Latest data released for the 9 major sub-industries of the pharmaceutical industry—which one is the hardest hit?

Editor’s Note: This article comes from Natural Medicine Theory. Author: Dr. Zhang Ziran. Reprinted with authorization by Cailan. Edited by Xiaolin.

Recently, the China Association for the Administration of Traditional Chinese Medicine and Pharmaceutical Enterprises (CAEPM) released the 2025 operating performance of China’s pharmaceutical and healthcare industry economy—among all pharmaceutical manufacturing enterprises above a designated size nationwide, operating revenue reached 29562.5 billion yuan, down 0.6% year over year; profits totaled 4080 billion yuan, up 1.4%.

The pharmaceutical industry is divided into 9 sub-sectors: chemical APIs, chemical formulations, traditional Chinese patent medicines, pieces of traditional Chinese medicine for decoction, biological products, pharmaceutical excipients/packaging materials, pharmaceutical-specialized equipment, health materials and pharmaceutical products, and medical instruments/equipment and devices.

Below is a ranking analysis of the 2025 revenue and profit growth rates of these 9 sub-sectors, along with a forecast for 2026.

01

Revenue: 4 growth, 5 decline

In 2025, nationwide pharmaceutical industry revenue fell overall by 0.6%. Of the nine sub-sectors, four grew and five declined.

I. 4 growth sectors: biological products have the second-highest growth rate

The largest revenue increases came from pharmaceutical excipients and packaging materials, and biological products, rising 7.7% and 7.5%, respectively. Medical instruments and equipment, and health materials and pharmaceutical products rose 3.4% and 0.2%, respectively.

II. 5 declining sectors: pieces of traditional Chinese medicine for decoction and traditional Chinese patent medicines have the largest declines

Both chemical and traditional Chinese sectors declined, whether for formulations or APIs.

The largest declines were in pieces of traditional Chinese medicine for decoction and traditional Chinese patent medicines, down 6.3% and 6.0%, respectively. Chemical formulations and chemical APIs fell 2.1% and 0.6%, respectively.

Pharmaceutical-specialized equipment declined 4.9%.

02

Profit: 2 growth, 7 decline

In 2025, nationwide pharmaceutical industry profits rose overall by 1.4%. Other than biological products and pharmaceutical-specialized equipment, all of the remaining seven sub-sectors declined.

I. 2 growth sectors: biological products grow the fastest

The growth rates of biological products and pharmaceutical-specialized equipment reached as high as 37.9% and 27.4%, respectively.

The growth of these two sub-sectors not only offset the declines of the seven sub-sectors entirely, but also drove overall pharmaceutical industry profit growth of 1.4%.

II. 7 declining sectors: traditional Chinese medicine and chemical APIs/formulations both fall

The largest profit decline was in pharmaceutical excipients and packaging materials, with the drop reaching 25.1%.

For chemical and traditional Chinese sectors—regardless of whether they are formulations or APIs—their profits all declined. Chemical APIs and chemical formulations fell 4.5% and 0.1%, respectively; pieces of traditional Chinese medicine for decoction and traditional Chinese patent medicines fell 3.7% and 2.9%, respectively.

03

Sub-sector differentiation is obvious

I. 4 sub-sectors with both revenue and profit down: traditional Chinese medicine and chemical sectors both down

In both chemical and traditional Chinese sectors, whether formulations or APIs, both revenue and profit declined. Specifically, revenue for pieces of traditional Chinese medicine for decoction, traditional Chinese patent medicines, chemical formulations, and chemical APIs fell 6.3%, 6.0%, 2.1%, and 0.6%, respectively; profits fell 3.7%, 2.9%, 0.1%, and 4.5%, respectively.

According to official data, the first 10 batches of National Centralized Procurement (NCCP) collectively saved about 4400 billion yuan of medical insurance funds. The implementation of the 10th batch of drug NCCP and the 5th batch of high-value medical consumable NCCP in 2025 caused more products to be included in the price-reduction list.

