U.S. drug companies have made $53 billion in licensing deals with Chinese biopharma firms since 2020—redirecting investment away from U.S. research hubs and deepening dependence on the Chinese Communist Party (CCP) for early-stage innovation.
Chinese biotech companies now supply roughly one-third of the new compounds entering U.S. drug pipelines, up from virtually zero five years ago, and are on track to reach 35% of FDA approvals by 2040.
American multinationals increasingly rely on China for faster, cheaper early-stage trials and manufacturing, embedding nearly 80% of surveyed U.S. biotech firms inside a supply chain that U.S. intelligence identifies as tied to the CCP’s military-civil fusion (MCF) strategy.
Without decisive action – including restricting exposure to CCP-linked firms, rebuilding domestic R&D capacity, and lowering U.S. development costs—the United States risks outsourcing the front end of its pharmaceutical ecosystem to its primary strategic competitor.
For months, big U.S. pharmaceutical companies have told U.S. policymakers that the industry doesn’t rely on China for finished medicines. In comments to the Commerce Department, for example, the Pharmaceutical Research and Manufacturers of America (PhRMA) insisted that “most innovative medicines made in America” or imported from “reliable allies” pose no national-security risk – and that tariffs on pharmaceuticals would only undermine U.S. competitiveness (1). AstraZeneca went further, assuring the administration that it “does not import medicines from China” (2).
But this narrative obscures the true dependence of big U.S. drugmakers on China’s biopharma sector: U.S. drugmakers are rapidly shifting the front end of America’s pharmaceutical ecosystem (e.g. discovery, early-stage-development, and the IP engine) to China through a surge of licensing deals and cross-border partnerships (Figure 1).
FIGURE 1
During 2020-June 2025, big U.S. biopharma firms struck $53 billion worth in licensing deals with Chinese partners, led by Pfizer, Merck, AbbVie, Bristol Myers Squibb, and Regeneron (Table 1).
TABLE 1
Five years ago, U.S. pharmaceutical companies licensed virtually no drugs from China; by 2024, roughly one-third of new compounds entering American pipelines originated in Chinese labs, and analysts now project that China could account for 35% of all Food and Drug Administration (FDA) approvals by 2040, up from roughly 5% today (3,4).
In practice, Chinese firms handle the cheap, fast early-stage development, while U.S. multinationals finance the far more expensive Phase 3 global trials required for FDA and European approval. Nearly 80% of surveyed U.S. biotech companies now contract with Chinese-owned or China-based manufacturers, further embedding the American pharmaceutical system inside Beijing’s ecosystem (5,6).
This growing dependence on Chinese-origin intellectual property, early-stage clinical data, and upstream innovation represents a structural vulnerability for the United States. Unlike traditional supply-chain risks, this form of reliance funnels U.S. capital into a biotech ecosystem that U.S. intelligence agencies have already warned is deeply enmeshed in the Chinese Communist Party’s (CCP) military-civil fusion (MCF) strategy.
At the same time, biotechnology has become a core pillar of China’s Five-Year Plans—the 15th of which is set to commence from 2026-2030—with Beijing intentionally building a fully integrated pharmaceutical ecosystem designed to dominate global drug discovery and development. Unless the United States constructs a competitive ecosystem of their own, the next generation of blockbuster therapies will be manufactured in China, eroding Western market share, pricing power, and long-term strategic competitiveness.
Why U.S. Drugmakers are Turning to China…
Several structural forces are pushing U.S. drug companies to license an unprecedented volume of Chinese-origin assets. To start, early-stage drug development is dramatically cheaper and faster in China than in the United States. For example, China’s regulatory reforms since 2015 cut first-in-human trial approvals from 501 days to just 87 (7). This has largely driven surging clinical trials in China, which are estimated to be 50-100% faster than in the United States or Europe (8) (Figure 2).
FIGURE 2
These cost and speed differentials reflect a decade of regulatory accumulation, funding instability, and fragmented governance in the United States that has steadily raised the cost of preclinical and early clinical work at home.
Further, Beijing’s heavy subsidies, permissive oversight, and large pool of low-paid scientists allow companies to initiate and scale early-stage trials far faster and at a fraction of U.S. costs (9,10). Crucially, China is no longer limited to copying Western drugs. More than 40 percent of its pipeline now consists of fast-follower or first-in-class therapies, marking a shift from replication to original innovation (11).
