China IVD pricing reform: the worst phase may be over, but new pricing guidelines bring a second round of uncertainty

Overview

This report focuses on the impact of China's diagnostic service pricing reform on the IVD industry and downstream independent clinical laboratory sector. It notes that before 2022, IVD had long grown faster than the overall healthcare market, for example around 15% for IVD versus about 10% for the industry average. But after price cuts from biochemical reagent VBP in 2023, the sector was hit in succession by falling prices, higher VAT and volume declines caused by DRG reform, turning growth negative and leaving it persistently below the healthcare industry average. Goldman Sachs believes that as the high base effect fades, the industry may briefly return to positive growth in 2H26, but the consultation draft of the NHSA diagnostic service pricing item guideline released in March 2026 could once again weigh on the sector.

Core views

The core views are: first, the worst phase for IVD seems to be behind us, but uncertainty around pricing reform has not ended; second, chemiluminescence VBP has been gradually rolled out across provinces since 2H25, with some provinces only implementing it in 2026, so there is still downside pressure in 1H26; third, if the guideline standardizes testing service prices across provinces and sets upper limits, high-price provinces will converge toward low-price provinces, and market size measured by hospital charges may shrink; fourth, oncology companion diagnostics are less affected by medical insurance and VBP and are a relatively independent segment facing lighter pressure; fifth, ICL companies may both benefit from higher outsourcing rates for testing and suffer from gross margin erosion caused by price cuts.

Analysis framework

The report analyzes industry impact by combining policy timelines, interprovincial differences in testing service prices, company feedback, valuation models and company risk disclosures. Policy focus includes VBP, DRG/DIP, the NHSA diagnostic service pricing item guideline and cross-provincial price harmonization; on the company side it covers Mindray, SNIBE, AmoyDx, Kingmed and Dian Diagnostics, and provides target-price methodologies including DCF, P/E and SOTP.

Methodology notes

• Valuation methodsDCF

  discounted cash flow valuation

  Mindray's target price of Rmb247 is based on a two-stage DCF with a terminal growth rate of 2% and WACC of 9.5%; AmoyDx's target price of Rmb30 is also based on a two-stage DCF, with a discount rate of 10.5% and a terminal growth rate of 3%.

• Valuation methodsDCF plus M&A value

  weighted combination of DCF and M&A value

  SNIBE's target price of Rmb72 consists of 85% DCF value of Rmb65 and 15% theoretical M&A value of Rmb114, with the latter based on 35x 2026E earnings.

• Valuation methodsexit P/E

  exit P/E valuation

  Kingmed's target price of Rmb38 is based on a 5-year exit P/E method, with a discount rate of 9.5% and global peer P/E of 21.8x.

• Valuation methodsSOTP

  sum-of-the-parts valuation

  Dian Diagnostics' target price of Rmb19 is based on SOTP: mature ICL and IVD businesses use a 5-year exit P/E, while the AI business uses a two-stage DCF.

• factor_frameworkGS Factor Profile

  growth, financial returns, valuation multiples and composite factor profile

  Goldman Sachs' factor profile uses indicators such as forecast sales, EBITDA, EPS, ROE, ROCE, CROCI, P/E, P/B and EV/EBITDA to calculate percentiles for comparing stocks with the market and industry peers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Mindray

  IVD-covered company; the report provides target-price methodology

  Strengths

  Broad coverage and valuation based on a two-stage DCF, with a target price of Rmb247.

  Weaknesses

  Ex-factory prices for some products may continue to be affected by VBP.

  Comparison

  Compared with companion diagnostics, routine IVD is more directly exposed to VBP and service pricing reform.

  Risks

  Further VBP-driven cuts to ex-factory prices, slower-than-expected penetration into top-tier hospitals in China, difficulties expanding in North America and Europe, patent litigation, and changes in trade policy.

• SNIBE

  Leading company in chemiluminescence; the report explicitly rates it Buy

  Strengths

  Import substitution and potential M&A value are incorporated into valuation, with a 12-month target price of Rmb72.

  Weaknesses

  Chemiluminescence VBP is being gradually rolled out across provinces, so pressure remains in 1H26.

  Comparison

  Like other IVD companies, it is affected by VBP and DRG/DIP, but the report still maintains a Buy rating.

  Risks

  Slower import substitution progress, policy risks such as VBP and DRG/DIP, intensified competition, risks from the distributor model, and new technological evolution.

• AmoyDx

  Oncology companion diagnostics company; the report explicitly rates it Buy

  Strengths

  Companion diagnostics have limited medical insurance coverage and VBP has not yet been implemented, so pricing pressure is lighter; tighter regulation of out-of-hospital channels benefits companies focused on in-hospital sales.

  Weaknesses

  Still exposed to industry competition and regulatory changes.

  Comparison

  Compared with routine IVD, companion diagnostics are a more independent segment with lower policy pressure.

  Risks

  Intensified industry competition, regulatory changes in mainland China or overseas, and VBP implementation.