“Provincial consensus” price governance, anchored by selected winning prices in centralized procurement—even the lowest national grid prices—was also launched in 2025. As disclosed in the 《2025 Medical Security Development Statistical Quick Bulletin》 (hereinafter referred to as the 《Medical Security Quick Bulletin》) released by the National Healthcare Security Administration, in 2025, six batches of drug price risk disposals and six batches of consumables price risk disposals were advanced on a rolling basis. This included interviewing 487 instances of drug enterprises and 104 instances of consumables enterprises.

In 2026, price-governance work will expand from point coverage (by province) to full coverage (nationwide), and will be rolled out comprehensively in a standardized and procedural manner. At the beginning of 2026, the National Healthcare Security Administration’s Price & Procurement Center issued the 《Notice on Implementing Price Risk Warning Labels for Drugs Listed on National Procurement Platforms》 (Medical Price and Procurement Letter〔2026〕No. 2), which made specific arrangements for this.

The 12th batch of NCCP is already a set agenda item. On March 20, the National Healthcare Security Administration’s official website published 《Drugs with Many Companies Passing Consistency Evaluation and Not Yet Included in National Centralized Procurement》. This further serves to endorse it.

As the Fourth batch of centralized procurement for traditional Chinese patent medicines draws closer, on March 30, the Hubei medical insurance service platform issued a notice soliciting public comments on 《Draft National Alliance Centralized Procurement Documents for Traditional Chinese Patent Medicines》 and 《Draft National Alliance Centralized Procurement Documents for Traditional Chinese Patent Medicines (Second Batch Continuation)》. On March 31, the Hubei provincial medical insurance bureau would also hold a special 《Communication Meeting for Traditional Chinese Patent Medicine Alliance Procurement Enterprises》 for this purpose.

In 2026, another centralized procurement for pieces of traditional Chinese medicine for decoction will also be carried out. On November 3, 2025, the Shandong provincial medical insurance bureau had already released 《Draft Main Rules for the Second Batch of National Alliance Centralized Procurement of Pieces of Traditional Chinese Medicine for Decoction and the List of Proposed Products》. One of the eight key tasks for 2026 proposed at the National Medical Security Work Conference held on December 13, 2025 is “continue advancing nationwide alliance procurement of traditional Chinese patent medicines and pieces of traditional Chinese medicine for decoction.”

In 2026, centralized procurement and price-governance pressure facing chemical APIs/formulations and traditional Chinese medicine will not be eased.

II. 3 sub-sectors: more revenue but not more profit

Three sub-sectors—including pharmaceutical excipients/packaging materials, medical instruments and equipment and devices, and health materials and pharmaceutical products—saw increased revenue but decreased profit. Their revenues rose 7.7%, 3.4%, and 0.2%, respectively, while profits fell 25.1%, 3.9%, and 6.2%, respectively.

First, the pressure from centralized procurement of medical consumables is no less than that for drugs. Second, centralized procurement price cuts have already passed through to the upstream and downstream of formulations. Upstream and downstream industrial chains have both shown a “volume-for-price” trend, but the increase in quantity is still difficult to offset the drop in price in the short term.

III. 1 sub-sector: more profit but not more revenue

Pharmaceutical-specialized equipment is the only sub-sector with profit growth but no revenue growth. In 2025, although its revenue fell 4.9%, its profit surged 27.4%.

IV. The only “both up” sector: biological products

Biological products are the only sub-sector achieving both revenue growth and profit growth, rising 37.9% and 7.5%, respectively.

The full-chain support for the innovation policy has been gradually implemented. As disclosed in the 《Medical Security Quick Bulletin》, “from 2018 to 2025, total sales revenue under medical insurance negotiation newly added drugs during their agreement periods exceeded 7000 billion yuan, of which medical insurance fund expenditures exceeded 4800 billion yuan.”

04

Outlook for 2026

I. Centralized procurement (NCCP)

After the completion of the 10th batch of NCCP, calls to and advocacy of “anti-overlap/anti-wasting efforts” have been ongoing. Multiple high-level documents also emphasized continuously optimizing and improving centralized procurement rules, and abandoning the notion that taking only the lowest price is the way forward, which has become a prevailing trend. The continuity rules for the 1st to 8th batches shifting from “bidding” to “requesting quotes” is a sign of warming.

