The China lesson: Markets create innovation

On September 29, the United States imposed a 100% tariff on certain patented pharmaceutical imports. India was among just 20 countries granted an exemption for eligible specialty medicines, while generics remained outside the scope of the measure. The exemption is welcome, but it highlights a deeper reality: access to the world’s largest pharmaceutical market can change with policy decisions made abroad. As India seeks to become a global centre for pharmaceutical innovation, the domestic market will become more important, not less. Export opportunities matter, but innovation ecosystems are ultimately built on reliable demand at home.

China offers a useful lesson. Its rise as a pharmaceutical innovation powerhouse was driven not only by scientific capability or research spending, but by creating a market that rewarded innovation.

What China’s data shows

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Reforms to China’s National Reimbursement Drug List (NRDL) dramatically expanded the effective market for innovative medicines. By negotiating prices and bringing new drugs into national insurance, China did what governments often overlook: it created predictable demand for innovation. By 2025, 634 medicines had been listed, with spending on them crossing Rs 1.4 lakh crore in 2024. Firms accepting lower prices won scale: volumes rose 350%, revenues doubled, and cancer drug revenues rose 500%.

Chinese trial volume rose 86% relative to US trials, with similar results against Europe, concentrated in exposed disease categories and in first-in-class and best-in-class drugs. Noveldrug trials rose from about 500 a year to more than 2,400. Chinese drugs winning first global approval rose from under five before 2016 to over 40 by 2024, and domestic firms drove 88% of the increase.