• Kingmed

  Leading ICL player; the report explicitly rates it Buy

  Strengths

  Rising industry concentration and the fading impact of pandemic-era accounts receivable impairment are expected to support an earnings inflection in 2026.

  Weaknesses

  Falling prices for testing items may erode gross margin.

  Comparison

  Compared with upstream IVD, ICL may benefit from higher outsourcing rates, but it also faces hospital charge cuts more directly.

  Risks

  Slower-than-expected recovery in outsourcing demand, continued weakness in demand for high-end testing, intensified price pressure under VBP and local procurement policies, and slower-than-expected industry consolidation.

• Dian Diagnostics

  ICL and IVD company; the report provides an SOTP target price

  Strengths

  Mature ICL and IVD businesses combined with an AI business, with the target price based on an SOTP approach; easing accounts receivable impairment pressure could provide upside.

  Weaknesses

  Price cuts and accounts receivable impairment remain the main drags.

  Comparison

  Like Kingmed, it is part of the ICL chain, with similar benefit and pressure dynamics, but also has a separate AI business valuation component.

  Risks

  Intensified industry competition, sharp declines in testing item prices, higher-than-expected accounts receivable impairment, and VBP implementation in the IVD industry; upside risks include better-than-expected sales of self-developed products and lower-than-expected accounts receivable impairment.

Key data

• Historical IVD growth comparisonabout 15% vs. healthcare industry average of about 10%The report states that before 2022 the IVD industry had long grown faster than the overall healthcare market.
• NHSA guideline release date2026-03-11The consultation draft of the diagnostic service pricing item guideline proposed payment price caps for all testing items.
• TEG test price capRmb170Previously the highest-charging province, Liaoning, was at Rmb360.
• HbA1c test price capRmb30Chromatography method; previously the highest-charging province, Gansu, was at Rmb88.
• BNP test price capRmb180Previously the highest-charging province, Shandong, was at Rmb345.
• Estimated average price cut in high-price regionsabout 50%The chart indicates that average prices in high-price regions fall by about 50% after the guideline.
• Estimated share of high-price regions in the China marketabout 30%The chart estimates that high-price regions account for about 30% of China.
• Estimated total market contractionabout 15%The chart indicates that from the hospital charge perspective, the total market may contract by 15%.
• Mindray target priceRmb247Two-stage DCF, terminal growth rate 2%, WACC 9.5%.
• SNIBE target priceRmb72Weighted 85% DCF value and 15% theoretical M&A value.
• AmoyDx target priceRmb30Two-stage DCF, discount rate 10.5%, terminal growth rate 3%.
• Kingmed target priceRmb385-year exit P/E, discount rate 9.5%, global peer P/E 21.8x.
• Dian Diagnostics target priceRmb19Mature ICL/IVD uses exit P/E, AI business uses two-stage DCF.

Impact & implications

In terms of investment implications, policy-driven price cuts remain the key variable for China's IVD and ICL sectors. If the guideline sets national price caps based on low-price provinces, hospital charges in high-price provinces will be reduced, and the industry chain may face pressure on revenue and gross profit; however, lower testing prices may also increase hospitals' incentive to outsource, thereby boosting ICL testing volumes. Investors should differentiate among subsegments: reimbursement-related IVD such as chemiluminescence remains constrained by VBP and DRG, oncology companion diagnostics face less pressure because of a different payment structure, and leading ICL players are caught between rising outsourcing penetration and falling unit prices.

Risks

• The diagnostic service pricing item guideline may push prices in high-price provinces down toward the national low-price provinces, leading to market contraction from the hospital charge perspective.
• VBP, DRG/DIP and local procurement policies may continue to depress testing service prices and IVD ex-factory prices.
• Because the rollout pace of chemiluminescence VBP differs by province, price downside pressure may still exist in 1H26.
• ICL companies may face gross margin erosion from price declines even if testing outsourcing rates and testing volumes rise.
• Intensified industry competition, slower import substitution progress, regulatory changes, channel model risks and new technological evolution may affect company performance.
• Companies such as Dian Diagnostics may still be affected by accounts receivable impairment formed during the pandemic period.

What to watch

• The final version of the NHSA diagnostic service pricing item guideline and the timing of follow-up announcements after summer 2026.
• Whether the guideline will be implemented from 1H27, as well as actual execution prices and transition arrangements across provinces.
• Whether high-price provinces such as Liaoning, Gansu and Shandong significantly cut prices to the level of low-price provinces nationwide.
• Changes in price, volume and ex-factory prices after chemiluminescence VBP is rolled out across provinces in 2026.
• Whether higher ICL testing outsourcing rates can offset the impact of lower unit prices on revenue and gross profit.
• Whether companion diagnostics companies such as AmoyDx continue to maintain relatively low pressure from medical insurance and VBP.
• Kingmed's and Dian Diagnostics' earnings inflection in 2026, rising industry concentration, and changes in accounts receivable impairment.