II. Medical insurance

1. Activating existing stock

The individual-account mutual support model has expanded from close relatives to more distant relatives, and from within provinces to outside provinces. A fund pool totaling as much as 1.5 trillion yuan—accounting for over one quarter of the accumulated medical insurance fund balances—has been continuously brought back into use.

The medical insurance pooling regions have been reduced from nearly 400 to 31 provinces (provincial-level pooling), increasing pooling levels, and also substantially improving the efficiency of medical insurance fund use.

An improvement in medical insurance fund mutual-support efficiency not only expands the range of where people can seek care, but also expands the scale of medication use.

2. Expanding incremental capacity

The commercial insurance innovation drug catalog introduced in 2025 opened a new payment channel for innovation drugs. The 《Outline of the “15th Five-Year” Plan》 requires “encouraging commercial insurance to expand the payment coverage of innovation drugs.” In 2025, premium income for commercial health insurance reached 9973 billion yuan, accounting for 28% of total basic medical insurance fund income in the same period. Once commercial insurance is slightly opened, it will trigger massive drug sales.

III. Traditional Chinese patent medicines

Eight departments including the Ministry of Industry and Information Technology issued the 《Implementation Plan for High-Quality Development of TCM (Traditional Chinese Medicine) Patent Medicines Industry (2026—2030)》 (MIIT-Lian-Xiao-〔2026〕No. 33) (hereinafter referred to as the 《MIIT-33 Document》). It proposes increasing efforts to protect intellectual property related to time-honored brands’ trademarks, brands, and traditional craftsmanship. It aims to cultivate a batch of new large single products of TCM patent medicines and orderly build a lineup of renowned TCM patent medicine brands.

Sales scale is the first intuitive indicator of a brand. It is believed that the dynamic balance between price reductions and building large product lines will be well managed.

IV. Pieces of traditional Chinese medicine for decoction

The 《MIIT-33 Document》 requires that “by strengthening the application of authentic medicinal materials and supporting enterprises to apply for geographical indication protection product certification,” efforts should be made to “build advantageous single products of pieces of traditional Chinese medicine for decoction.” The document also mentioned centralized procurement, requiring “to follow the trend of centralized, volume-based procurement, build a unified and standardized market for pieces of traditional Chinese medicine for decoction, and promote the formation of a market pattern with good quality, fair prices, and reliable supply.”

In 2025, the General Office of the State Council issued the 《Opinions on Comprehensively Deepening the Regulatory Reform of Drugs and Medical Devices to Promote High-Quality Development of the Pharmaceutical and Medical Industry》. It states that “pieces of traditional Chinese medicine for decoction manufactured in accordance with provincial-level processing specifications may, as required, be sold across provinces; traditional Chinese medicine formula granules produced according to national drug standards may be sold directly across provinces.”

In June 2025, the National Administration of Traditional Chinese Medicine issued the 《Notice on Printing and Distributing the Performance Monitoring Operating Manual for National-Level Tertiary Public TCM Hospitals (2025 Edition)》, which, in the evaluation indicators for tertiary TCM hospitals, removed pieces of traditional Chinese medicine for decoction and traditional Chinese medicine formula granules.

All of these are beneficial to the development of the pieces of traditional Chinese medicine for decoction industry.

V. Innovative drugs

The 《Outline of the “15th Five-Year” Plan》 has designated biopharmaceuticals as a “strategic emerging pillar industry,” and biomanufacturing as “a new growth point for the economy,” requiring “adopting extraordinary measures to push forward across the entire value chain.”

In 2025, the total amount of outbound licensing and authorization transactions for China’s innovative drugs reached as high as $1355.67 billion, accounting for nearly half of the globe (49%).

On March 28, the National Medical Products Administration stated that as of 2026 to date, China’s innovative drugs’ total outbound licensing and authorization transaction amount had exceeded $600 billion. With one quarter of the year remaining, that period already created performance close to half of 2025 full-year results.

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