Take your head out of the sand on China: a Perspective

If half the time spent on hysteria about China went to competing on merits, biotechs and patients would be much better served

The ability of U.S. biotech executives, policymakers and some investors to deny the rising innovation and inventiveness from China is astonishing. But no degree of protectionism, and no willing it away, is going to change the reality that the U.S. is facing ever-increasing competition from a new geographic center of excellence, and — barring a dramatic change in policy and pace — that it’s going to lose some or even most of its biotech dominance.

Moreover, this is good for patients.

So where are you going to put your energy? Finding opportunities for investment and partnering? Or lobbying Congress to build walls to keep out the competition? Or just burying your head deeper in the sand?

Over the past 20 years, there’s been an evolution in China biotech that quietly accelerated while the U.S. was enjoying its own success and not imagining innovators elsewhere could seriously compete or contribute.

Stage 1: China biopharma develops unsafe generics. It will never be trusted by Chinese patients and docs. This means Pfizer can sell Lipitor off-patent at a premium, forever.

Stage 2: China biopharma now develops safe generics due to regulatory reforms and anti-corruption campaigns. China patients and docs can trust local generics, like patients and docs trust generics in the U.S. and Europe. Pfizer will transition to selling true innovation in China at a premium, paid OOP.

Stage 3: China biopharma now develops safe generics and me-worse innovation (for example, Betta’s icotinib), which will be prescribed to poorer patients and reimbursed by government insurance. Richer patients will pay OOP for the true innovation Pfizer is selling in China.

Stage 4: China biopharma now develops safe generics and me-better innovation (e.g., PD-1s) to license as “catch-up” deals for Western biopharma, and to be reimbursed by government insurance. “But China will never develop true innovation,” say the skeptics.

Stage 5: China biopharma now develops incremental innovation, which is fueling all the cross-border deals and NewCos. But “it will never develop true innovation like Western biopharma,” and China would never reimburse for it anyway, they say.

Incremental innovation — damning with faint praise the idea that China researchers could produce groundbreaking transformational advances. Where is the logic behind the idea that only those in the West can develop “true innovation.” Go ask the EV auto industry. Or solar. Or high-speed rail.

Where is the logic that the dominant market position of the U.S. is written in stone? What happens when China fixes its reimbursement system, which is a predictable next step in China’s evolution.

What if, through a combination of government insurance and commercial insurance, China starts paying European prices, with a patient population that is four times the size of the U.S.? And what if Europe doesn’t want to pay U.S. drug prices either (spoiler: they don’t) and starts cutting deals with China biotechs. If either happens, the U.S. market becomes nice-to-have for China biotech, not have-to-have.

More importantly, for an industry whose leaders say they wake up every day motivated by patient need, where is the patient benefit in trying to choke off a key source of innovation?

To be sure, policy reforms are needed in the U.S., and perhaps we should adopt a policy or two from China or Australia to help biotechs move faster into the clinic to de-risk assets.

But instead of building walls or pushing back wholesale, it’s worth defining exactly what the concerns are — IP, trial quality or working 24/7 — and addressing those in a circumscribed and non-hysterical way.

Do the due diligence; meet the innovators; visit the trial sites; conduct multi-regional clinical trials; work harder, move faster.

And most of all, don’t be left behind.

Signed commentaries do not necessarily reflect the views of BioCentury. For more of BioCentury’s China coverage, see the Hot Topics page.