2025 has been a turbulent year for the diagnostics industry, shaped by policy changes and the ongoing effects of VBP implementation in China. To better understand the market dynamics and avenues for future growth, we spoke with Yi Kong, PhD, a healthcare executive. Yi leads Greater China operations at a major life sciences and diagnostics company. See the transcript below:

Disclaimer: The views expressed in this interview are those of the individual expert and do not necessarily reflect the positions, policies, or opinions of their current or former employers or any affiliated organizations.

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To get us started, how has China's IVD market evolved over the last couple of years post-COVID?

From a policy perspective, for many years now, China has been implementing what's called VBP, or volume-based procurement, which started out in the pharmaceutical industry, then expanded to MedTech, and now IVD. Over the last 3 years, post-COVID, China has really amplified VBP, both in scope, as well as depth, in terms of the degree of discount. It has impacted margin for manufacturers, distributors, hospitals, and labs.

It's important to understand that VBP was born out of necessity. It was not designed to target manufacturers or any other stakeholders; it's a requirement on the part of the government to cover as many lives as possible with limited resources. The government looked at how its funding was deployed on healthcare and where it could save the most. That's why from a segment perspective, it started out in pharmaceuticals and moved to other areas such as IVD.

In recent years, China also implemented what can be dubbed the ‘Made in China’ policy. This encourages and sometimes requires, manufacturers to localize their products and bring in the manufacturing process in order to participate in the commercial market.

IVD, and in particular, molecular diagnostics, has also seen a lot of ups and downs during and post-COVID. Before COVID, molecular testing infrastructure was quite nascent in China. Then suddenly there was this huge need and funding for testing. Within two years, some 2,000 testing providers popped up to provide qPCR-based kits and testing services. Then since the end of COVID, 25% of them have gone out of business, and many of the rest are struggling to survive in today’s ultra-competitive, low-margin market conditions.

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That's interesting to hear. What is your perspective on the regional differences within China that create distinct market behaviors?

Different regions have different philosophies. For example, Shanghai, a metropolitan and a top-tier city, is more progressive in its adoption of new technologies. Naturally, a mega city like Shanghai also enjoys more tax collection and government funding and is able to afford more premium-priced products. The city places a heavier emphasis on quality and performance than just purely cost.

From a policy perspective Anhui has really been the leader in driving VBP initiatives. Anhui runs its own provincial-level VBP programs, and those policies are often picked up by neighboring provinces and eventually adopted nationwide. Different provinces are at different stages of adopting these policies, which affects how pricing and procurement evolve over time. It’s quite varied across the country.

Regionally, there are a lot of different forces at play. First is how strong a particular region is economically. Shanghai and its neighboring provinces like Zhejiang and Jiangsu are economically advanced, socially more progressive, and have a bigger international population. Typically, we see greater adoption of advanced medical technologies and less compromise in terms of VBP.

Other regions may have large populations to cover and comparatively limited resources. As a result, they are much more price-sensitive and have less options in terms of technology adoption.

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What has the IVD industry done to protect itself from these headwinds knowing what happened to pharma and MedTech?

First, the IVD industry took a more proactive and coordinated approach. We recognized early on that industry associations can have a voice, so rather than waiting for VBP to be imposed, we started engaging the government directly. Through organizations like AdvaMed, a U.S.-based industry association with a China branch where I serve as a board member, we conducted studies to collect data and lessons learned from earlier MedTech VBP rounds and used that evidence to highlight need for quality, sustainability, and future innovation.

Second, even during the VBP process, we tried to avoid the kind of unhealthy price wars seen in earlier waves. In other segments, bidding was like haggling at a wet market, with companies undercutting each other to unsustainable levels. Many recognized that this approach helped no one and began holding firm to reasonable bottom lines.

The government, in turn, has been open to dialogue. We have engaged directly with the Ministry of Finance and the National Healthcare Security Administration, sharing data and feedback on how VBP can impact various segments. We have seen that they are very open to hearing feedback. They want to know the impact on manufacturers and the potential implications of the policies they're pushing out. They want to make the right adjustments if and when appropriate. They want to get this right, and adjust what is suboptimal. I'm pretty confident that in future rounds, they'll take the learnings from this round into consideration, and there will be some positive adjustments reflected.

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How has VBP, ‘Made in China’, and this new data sharing mandate changed how IVD companies look at investing in the Chinese market?

From the top-line perspective, historically, China has been a very strong growth market. From 2000 until COVID, it was two decades of growth—double-digits, even 30-40%. Back then, the resources needed to play were easily justifiable. Today, we're looking at a different market, where growth is very challenging, and in some areas, decline is inevitable.

Companies must assess the potential impact of these policies on their top and bottom lines in China. You can't just assume you're going to have 80% of the U.S. price and sustain that for the next 5-10 years. What will happen in the face of VBP or ‘Made in China’ mandates? You see companies behaving very differently in the face of these policies, tariffs, and geopolitical tensions.

In our industry, most companies have taken the approach of rationalizing investments while staying relevant, because China remains a strategically important market. Right now, it may be a long, harsh winter, but if you're not there during the winter, when spring comes, you're going to miss out on the growth. In general, people have a view that in the medium to long term, 5+ years, China will bounce back.

There are also companies that are committing to doing even more in China, publicly announcing new facilities, bigger investments, etc. It just depends on the philosophy and the long-term vision of each company.

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The market is indeed complex! Thank you for taking the time to speak with us.

Be on the lookout for part 2 of our conversation with Yi, where we take a deep dive into market entry and stakeholder engagement strategies.

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