Beyond Price Cuts: VBP as a Driver for Innovation and Global Reach in Chinese Medtech

September 17, 2025

China’s Volume-Based Procurement (VBP) or centralized procurement policy started its pilot launch in 2018. Since then, it has profoundly reshaped the medical devices industry landscape in the country. VBP of medical devices has achieved remarkable results nationwide, particularly in saving procurement funds, increasing the share of domestic products, and optimizing the market structure. For example, as a pilot province, Anhui saved a cumulative total of over 450 million RMB through VBP between 2020 and 2021, with price reductions for individual devices generally ranging from 30% to 50%.

VBP of high-value medical consumables has gradually expanded from its initial focus on cardiac stents and orthopedic consumables to multiple fields. In 2023, the emphasis was placed on key areas in cardiovascular, orthopedic, general surgical and neurosurgical consumables, and in vitro diagnostics (IVD). By 2024–2025, the scope of VBP is expected to further extend to high-end consumables including neurointerventional, peripheral interventional and electrophysiological devices, and orthokeratology lenses.

As the concluding year of the 14th Five-Year Plan in 2025, VBP is transitioning from “expanding coverage and reducing prices” to “stabilizing prices and improving quality,” demonstrating a more complex and diversified development trend.

The Double-Edged Sword of VBP

VBP’s core principle is simple: in exchange for securing a large, committed volume of sales through a centralized tender, manufacturers agree to significant price reductions. The results have been dramatic. For commoditized products like coronary stents and joint implants, prices have dropped by over 80%. Nationwide, the centralized procurement has generated substantial savings in medical insurance funds. These surplus funds have created conditions for expanding medical insurance coverage and including more innovative medical services. The strategic purchasing of medical insurance funds is achieving the dual functions of “total amount control and structural adjustment,” paving the way for more new medical consumables, diagnostic and treatment services to enter clinical application.

However, such massive price pressure has squeezed profit margins and made it unsustainable for many international and domestic companies to rely solely on their legacy product lines. While mutilnationals are implementing an “in-China-for-China” strategy, domestic manufacturers are investing heavily on R&D to strengthen their innovative competitiveness to bypass VBP. Under multiple innovation-promoting policies, e.g., the National Medical Products Administration (NMPA)’s fast-track approval channels for innovative devices, giving priority to novel products that address critical clinical needs, the VBP pressure has become a powerful catalyst for innovation.

While VBP has forced companies to rethink their strategies, including cost optimization, innovation enhancement and portfolio expansion, it has also inadvertently accelerated the market coverage of high-end medical devices by Chinese firms and pushed them to seek new revenue streams abroad. This combination of intense price competition for legacy products and policy support for innovative devices has effectively forced Chinese Medtech companies to shift their focus from imitation to innovation. They can no longer compete on price alone; they must now differentiate themselves with new, high-tech products.

A New Generation of Medtech Powerhouses

This strategic pivot is driving a new wave of innovation in the Chinese Medtech landscape. Companies are pouring resources into R&D for sophisticated devices, such as surgical robots, advanced imaging systems, and cutting-edge orthopedic implants as well as innovative minimally invasive solutions. These are the “high-end” devices that were once almost exclusively dominated by multinational corporations in China.

With VBP making it more difficult for foreign players to maintain their previous profit margins on a national scale, domestic manufacturers are seizing the opportunity. They are leveraging their newfound expertise to increase their market share in the high-end segments. This is a crucial step for China’s healthcare system, as it fosters self-reliance and reduces dependence on imported technology. Medtech in China is rapidly developing and is becoming a global force to watch due to a unique combination of market dynamics, government policy, and technological prowess.

• A Vast Patient Base and Domestic Market Needs

China has nearly the world’s largest population with 1.41 billion people, with an ever-growing middle class and a rapidly aging demographic. This creates an immense and growing demand for a wide range of medical devices, from basic consumables to complex, high-end equipment. This large patient base provides a natural testing ground for new technologies and allows Chinese companies to scale their production quickly. The sheer size of the domestic market provides a robust foundation for companies to grow and innovate before expanding internationally.

• Strong Government Support

The Chinese government plays a crucial role in the development of the Medtech sector. Initiatives like “Made in China 2025” have identified Medtech as a strategic industry for domestic self-sufficiency. Policies like VBP, while pressuring margins on commodity products, have also encouraged companies to focus on innovation to create new, high-value products that are exempt from the steepest price cuts as previously noted.

• Engineering and AI Expertise

China possesses a large and highly skilled workforce of engineers. This talent pool, combined with the country’s leadership in artificial intelligence (AI), is a major driver of Medtech innovation. AI is being applied to various aspects of healthcare, including medical imaging, surgical robotics and digital health, just to name a few. AI is also a key promoting factor for automated production, e.g., the so called “Light-out factory” primarily applied in sectors such as automotive manufacturing and precision engineering. These factories achieve full-process unmanned operation through technologies such as industrial internet, AI, and robotics, significantly enhancing efficiency while reducing costs. In China’s medical device manufacturing sector, “lights-out factories” have achieved high-precision and sterile production through fully automated processes (such as Mindray’s unmanned logistics dispatch system) and AI-powered quality inspection (e.g., Bloomage Biotech’s image recognition for detecting foreign particles in hyaluronic acid products). Furthermore, Tianyi Medical’s intelligent sterilization storage system and Hengrui Medical’s AI-driven injection pen production line (with a 98.7% yield rate) have significantly enhanced efficiency and safety.

• Efficient Supply Chain and Fierce Competition

China’s established manufacturing base and efficient supply chain are a significant competitive advantage, which is unique and hardly to find elsewhere. This ecosystem allows companies to produce high-quality medical devices at a lower cost and with greater speed to market than many international competitors. Furthermore, the fierce domestic competition, particularly as a result of policies like VBP, pushes companies to constantly innovate and improve their products to stay ahead, creating a dynamic environment that breeds new, high-quality products.

• Clinical Expertise and Collaboration

Chinese surgeons and clinicians are a critical part of this ecosystem. They have a vast amount of clinical experience, given the large patient population. Their feedback provides domestic manufacturers with invaluable data and insights that can be used to refine and improve devices. This close collaboration between engineers and clinical professionals helps to ensure that new devices are not only technologically advanced but also practical and effective in a real-world clinical setting.

The Push Towards International Markets

The pressure from VBP is not just pushing Chinese companies to innovate; it’s also pushing them to look beyond their borders. With the domestic market for legacy products becoming less profitable, a growing number of Chinese manufacturers are actively pursuing international expansion to diversify their revenue streams.

This is where the rapid development of domestic innovation plays a critical role. The high-end devices being developed in China are no longer low-cost imitations. They are becoming technologically competitive and often more cost-effective than their Western counterparts. This positions Chinese companies to enter and compete in new markets, particularly in emerging economies where there is a strong demand for advanced yet affordable medical solutions. China’s leading Medtech companies, such as Mindray, United Imaging, MicroPort, Lepu Medical, Venus Medtech and SonoScape etc., have already shown their competitive strength in overseas markets. More and more small and medium-sized enterprise (SMEs) and startups from China are following the path of these large companies to seek local collaboration opportunities to gain valuable clinical expertise and sales channels outside China.  

In conclusion, VBP is not merely a cost-cutting measure. For China’s Medtech industry, it is a forced evolution. The policy has created immense pressure, but this pressure has forged a new generation of innovative companies. These companies are not only accelerating their market penetration of high-end devices within China but are also ready to take on the world.