Core Viewpoint - The cancellation of the VAT exemption policy for contraceptive drugs and devices in China, effective January 1, 2026, is expected to impact pricing strategies and market dynamics in the reproductive health industry [2][7]. Group 1: Policy Changes - The VAT exemption for contraceptive drugs and devices has been in place since the 1990s, aimed at supporting family planning policies [2]. - The new VAT law, passed on December 25, 2024, will end this exemption, reflecting the government's shift towards encouraging childbirth and optimizing population structure [2]. Group 2: Industry Impact - The removal of the VAT exemption will lead to increased costs for companies, as they will no longer be able to deduct input VAT on raw materials and production equipment [2]. - Large manufacturers with annual sales of 500 million yuan may face significant profit pressure due to the new tax burden, while smaller companies may struggle to maintain profitability [2][5]. Group 3: Pricing Strategies - Experts suggest that companies may need to implement differentiated pricing strategies to balance consumer acceptance and business objectives, with potential price increases limited to 3%-5% for high-repurchase products [3]. - Companies are encouraged to consider market competition and consumer sensitivity when adjusting prices, particularly in urban versus rural areas [3]. Group 4: Market Dynamics - The contraceptive drug market is expected to grow, with projections indicating a market size of 8.5 billion yuan by 2025, driven by policy and consumer demand [6]. - The cancellation of the VAT exemption may reshape market competition, favoring larger companies that can leverage economies of scale and tax deductions, while smaller firms may face consolidation pressures [6][7].