Objectives: This study evaluated the effectiveness of government epidemic control policies centered on diagnostic testing and examined their impact on the in vitro diagnostics (IVD) industry. It also analyzed the complex interplay among policy interventions, epidemic dynamics, and the IVD industry’s value chain to identify key leverage points for managing future public health crises. Methods: A system dynamics (SD) model calibrated using national data from the Republic of Korea simulated the interactions between epidemic progression and the IVD value chain.We conducted a scenario analysis encompassing 6 policy interventions: research and development (R&D) investment, public–private collaboration, regulatory easing, diagnostic test performance, testing intensity, and social distancing. Results: Policies promoting investment, public–private collaboration, and regulatory easing accelerated the market entry of diagnostics, thereby reducing infections and deaths. However, these interventions were associated with lower overall industry revenue, attributable toincreased market competition and a reduced patient population. A critical trade-off was noted:although regulatory speed is advantageous, using low-sensitivity diagnostics substantially worsened public health outcomes. Aggressive testing strategies and stringent social distancingwere also confirmed to be effective in reducing both infections and mortality. Conclusion This study provides a strategic framework for understanding interactions between pandemic control policies and the IVD industry. Sustained pre-crisis investment in R&D,public–private networks, and public health infrastructure is essential for effective pandemicpreparedness. During a crisis, policymakers must carefully manage the critical trade-off between regulatory speed and diagnostic quality to ensure that rapid responses do not compromise public health outcomes.