Healthcare Industry Outlook: From Scale Expansion to Value Reconfiguration

Healthcare Industry Outlook: From Scale Expansion to Value Reconfiguration

As of 2026, China's healthcare industry stands at a historic inflection point. The sector's scale has exceeded RMB 10 trillion, the policy framework has undergone systemic restructuring, and technological revolutions are moving from laboratories to clinical practice—three powerful forces converging to steer the industry away from past crude expansion toward a new phase of high‑quality development driven by innovation and value.

I. Top‑Level Policy Design: Anchoring Healthy China 2030

In July 2026, the State Council formally issued the 15th Five‑Year Plan for National Health, setting the goal of building a Healthy China by 2035 and specifying that by 2030, average life expectancy will reach 80 years, with major health indicators entering the ranks of high‑income countries. This document serves as the guiding blueprint for the industry's future.

For the first time, the Plan explicitly calls for "full‑chain support for the development and application of innovative drugs and medical devices," mentioning innovative drugs seven times—more than in any previous five‑year plan. It also designates key technological fronts, including cell and gene therapy, novel antibodies, new vaccines, nucleic acid drugs, and radiopharmaceuticals. More notably, the 2026 Government Work Report for the first time positions biomedicine as an "emerging pillar industry," signaling a significant upgrade in the strategic weight of the healthcare sector within national development.

On the reimbursement side, in 2026 the medical insurance fund focuses on three directions: improving management efficiency, developing a multi‑tiered insurance system, and supporting innovation. The National Healthcare Security Administration included 12 AI‑assisted diagnostic items in the national unified Class B medical insurance catalogue, making China the first country in the world to incorporate large‑scale AI diagnostics into its national insurance system. The unblocking of the "last mile" of insurance payment is transforming AI healthcare from a "pilot project" into a "routine configuration."

II. Market Size: Rational Expansion on a RMB 10‑Trillion Track

In terms of market size, China's healthcare industry has already built substantial scale. In 2025, the sector surpassed RMB 10 trillion, and it is expected to reach RMB 10.66 trillion in 2026, growing 6.3% year‑on‑year. Within this total, the pharmaceutical industry is estimated at about RMB 2.64 trillion, the biopharmaceutical market at approximately RMB 2.31 trillion, and the medical device market at about RMB 1.02 trillion.

However, the growth logic behind these numbers is fundamentally shifting. Deloitte's 2026 industry survey shows that high‑growth expectations have moderated compared with last year, and the sector is moving from explosive expansion to a more rational growth phase. Over 60% of surveyed companies believe their 2025 performance was better than in 2024, but only 27% achieved results exceeding internal expectations. This means competition in healthcare is shifting from "making the cake bigger" to "dividing the cake better"—from scale‑chasing to quality‑driven development.

III. AI Healthcare: From Assistant Tool to Industry Operating System

2026 is widely seen as the "year of certainty" for AI healthcare commercialization. Changjiang Securities projects that domestic AI healthcare industry scale will exceed RMB 40 billion in 2026 and could surpass RMB 200 billion by 2030. As of the end of June 2026, more than 170 drug pipelines designed or optimized by AI had entered clinical stages globally.

AI is evolving from a point‑solution assistant into a "basic operating system" for the entire industry. The 15th Five‑Year Plan for the first time proposes "advancing the digital and intelligent development of universal health," signaling that digital technologies have risen from partial applications to a core driver of industry‑wide transformation. IDC predicts that the healthcare sector is entering a new phase of "agentic healthcare"—where intelligent healthcare will no longer be a collection of tools attached to existing systems but the core architecture redefining service delivery models.

On the clinical front, 49% of global healthcare professionals are already using AI in their work; 80% of respondents expect that AI will not replace clinical staff in the next five to ten years, but will become an important assistant in clinical decision‑making and bedside care. AI's role is becoming increasingly clear: not a replacement, but an enabler.

