How Can Biopharmaceutics Break Through and Transform During Its Critical Transition Period as an Emerging Pillar Industry?

How can AI industry adjustments highlight the importance of clinical value?

21st Century Business Herald Reporter Yan Shuo

The 2026 National Two Sessions have set a new development benchmark for China’s biopharmaceutical industry.

This year’s government work report for the first time included biopharmaceuticals in the category of emerging pillar industries, alongside integrated circuits, aerospace, and low-altitude economy sectors. The industry’s strategic position has risen from “cultivating emerging industries” to “economic pillar.”

Several securities analysts believe that the government work report’s positioning of biopharmaceuticals as a pillar industry signals a clear policy direction from the state to accelerate industry upgrades. Meanwhile, “innovative drugs” have been included in the government work report for three consecutive years, reinforcing the policy focus on industry innovation and development.

Since the beginning of 2026, the industry performance shows that biopharmaceuticals have not continued the previous capital-driven rapid expansion but have entered a phase of deep adjustment and structural restructuring. Market fluctuations, slowed financing, and more cautious project exits have led to perceptions of a “cooling industry.”

An industry insider told the 21st Century Business Herald that, from an industry perspective, this adjustment is not a decline in innovation value but a necessary shift from capital-driven quantity expansion to quality improvement focused on clinical value. Over the past few years, under capital support, a large number of homogeneous pipelines and research projects lacking commercialization potential flooded the market. Low-level competition not only consumed resources but also diluted true innovation value. The current market filtering is a key step for industry rationality.

In the long term, with continued policy benefits from the Two Sessions and ongoing industry transformation, China’s biopharmaceutical industry will gradually return to its core of innovation and achieve new breakthroughs on the path of high-quality development.

After years of policy guidance and industry accumulation, China’s innovative drug R&D system has gradually improved, and the industry is entering a critical period of high-quality transformation. However, during rapid development, bottlenecks in R&D, approval, reimbursement, and commercialization remain unresolved, restricting the industry’s advancement to higher levels.

An industry expert stated that currently, China’s innovative drug industry faces several practical issues, including disconnection between R&D and clinical needs, intensified homogeneous competition; difficulties in commercialization due to price constraints from medical insurance negotiations and an underdeveloped commercial insurance payment system; and high R&D costs and cash flow pressures for small and medium-sized enterprises, making full R&D-to-clinical application chains difficult to achieve.

These industry pain points are precisely the focus of the policy priorities at the 2026 National Two Sessions. For the first time, biopharmaceuticals are included as a new pillar industry, with policy support shifting from “universal” to “precise,” focusing on supporting companies and projects with original innovation capabilities, clinical value orientation, and industry collaboration.

Du Xiangyang from Southwest Securities pointed out that China’s R&D strength continues to be recognized. The government work report emphasizes biopharmaceuticals as an economic pillar and promotes further market system opening. In the future, China’s innovative drugs are expected to significantly increase their global market share under this dual resonance.

An industry insider said that the 2026 Two Sessions provide not just simple policy benefits but a comprehensive institutional guarantee addressing industry pain points, clarifying the pathway for innovative drugs from laboratory to clinical application.

During the Two Sessions, many representatives and committee members proposed suggestions related to industry development bottlenecks. NPC deputy Sun Piaoyang suggested strengthening basic research, removing barriers for national negotiations on drugs entering hospitals, and solving issues of insufficient original innovation and low hospital accessibility; NPC deputy Yu Xubo recommended establishing multi-channel payment systems for innovative drugs, noting that in 2024, commercial insurance only covered 7.65% of innovative drug costs, and future improvements would directly boost sales peaks; CPPCC member Ding Lieming called for scientific coordination of insurance negotiations to ensure fair returns for companies and sustainable R&D investments.

Merck China General Manager Mu Ande told the 21st Century Business Herald that China’s policy environment encouraging innovation has never changed. The large patient population and strong demand for precision medicine are core reasons multinational companies have long rooted in China, and they are also key supports for the biopharmaceutical industry to navigate industry adjustments. The ultimate goal of innovation is to create value for patients. Only by truly achieving this can companies stand firm amid policy and market filtering.

“China’s pharmaceutical innovation development is attracting international attention. Currently, about 30% of innovative drugs in global R&D are from China, and related innovations are continuously being implemented worldwide. By 2025, China’s innovative drug licensing transactions are expected to total around $130 billion, with increasing collaboration between domestic and multinational pharmaceutical companies,” Mu Ande said.

Data shows that in the first two months of 2026, China’s external licensing of innovative drugs reached $53.276 billion, close to the total for 2024, with continuous increases in transaction prices, reflecting the growing global value of Chinese innovative drug assets. Moreover, in 2025, China approved 76 innovative drugs, a record high, with over 85% being domestically developed.

Beyond enhancing innovation capabilities, China’s clinical research system has also made significant progress. Sheng Zelin, Chairman and General Manager of Zhaoke Pharmaceutical, told the 21st Century Business Herald that the quality of clinical trials in China has greatly improved, with doctors’ ability to control GCP (Good Clinical Practice) standards increasing, leading to more clinical data recognized by global pharmaceutical companies and the US FDA.

As innovative results accelerate their global implementation and recognition continues to grow, China’s innovative drug industry is also entering a phase of structural adjustment. Since 2026, the biopharmaceutical sector has not sustained the rapid expansion driven by capital enthusiasm.

An industry insider explained that cautious market sentiment is directly related to industry pain points. It is important to emphasize that the current adjustment phase is actually a process of industry shedding falsehoods and returning to development fundamentals. This adjustment does not weaken innovation value but signifies a fundamental shift in industry development logic.

Essentially, the adjustment of the biopharmaceutical sector reflects a market re-recognition of long-term development concepts. Companies that focus solely on R&D pipeline quantity and ignore clinical value, or prioritize short-term capital returns without long-term industry planning, will gradually be phased out; those that focus on clinical needs, uphold industry collaboration, and develop the full value chain will be better equipped to withstand industry cycles and drive industry upgrades.

The 2026 National Two Sessions further clarified the development direction of the biopharmaceutical industry, emphasizing a focus on clinical value, industry collaboration, and policy support, which will promote the transition of innovative drugs from laboratory concepts to clinical applications and from conceptual layouts to value realization.

Several interviewees pointed out that as relevant policies are implemented, the development logic of the biopharmaceutical industry will shift from capital-driven to a model combining policy backing, demand-driven growth, and value realization. Innovative results that meet clinical needs and have strong commercialization potential will become the key beneficiaries of policy support.