China’s medical insurance enforcement in 2026: New rules, active campaign, and implications for pharmaceutical companies

Background

China’s medical insurance system is facing mounting structural pressures, including a rapidly aging population, rising healthcare utilization, expanded coverage, and growing reimbursement demands. These challenges have, in recent years, significantly intensified the policy focus on protecting medical insurance funds and enhancing oversight.

Enforcement actions since the Regulation on the Supervision of the Use of Medical Insurance Funds (《医疗保障基金使用监督管理条例》, the "Regulation") took effect in 2021 illustrate three recurring patterns that the Implementing Rules now address with greater specificity: falsification of medical documentation (for example, doctoring medical test reports) to enable unauthorized reimbursement; inducement of patients through fee reductions or false advertising to generate inflated claims; and the collection, laundering, and resale of prescription drugs purchased through national medical insurance.

The Implementing Rules

The Implementing Rules address perceived gaps identified after the Regulation took effect in 2021. They clarify responsibilities of medical insurance authorities, agencies, and designated medical institutions; establish consistent standards for identifying unlawful conduct; and resolve practical issues in areas such as calculating fund losses and extending supervision to long-term care insurance.

Key definitions introduced by the Implementing Rules include “inducing false medical treatment or drug purchases” (诱导他人冒名或者虚假就医、购药), meaning the use of persuasion, false advertising, or unauthorized fee reductions to generate fraudulent claims, and “assisting false medical treatment or drug purchases” (协助他人冒名虚假就医、购药), which covers knowing facilitation of another person's fraudulent visit or drug purchase. Under Article 40, designated medical institutions found to have defrauded insurance funds face fines of two to five times the defrauded amount, suspension of relevant services for six months to one year, and potential license revocation.

The 2026 Enforcement Campaign

The Campaign complements the Implementing Rules with targeted enforcement across two phases. In practice, the Campaign relies heavily on anomalies in drug traceability codes as investigation triggers. Every reimbursed drug package carries a unique 20-digit electronic traceability code, and as of January 1, 2026, relevant medical and pharmaceutical institutions are required to scan and upload the code in real time during insurance settlement. Regulators automatically flag suspicious patterns (such as the same code being settled multiple times, unusually high volumes for a single patient or institution, or code appearing in inconsistent locations) which may be indicative of drug diversion schemes. This traceability-based screening is supplemented by national leads from the NHSA, local findings of abnormal prescribing patterns, and public complaints. Moreover, the Campaign applies a full-process look-through approach that examines the entire chain from prescribing and purchasing to insurance settlement.

Impact on pharmaceutical manufacturers

Pharmaceutical manufacturers are not the direct regulatory targets of the Implementing Rules, which focus primarily on designated medical institutions and insured individuals. Official interpretations from the NHSA similarly center on supervision of these entities and on individual fraudulent behaviors.

Against this background, the provision of greatest relevance to pharmaceutical companies is Article 41, which creates a mandatory obligation requiring medical insurance authorities to refer specified behaviors to public security organs where criminal offenses are suspected. Article 41 expressly extends to parties beyond hospitals and pharmacies, including any person who organizes or assists fraudulent hospitalization or false claims; organizes drug resale or transfer; forges prescriptions, invoices, or medical reports; provides intermediary service, such as organizing insured persons, collecting credentials, moving funds, or buying and selling drugs, in furtherance of another party’s fraud; or knowingly conceals, transfers, or sells drugs fraudulently obtained through the insurance system.

The knowledge standard is critical in determining liability. For instance, where a company or its employees knew or had reason to know of a counterpart’s fraudulent purpose, such as through awareness of false prescriptions at a pharmacy partner, drug resale by a distributor, or a diversion scheme in the commercial channel, complicity under the Criminal Law may apply. This is true even if the company was not the architect of the scheme. This is consistent with the 2024 Guiding Opinions issued by the Supreme People’s Court, Supreme People’s Procuratorate, and Ministry of Public Security on the handling of criminal insurance fraud cases.

These are not theoretical risks. In 2025, model cases from the NHSA’s special campaign using drug traceability codes to combat illegally diverted drugs identified medical representatives as direct participants in fraud schemes. For example, one case involved a sales representative who printed blank prescriptions, falsified seals, and collaborated with pharmacy staff to purchase medicines at reimbursed prices without actual patient involvement to facilitate improper purchases of high-value immunology drugs. The cases were referred to public security organs for criminal investigation. In addition, the Supreme People’s Court's model cases on strictly punishing fraud against medical insurance (published on August 5, 2025) highlighted a case in which a medical representative received a nine-month prison sentence and a fine of RMB 10,000 for falsifying patients’ genetic testing reports to enable ineligible reimbursement. Furthermore, patient assistance programs (“PAP”) for National Reimbursement Drug List (“NRDL”)-listed products have emerged as an area of concern. PAPs that incentivize excess purchasing of drugs already reimbursed have generated liability theories extending to the sponsoring manufacturer. Similarly, off-label promotion that generates prescriptions outside the approved reimbursement indication may result in insurance funds being applied outside the authorized scope, a pattern regulators have increasingly treated as a fraud-related violation.

Internal investigation considerations

Given the mandatory criminal referral risk under Article 41 and the precedents involving medical representatives, companies should have clear protocols for recognizing and responding to potential insurance fraud issues. Triggers for a structured internal review include: anomalous traceability data (unusually high dispensing volumes, products at inconsistent locations, settlement data misaligned with prescribing patterns); allegations involving medical representatives and pharmacy personnel; indications that a PAP is incentivizing excess purchasing of NRDL-listed products; and commercial practices generating prescriptions outside the approved reimbursement indication.

Investigations should be conducted comprehensively to encompass the entire commercial chain, including medical representatives, distributors, contract sales organizations (“CSO”), and pharmacies, utilizing traceability data, sales records, and distributor agreements as primary sources of evidence.

Practical steps for pharmaceutical companies

Pharmaceutical companies with NRDL-listed products should take the following steps now:

• Evaluate PAPs for NRDL-listed products. Programs providing value-added benefits to patients who already have discounted insurance access are a specific enforcement target and should be reassessed where they risk characterization as incentivizing excess purchasing.
• Map medical representative activities at retail pharmacies against the 2025 NHSA model case fact patterns. Training should specifically address Implementing Rules Article 41 categories and the criminal consequences they can trigger.
• Review distributor and CSO agreements for explicit prohibitions on facilitating false prescriptions, diverting insurance-covered drugs, or collecting insurance credentials. Document due diligence and periodic audits to support a defense that the company lacked knowledge of downstream misconduct.
• Establish systematic traceability data monitoring and escalation protocols. The Campaign uses traceability anomalies as investigation triggers; early self-detection puts companies in a materially better position. Given the mandatory Article 41 referral, delayed response may narrow the options available.

Conclusion

China’s 2026 medical insurance enforcement developments represent a material increase in risk for pharmaceutical companies, not merely a technical refinement of regulatory rules. The combination of the Implementing Rules’ detailed definitions and escalation mechanisms, the mandatory Article 41 criminal referral obligation, and the active Campaign currently underway creates an environment in which commercial conduct that might previously have attracted limited scrutiny now carries significant administrative and criminal exposure for companies and their individual personnel alike. The precedents involving medical representatives, patient assistance programs, and off-label promotion make clear that the pharmaceutical industry is squarely within the enforcement frame. Companies that have not recently reviewed their China compliance programs against risk categories described by the Implementing Rules and that do not have clear protocols for recognizing and responding to potential issues should do so now.

Authored by Calvin Ding and Evelyn Ni.