IV. Innovative Drugs: From Follower to Leader

China's innovative drug industry is undergoing a qualitative shift from "follow‑on innovation" to "source innovation." In 2025, a record 76 innovative drugs were approved nationwide, with domestic products accounting for over 80%; among them, 11 were first‑in‑class drugs, four of which were independently developed in China. China's pipeline of new drugs accounts for about 30% of the global total, ranking second worldwide.

The 2026 figures are even more encouraging: in the first half of the year, the National Medical Products Administration approved 38 innovative drugs, of which 31 were domestically developed; out‑licensing deals for domestic innovative drugs reached 81 transactions, with a disclosed total value of approximately USD 110 billion—and among the top ten global licensing deal values, Chinese companies took eight spots. The longstanding pattern of "first in the West, then in China" for new drug launches is being fundamentally rewritten.

On the technology frontier, ADC drugs have moved from technical validation into commercial scale‑up. Global ADC product sales reached USD 16.5 billion in 2025, maintaining over 20% growth for the fifth consecutive year. In cutting‑edge areas such as cell and gene therapy and in‑vivo gene editing, policy support and industrial breakthroughs are accelerating in tandem.

V. Medical Devices: Domestic Substitution Enters a Critical Phase

The medical device industry is in a key development stage characterized by "domestic substitution breakthroughs, accelerated technological iteration, and deepened global expansion." Domestic devices continue to increase their market share in core segments, with high‑end equipment and innovative consumables gradually breaking the monopoly of imports. Industry experts predict that within the next three to five years, the market share of domestic medical devices is likely to exceed 50%.

During the 15th Five‑Year Plan period, China's medical device industry is expected to transition from scale expansion to structural optimization, with the overall market size potentially ranking among the top globally. Future competition will shift from single‑product breakthroughs to systemic capability competition. Companies with strengths in technological innovation, clinical evidence, regulatory access, supply chain quality, and commercial execution will build long‑term competitive advantages.

VI. Aging Population: The Most Certain Demand Driver

By the end of 2025, China's population aged 60 and above reached 323 million, accounting for 23% of the total—marking the entry into a moderately aging society. It is estimated that during the 15th Five‑Year Plan period, the elderly population will increase by an average of 14 million annually, reaching 390 million by 2030.

The healthcare demand driven by aging is multi‑dimensional: chronic disease management, functional maintenance, rehabilitation care, and disability prevention all continue to grow. The elderly generally face co‑morbidities, high prevalence of chronic conditions, and declining functions, creating an increasingly urgent need for integrated health services covering medical care, medication, rehabilitation, and nursing.

The silver economy has thus become the most certain trillion‑yuan track. China's silver economy market size is expected to reach RMB 9.8 trillion in 2026, with smart elderly care, rehabilitation aids, and health management showing both high growth potential and strong resilience.

VII. Challenges and Outlook

Of course, the outlook for the healthcare industry is not without obstacles. The sector faces multiple challenges: continued pressure on medical insurance cost control, with DRG/DIP payment reforms pushing hospitals from scale‑based expansion to refined management; centralized procurement (volume‑based purchasing) squeezing profit margins for traditional generics and low‑end devices; and geopolitical risks casting uncertainties on the overseas expansion of innovative drugs.

But within these challenges lie even greater opportunities. The industry's growth logic is shifting from "volume‑driven" to "value‑driven"—innovative drugs are becoming the core growth engine and entering a phase of volume realization; pharmaceutical sales channels are breaking the dominance of hospital‑based distribution, with retail pharmacies, primary care facilities, and e‑pharmacies diversifying the landscape; and commercial health insurance is upgrading into a key differentiated payer for innovation.

As KPMG has observed, China's life sciences sector is undergoing a profound transformation from imitation and follow‑on development to global parity and leadership. The pervasive integration of AI, the source‑level breakthroughs of innovative drug companies, and the commercialization of frontier technologies will be the key battlegrounds determining industry rankings.

For practitioners and investors alike, healthcare is no longer the "golden age" of effortless growth—but a new, more dynamic, more resilient, and more valuable era of healthcare is now unfolding.