China’s biotech market capitalization now exceeds $1.5 trillion—second only to the United States—and Beijing has built more than 100 state-financed biotechnology parks with world-class laboratories, subsidized equipment, and a swelling talent pool driven by reverse-brain-drain incentives (12). This structural advantage makes early-stage development both cheaper and more scalable than in the U.S.
Favorable deal terms also play a role. Venture capital has dried up in China, forcing Chinese biotechs to license assets early to secure cash, often at steep discounts (13). This allows U.S. companies to transfer risk by back-loading milestone payments instead of paying high upfront costs. The U.S.–China Economic and Security Review Commission reports that the total value of drugs licensed worldwide from China surged 15-fold to $48 billion in 2024, with many Western labs—including American firms—now turning to Chinese partners to run early-stage testing because of their price and speed advantages (6).
A looming U.S. patent cliff is also accelerating the trend. Big Pharma faces between $140–$200 billion of annual revenue losses by 2030 as blockbuster drugs expire, forcing companies to aggressively refill their pipelines (6,7). To that end, nearly a third of large licensing deals (worth $50 million or more) struck by U.S. firms last year were with Chinese biotechs—up from virtually none in 2020 (7,9).
This pressure is structural: U.S. multinationals need a constant flow of new assets to sustain revenue growth, and China has become the lowest-cost, fastest source of replenishment. Unless the United States builds a competitive early-stage ecosystem at home, Big Pharma will continue turning to China by default, locking in long-term dependence regardless of policy signals.
…and Why China Needs the U.S.
China depends on the United States for two main reasons. First, despite its status as the world’s second-largest market for drugs after America, China remains a far less lucrative market than America’s. For example, its prescription drug sales are roughly one-sixth of America’s and around 80% of its domestic sales are of generics and older branded drugs (11).
At the same time, China’s state-insurance system suppresses drug prices by pooling hospital demand and forcing manufacturers into winner-take-most bidding rounds, often requiring price cuts of 50 percent or more to gain coverage (11).
In addition, structural pressures are pushing Chinese firms to look to the U.S. for funding (Figure 3). Beijing’s national insurance scheme has forced steep price cuts on innovative drugs, eroding domestic margins. Moreover, multiple economic shocks to the Chinese economy further constrained local financing in recent years, leaving many biotechs reliant on foreign licensing to gain funding (2,14).
FIGURE 3
The incentives now align: U.S. drug companies want cheap, fast early-stage assets, and Chinese firms need outside capital. The result is a self-reinforcing licensing pipeline that is shifting the center of gravity in drug discovery toward China. The country’s share of global innovative drug candidates in clinical trials has climbed from 8% in 2018 to 30% today, while the U.S. share has dropped from 47% to 36% (15).
In practice, Chinese firms handle the cheap, fast early-stage development, while U.S. multinationals pick up the far more expensive Phase 3 global trials required for FDA and European approval. The result is a pipeline where discovery occurs in China, and U.S. companies finance the costly late-stage work—shifting more of the world’s drug-innovation base toward Beijing’s industrial strategy (16,17).
National Security Risks of Deeper U.S.-China Biotech Integration
There are numerous national security risks associated with the entrenchment of the U.S. and Chinese biotech sectors including:
MCF Exposure – China’s biotech ecosystem is structurally integrated into the country’s MCF system, which merges commercial research with their military—the People’s Liberation Army (PLA)—objectives (5). U.S. companies operating in China inevitably interact with firms identified by Congress and the Pentagon as military-linked. Beijing-based WuXi AppTec, for example, has been flagged as a potential MCF contributor even as it develops or manufactures ingredients for about one-quarter of U.S. drugs, all while receiving over $30 million in state tax incentives to expand in Delaware and Massachusetts (18). By revenue, WuXi is one of the top five drug development and manufacturing companies worldwide and two-thirds of its earnings came from the United States (19,20). Likewise, the House Select Committee on the CCP has warned that BGI Group, a PLA-affiliated genomic firm already on the Pentagon’s military-company list, is operating hidden U.S. subsidiaries such as Innomics and STOmics to evade scrutiny (21). The Committee further highlighted Origincell, Vazyme Biotech, and Axbio—each linked to PLA research funds or state-backed industrial programs—underscoring that U.S. industry is becoming enmeshed with a Chinese biotech ecosystem that Washington itself considers a strategic arm of the CCP.
