The destruction of American biotech
It's happening in pursuit of short-term profits
Last week, I wrote an op-ed for STAT News about how American biotech is being destroyed by pharma’s short-term mindset.
Our dependence on China for generic drugs mirrors our dependency with rare earth minerals, and it greatly concerns policymakers and military leaders.
But the same thing is beginning to happen in biotech. We still have a thriving, innovative industry in the U.S., and pharmaceutical executives are throwing it away for their short-term bottom line.
The American biopharma sector is increasingly bifurcated between innovative startups that are taking the risk on developing therapeutic assets, and the large pharmaceutical companies that have the capital to bring assets through clinical trials; large pharma companies are hollowing out their early-stage R&D functions in favor of licensing assets developed by startups. While I don’t think this is the best case scenario, it mostly works to get drugs to patients: the startups do the science, the pharma companies act as investment banks with capital to handle development and marketing.
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But this system only works so long as the pharmaceutical-companies-as-investment-banks see opportunities for a high margin among American biotech startups. And that is increasingly not the case:
For years, the most interesting drug candidates came from U.S. companies. Then, in the 2020s, China began investing heavily in its biotech industry. China’s investments have borne fruit. Assets developed by Chinese biotechs are successfully competing with assets developed by U.S. companies. And Chinese companies are able to conduct early-stage clinical trials on its assets much more cheaply than U.S. companies. In 2015, the Chinese equivalent of the FDA, known as the National Medical Products Administration, or NMPA, adopted streamlined regulations. In 2018, the system shifted to an “implied license” system, meaning that investigational new drug (IND) applications were allowed to proceed if regulators did not object within 60 days. Chinese investigators enroll patients who are largely healthy volunteers, motivated by pay, and who aren’t always given the opportunity for adequate informed consent. Between this clinical trial model and the size of the population, physicians recruit for clinical trials in about half the time required in the U.S.
Western pharmaceutical companies are increasingly drawn to China, even at the university level, to seek out assets to license and bring to market in the U.S.
Short-term, this makes sense! It’s much cheaper to acquire a drug that has already gone through first-in-human trials, especially if those trials were done in a country with a streamlined regulatory structure; in the U.S., it can cost as much as $200 million to bring a drug through trials.
Long-term, this will destroy American biotech.
Innovation, research, and development are learned skills that must be cultivated to be maintained. As large Western pharmaceutical companies increasingly spend their research and development capital on assets licensed from China, they have less to spend on American assets. Over time, the capital for American biotechs will dry up, leaving U.S. pharmaceutical companies dependent on Chinese researchers. China has repeatedly leveraged an early foothold in innovative industries to move up the value chain and take over a sector; it is pursuing the same policy in biotech.
The argument I’ve heard most frequently in response is that blocking investment by American companies into Chinese drug assets would diminish access for patients. But protecting the American biotech sector and preserving its ability to innovate can only be a positive for patients.
To focus on the short-term cost issue is to agree to give up the long-term viability of American biotech — and the loss of American capacity to research, develop, and bring to market therapeutics would indeed be a loss for patients.