By Sujai Shivakumar, Charles Wessner, and Julie Heng
For years, China has played a leading role in manufacturing active pharmaceutical ingredients and generic drugs. While securing the supply chain for active pharmaceutical ingredients is increasingly recognized as a national security priority by policymakers, China’s growing role in biotechnological innovation has generally received less attention.
The need for more attention was revealed last year when a drug from a little-known Chinese biotech outperformed one of the world’s top-selling medications. As the Wall Street Journal reported, Akeso’s Ivonescimab outperformed Merck’s Keytruda, a drug that generates over $30 billion annually, in what some are calling a “DeepSeek moment” for biopharmaceuticals.
It is important to note that this is not a one-off event. There are increasing numbers of new drugs in development, accompanied by a surge in clinical trials, licensing agreements, and acquisitions in China. According to The Economist, Western pharmaceutical companies struck nearly a third of large licensing deals—those valued at $50 million or more—with Chinese firms in the past year, a threefold increase since 2020. In 2024, the value of drugs licensed from China to the West reached $48 billion, 15 times higher than in 2020.
Reflecting this growth, China is emerging as a major force in the global biopharmaceutical industry. Since 2006, China has prioritized biotechnology, implementing a long-term national strategy to develop its biopharmaceutical industry. Chinese authorities have overhauled the regulatory ecosystem to achieve this goal, enabling drug testing to be done more quickly and affordably than in the United States. This gives emerging Chinese firms a competitive edge over many smaller U.S. biotech firms. Additionally—and somewhat ironically—China is strengthening its intellectual property framework and investing heavily in both basic and applied research among other supportive measures. These policies, and the substantial resources devoted to the sector, have enabled China to make significant strides in biopharmaceutical innovation. Crucially, some estimate that clinical development in China has become 50–100 percent faster than in the United States or Europe.
Meanwhile, the United States has long had a strong biopharmaceutical innovation system backed by sustained funding from the National Institutes of Health (NIH). As a global leader in health research with a current budget of some $48 billion, last year the NIH generated an estimated $94.58 billion in economic activity—about $2.60 of economic activity for every dollar of NIH funding. Thanks to the strong U.S. patent regime, this means every dollar of NIH funding creates an estimated $6.00 of further research and development (R&D).
This sustained support has enabled a U.S. biopharmaceutical innovation system that is the envy of the world, one that supports 300,000 researchers in every U.S. state. Yet it now appears under threat from within. Government investments in research, through the NIH, have been stagnant for years. Last year, the Biden administration cut federal research funding even as Chinese funding for research surged, and now the additional cuts projected by the Trump administration risk undermining our leadership. Compounding these concerns, in February, the NIH announced that it would limit funding for universities’ indirect research costs to 15 percent, down from a historical average of 40 percent. If fully implemented, this could represent a massive reduction in funding for the university research enterprise, perhaps as much as $4 billion a year. These funds are essential to fund the equipment, maintenance, and staff for complex and costly research centers and the training of the next generation of researchers.
At a time when China is intensifying investment in biopharmaceutical innovation, the United States cannot afford major cuts in funding for this leading research enterprise. Innovation leadership depends on a country’s ability to continue to make new health-enhancing discoveries and bring them to market at affordable cost. Yet, since the NIH announced cuts to indirect research funding, at least 20 U.S. universities have announced hiring freezes, and 33 have reduced PhD admissions for this year, most notably in biomedical programs.
There’s no doubt the United States can improve the effectiveness of public dollars in health and biopharmaceutical R&D. There are serious impediments in the U.S. R&D system, including in the way that research grants are reviewed and funded and in the administrative oversight of clinical trials—indeed, there may be valuable lessons from some of the Chinese initiatives. But these needed changes should not be confused with broad disruptions to the innovation pipeline. Sweeping changes to the R&D system risk negative consequences on discovery, development, clinical trials for efficacy, and the growth of our talent pool. Effective reform of established procedures would be welcome, but the U.S. needs to maintain and grow the funding streams crucial to ongoing research projects, including clinical trials for drugs targeting cancer, heart disease, and new outbreaks like the avian flu.
The United States should keep in mind that better drugs and better treatments mean better health outcomes, enabling longer and more productive lives. And a robust biopharmaceutical industry is an immense source of security for our citizens and the nation.
Furthermore, it is critical to recognize that competitive leadership in biopharmaceuticals is a long-term contest, and short-term setbacks can have lasting effects. As China improves its domestic STEM pipeline, streamlining clinical trial approval processes and injecting vast investments into the sector, the United States can’t afford to undermine its own position by cutting funding, staff, and training. It can, however, adopt better, more streamlined rules and operations and focus on where and what change is needed.
Above all, the United States should remember that leadership in biopharmaceutical innovation is driven by its unparalleled R&D ecosystem. Arbitrary changes in funding and rules threaten U.S. bioinnovation leadership and, along with it, the nation’s health, welfare, and national security. It is time to focus on constructive change, not disruption.
Sujai Shivakumar is the director and senior fellow of Renewing American Innovation at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Charles Wessner is a senior adviser (non-resident) with Renewing American Innovation at CSIS. Julie Heng is a research associate with Renewing American Innovation at CSIS.
This piece was originally published on March 18th with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, D.C.