Genomic Data Risks – The National Counterintelligence and Security Center has warned that BGI and other Chinese firms are collecting genetic data from around the world as part of Beijing’s push to build the world’s largest bio-database (20). BGI’s neonatal test, co-developed with the PLA, has already harvested DNA from millions globally, including Americans. Intelligence officials caution that once U.S. genomic data enters China’s systems, it can be exploited for military research, population-level surveillance, targeted biological programs, or synthetic-biology capabilities aligned with the CCP’s goal of “biological dominance” (5,20).
Undermining the U.S. Innovation Base – U.S. licensing of Chinese drugs diverts capital from American biotech hubs in San Francisco, Cambridge, and North Carolina’s Research Triangle (9). The domestic pipeline depends on this investment, but as early-stage innovation shifts to subsidized, PLA-aligned Chinese labs, the U.S. risks outsourcing the front end of its pharmaceutical ecosystem to its biggest geostrategic adversary. This can afford the CCP opportunities to weaponize a critical industrial supply chain against the United States (6).
Policy Solutions: How the U.S. Can Reduce Dependence on China’s Biotech System
A credible strategy to counter China’s state-directed biotechnology system must restrict exposure to PLA-linked firms, rebuild the domestic research base, modernize FDA pathways, and limit the flow of U.S. capital and IP into the Chinese ecosystem. The following actions are essential.
1. Implement the ‘BIOSECURE Act’ to Block Federal Contracts With CCP-Linked Firms
Congress has now taken an important first step by enacting the BIOSECURE Act as part of the FY2026 National Defense Authorization Act (NDAA). The law restricts federal contracts and research funding from flowing to biotechnology firms tied to foreign adversaries, including entities linked to the Chinese Communist Party and its military-civil fusion system. Firms such as WuXi AppTec, BGI Group, MGI, Vazyme, and Axbio—identified by Congress and U.S. intelligence as CCP-aligned or PLA-linked—sit at critical chokepoints in the American biomedical supply chain, and U.S. taxpayer dollars should not be reinforcing their market position.
As CPA noted in its statement supporting its inclusion in the NDAA, the BIOSECURE Act correctly recognizes that biotechnology is both a national security asset and a strategic vulnerability. By ensuring that federal funding supports trusted domestic and allied producers, the law strengthens U.S. biomedical supply chains while reducing dangerous dependencies on hostile nations. However, while the BIOSECURE Act closes off federal procurement and research dollars, it does not address the broader private-sector licensing and investment flows that continue to finance China’s biotech ecosystem. As CPA has argued, the logic underpinning BIOSECURE should ultimately be extended across other essential industries – where similar dependencies on China have already hollowed out U.S. capacity—if the United States is serious about restoring economic resilience and strategic autonomy.
2. Create a Committee for Licensing Deals and R&D Partnerships With China
While the BIOSECURE Act restricts federal contracts and research funding, the United States still lacks any mechanism to review private-sector licensing and co-development deals between U.S. drugmakers and Chinese biotechs—the primary channel through which U.S. capital, intellectual property, and early-stage clinical advantages now flow to China. These transactions fall outside existing Committee on Foreign Investment in the United States (CFIUS) authorities, which are limited to mergers and acquisitions.
A CFIUS-style biotech review would close this gap by assessing whether licensing agreements transfer sensitive biological IP, genomic data, or early-stage research advantages to firms embedded in China’s military-civil fusion system. The National Security Commission on Emerging Biotechnology (NSCEB) has already urged outbound-investment rules to prevent U.S. capital from advancing Chinese biotechnologies with national-security implications. Without this oversight, U.S. firms will continue financing China’s biotech rise by default—outsourcing early innovation while retaining only the most expensive downstream risks at home.
3. Invest at Least $15 Billion to Rebuild Domestic Biotech Capacity
Invest at least $15 billion over five years to establish an Independence Investment Fund for early-stage firms and build pre-commercial biomanufacturing facilities similar to ‘CHIPS Act’ fabricators. These investments would anchor U.S. capabilities that are currently drifting offshore and ensure America does not outsource the front end of its drug-innovation pipeline to strategic competitors.
4. Reverse National Institute of Health Funding Cuts and Protect the U.S. Scientific Workforce
China is ramping up STEM training and basic research precisely as U.S. biomedical funding weakens. The National Institute of Health’s (NIH) $48 billion budget is the backbone of U.S. biopharma leadership, generating $94.6 billion in economic activity and supporting 300,000 researchers nationwide (8).
