnel shall also be subject to disciplinary sanctions in accordance with the law; (ii) where the offending entity is a designated medical and pharmaceutical institution, it shall also be ordered to suspend, for a period of not less than six months and not more than one year, the medical and pharmaceutical services provided by the responsible department or personnel that involve the use of healthcare security funds, up to termination by the healthcare security administrative agency of the healthcare security service agreement; and (iii) where the offending entity is an insured person, management and restrictive measures shall also be imposed, including suspension of networked settlement of that person's medical expenses for a period of three to twelve months and restriction of the range of designated medical and pharmaceutical institutions from which the person may obtain services. If a responsible person committing the violation is a physician, such person shall also be penalized under the Physicians Law of the PRC.
Hence, entities and individuals that obtain healthcare security funds through fraud, falsified documentation or other deceptive means may be ordered to repay the amounts improperly obtained and may face fines ranging from two to five times the amount involved. Additional sanctions may include suspension of healthcare services, termination of participation agreements, and restrictions on medical reimbursement privileges.
Under the new law, fraud is not limited to any particular type of offending entity. In practice, there have been cases in which employees of pharmaceutical companies also participated in medical insurance fraud. Due to more stringent regulatory requirements, this also becomes a key issue to be checked by health authorities. Whether such pharmaceutical companies — which are not designated medical and pharmaceutical institutions — may constitute offending entities for the purposes of medical insurance fraud has long been a topic of industry concern. Currently, neither the Social Insurance Law of PRC nor the Healthcare Security Law restricts the type of offending entity. The structure under Healthcare Security Law does not preclude the possibility of administrative liability for pharmaceutical companies. Besides, criminal liabilities may also be pursued in serious cases. Relevant companies should accordingly pay particular attention to the risk of medical insurance fraud.
The Healthcare Security Law serves as the underlying principle to define the Chinese healthcare policies in terms of centralized VBP, insurance catalogue, which shows the long-term strategy of the Chinese government regarding the overall policy of healthcare insurance. This also shows that the reform related to centralized VBP and insurance will continue to develop in China, which will have longstanding effect on pharmaceutical and medical devices companies.
