China's latest boom is sounding alarm bells in America

The Age

2 days ago

It marked a watershed moment for the pharmaceutical sector, which had long written off China as a nation that excelled in drug manufacturing and 'copycat' treatments but not medicine discovery.
Akeso's debut on the world stage has been described as a 'DeepSeek' moment for the industry – a reference to the sudden emergence of a highly advanced AI chatbot out of China earlier this year, which took US tech giants by surprise and wiped close to $US1 trillion ($1.5 trillion) off global stock markets.
Summit's shares are up more than 600 per cent since first announcing the lung cancer trial results.
'The two large innovators in our industry today are the US and China,' Sir Pascal Soriot, the boss of AstraZeneca, said in March. 'China is, I think over the next five to 10 years, going to emerge as really a driving force for innovation in our sector.'
It sets the stage for a growing tussle between the US and China over the future of drug development. Donald Trump has been clear that he wants pharmaceutical giants to be investing more in America. Biopharmaceutical companies and their suppliers account for 4.9 million jobs and are worth around $US1.65 trillion ($2.6 trillion) to the US.
However, drug companies are increasingly turning east when it comes to investing in new drugs and clinical trials. Not only is China becoming an easier place to research and create new drugs, but the Trump administration is also shaking faith in the US.
Vaccine sceptic health secretary Robert F Kennedy Jr has prompted much anxiety in the industry. By contrast, China is 'very business friendly and stable' Novartis boss Vas Narasimhan said in May.
Drugs boom
Beijing has been attempting to win more pharma investment for years – and specifically attempting to boost funding for drug innovation. Drug discovery was a key pillar of the 'Healthy China 2030″ strategy unveiled in 2016, aimed at helping the country cope with its ageing population.
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The focus has already paid dividends. Over the past three years alone, the number of Chinese drugs in development has doubled to 4,391. Almost half are either novel drugs or something known as a 'fast-follower', where treatments are quickly developed on the back of breakthroughs by rivals.
According to Barclays, the number of so-called 'first-in-class' drugs under development in China rose to around 120 last year, having been in the single digits in 2015. First-in-class essentially measures the level of innovation by looking at the highest development stage a drug has reached and the earliest time it reached that stage.
The growth in China is unmatched. While the US, which has long been regarded as the world leader in drug discovery, has more first-in-class drugs in development, at 151, the growth rate has been much slower.
'The shift isn't incremental, it's tectonic,' says Abhishek Jha, the founder of life sciences data company Elucidata.
One crucial part of Beijing's push to drive more drug discovery has been speeding up clinical trials. In China, regulators allow businesses to get studies up and running quicker, and then update them as they progress.
This can provide early data on new drugs, which is a major draw for multinational companies looking for novel treatments that show signs of working well.
It has sparked a boom in studies taking place in China. According to figures from the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), China accounted for around 18 per cent of clinical trials sponsored by companies in 2023 compared to just 5 per cent in 2013. Meanwhile, the US proportion has dipped from 28 per cent to 23 per cent.
Clinical trial enrolment in China is surging, with around 40 per cent now having more than 100 participants.
Bitter pill
Fewer regulatory barriers are just one of a number of reasons pharma companies are turning to China. Workers, too, are less averse to working unsociable hours than they would be in Western nations.
Shirley Chen, a Barclays analyst, says: 'Chinese scientists may be happier to accept very long work hours and people like hospital personnel [where trials take place] are actually okay to do night shifts.'
Major drug giants are now scouring China for potential deals. The likes of GSK, AstraZeneca and Merck have all struck deals worth more than $US1 billion to get the rights to develop and sell Chinese drugs outside the country.
The rise of China's pharmaceutical industry has started to raise alarm bells in the US. Trump may be focused on returning manufacturing jobs to the US, yet some say he should be concerned that more high-quality jobs and research posts are starting to drift to China.
'Five years ago, US pharmaceutical companies didn't license any new drugs from China,' Scott Gottlied, the former Food and Drug Administration commissioner, wrote earlier this month. 'By 2024, one third of their new compounds were coming from Chinese biotechnology firms.'
He warned that the shift of clinical trials to Asia could undermine innovation in the US as companies choose to 'divert funds that might otherwise bolster innovation hubs such as Boston's Kendall Square or North Carolina's Research Triangle'.
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'The US biotechnology industry was the world's envy, but if we're not careful, every drug could be made in China.'
While Trump exempted most countries' pharmaceutical industries from tariffs in his 'liberation day' blitz, China was not spared. That means physically manufacturing drugs for the US in China is out of the question, for now at least.