An NBER working paper by Barwick, Zia, and Zia (2026) provides the answer:
In 2010, China accounted for less than 8% of global clinical trials; By 2020, it had overtaken the US in annual registered clinical trial volume… We provide strong evidence that China’s rise was driven primarily by the National Reimbursement Drug Listing (NRDL) reform, which dramatically expanded the effective market size for innovative drugs. We document a sharp increase in both volume (86% increase) and innovation of drug trials following the reform, with growth concentrated among reform-exposed disease categories, first- or best-in-class drugs, and domestic companies. A decomposition exercise shows that the NRDL reform is responsible for a 43% increase in oncology trial activity, almost doubling the combined contribution of upstream knowledge accumulation and talent flows (24%), while other government policies play a smaller role. Finally, the dynamic benefits from induced innovation are three times greater than the static benefits from improving consumer access to innovative drugs, underscoring the importance of accounting for the long-term effects of reforms on innovation incentives in addition to near-term improvements in drug affordability.
analytical approach
The authors used a variety of data sources:
- Sightline TrialTrove: Census of all clinical trials globally
- Sightline Pharmaprojects: Tracks development milestones such as patenting, out-licensing and regulatory approvals.
- sinohealth pharmaceutical sales: Measures drug sales in China
- OpenAlex Publishing: Tracks global scientific publications
- National Medical Products Administration (NMPA;国家科学白用管理局: Identify the approval of investigational new drugs (IND).
- global burden of disease: measures the prevalence of disease
Using these data, the authors use a difference-in-differences specification at the disease-country-year level to compare the log numbers of US and Chinese launched clinical trials and test whether there was an acceleration of clinical trials following the NRDL reform.
Chinese health care system overview
The Chinese health care system (CHS) provides nearly universal coverage to more than 95% of the population, making it the largest public health insurance program in the world. Established in 1999, it has since evolved into two main schemes: Urban Employees Basic Medical Insurance (UEBMI), which covers formal sector employees and retirees, and Urban and Rural Residents Basic Medical Insurance (URRBMI), which covers the rest of the population including children and the elderly…
In 2022, the system spent more than Y520 billion ($74 billion) on pharmaceuticals…In contrast, the private commercial insurance market remains underdeveloped, accounting for less than 7% of total health spending. As a result, inclusion in the National Reimbursement Drug List (NRDL) is the primary gateway to the Chinese pharmaceutical market.
What is NRDL?
…The National Health Care Security Administration (NHSA) initiated a historic reform in 2016, integrating innovative treatments into the national insurance list through centralized price negotiations. This ongoing reform represents a fundamental shift from a rigid, budget-capped formulary to a dynamic, value-based reimbursement model. The negotiation process follows an annual cycle. Each spring, the NHSA defines an “eligible list” of drugs, targeting innovative drugs (those receiving market approval within the last five years) that address significant unmet clinical needs. Companies with eligible drugs and the NHSA exchange information on cost and medical effectiveness during the pre-negotiation phase, which can last months. On the day of negotiations, government representatives negotiate together and independently with representatives of each pharmaceutical company. Successful negotiations result in inclusion in the NRDL, which typically involves a 50–60% reduction in the average price. If negotiations fail, the drug remains on the private market in much smaller quantities. The reform has had a huge impact on the drug market and has successfully included 699 drugs in the NRDL by 2024, and achieved spending on innovative drugs has reached Y460 billion ($67 billion) between 2016 and 2024 (Table 1), dwarfing the Y66 billion ($10 billion) innovative drug market in 2015.
The authors outline some key features of NRDL. First, NRDL has strongly supported coverage of innovative drugs. The authors wrote that >80% of the interacted drugs qualified as “new molecule entities approved within the last five years.” First or best class medicines are given utmost priority. Second, the NRDL reform is larger in magnitude with >Y100 billion ($14.5 billion) for drugs negotiated in 2024. This had a surprisingly large impact on incentives for life sciences R&D investment, especially in China. Third, NRDL focuses on “price-per-volume” negotiations. Why is this a useful strategy? Higher prices are required to encourage R&D (dynamic efficiency), but lower prices maximize consumer surplus, provided the drug is approved (static efficiency). “By leveraging its buyer power to guarantee quantities in exchange for price concessions, the state aims to find a ‘sweet spot’ that expands access while preserving or enhancing the net present value (NPV) of innovative drug projects.”
You can read the full paper here.