Yet federal proposals to cap universities’ indirect-cost reimbursement at 15%—down from roughly 40%—would remove $4 billion annually from U.S. labs according to the Center for Strategic and International Studies. Since the announcement, 20 universities have imposed hiring freezes and 33 have reduced biomedical PhD admissions. Reversing these cuts and restoring stable NIH funding is essential to maintain the talent pipeline China is aggressively expanding.
5. Reshore Clinical and Biomanufacturing Capacity
The U.S. should use Defense Production Act tools, targeted tax incentives, and procurement preferences to bring biologics manufacturing, cell-therapy production, and clinical-trial material supply chains back onshore. Without reshoring, U.S. firms remain dependent on CCP-linked contract development and manufacturing organizations for essential drug-development steps.
Conclusion
U.S. pharmaceutical companies are shifting the upstream engine of drug discovery to China, channeling more than $53 billion into Chinese biotechs since 2020 and increasingly filling American pipelines with compounds born in Beijing’s state-directed ecosystem. This trend is driven by China’s faster and cheaper early-stage trial environment, steep discounts made possible by China’s capital shortages, and the looming U.S. patent cliff that pushes multinationals to seek new assets abroad.
The national security risks are substantial: nearly 80% of surveyed U.S. biotechs now rely on Chinese manufacturing; China controls the early-stage innovation that anchors future medicines; and the firms at the center of this integration—WuXi, BGI, MGI, Vazyme, Axbio—operate within China’s MCF apparatus and, in some cases, are tied directly to PLA research and genomic-data collection efforts.
Meanwhile, U.S. drug dependence deepens as domestic R&D capacity erodes under stagnant NIH budgets, proposed cuts to research-cost reimbursement, and shrinking biomedical training pipelines. To avoid outsourcing the front end of America’s pharmaceutical ecosystem to its primary strategic competitor, the United States must enforce guardrails on licensing and investment, block federal contracts with CCP-linked firms, rebuild domestic research capacity, and lower the cost of early-stage development for American scientists.
The United States must protect the innovation base that underpins U.S. biopharmaceutical leadership or risk Beijing becoming the world’s default engine for the medicines of the future.
References
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Temple-West P. “Big Pharma is increasingly reliant on Chinese biotech advances.” Financial Times. July 22, 2025. https://www.ft.com/content/89285fd5-cd24-4772-a53d-0553cd37032d.
Gottlieb S. “How to stop the shift of drug discovery from the U.S. to China.” STAT. 2025. https://www.statnews.com/2025/05/06/how-to-stop-the-shift-of-drug-discovery-from-the-u-s-to-china/.
Morgan Stanley. “A Global Shift in Pharmaceuticals.” https://www.morganstanley.com/insights/articles/china-biotech-boom-generics-to-innovators.
International Security Advisory Board (ISAB). Report on Biotechnology in the People’s Republic of China’s Military-Civil Fusion Strategy. October 2024. https://www.state.gov/wp-content/uploads/2024/11/ISAB-Report-on-Biotechnology-in-the-PRC-MCF-Strategy_Final.pdf.
U.S.-China Economic and Security Review Commission. 2025 Annual Report to Congress. 2025. https://www.uscc.gov/annual-report/2025-annual-report-congress.
The Economist. “It’s not just AI. China’s medicines are surprising the world, too.” February 16, 2025. https://www.economist.com/business/2025/02/16/its-not-just-ai-chinas-medicines-are-surprising-the-world-too
Shivakumar S and Wessner C, Heng J. “The United States Cannot Afford Disarray as China Strengthens Its Biopharmaceutical Industry.” Mar 18, 2025. https://www.csis.org/analysis/united-states-cannot-afford-disarray-china-strengthens-its-biopharmaceutical-industry.
Gottleib, Scott. “The FDA should match China in speeding drug discovery.” The Washington Post. September 22, 2025. https://www.washingtonpost.com/opinions/2025/09/22/gottlieb-fda-drugs-discovery-speed-china/.
Olcott E, Kuchler H, and Sandlund W. “Chinese biotech shares surge as Big Pharma looks to license cancer treatments.” Financial Times. July 14, 2025. https://www.ft.com/content/1beb84a6-71c1-494f-8a6c-b10a5da8b01b.
The Economist. “Chinese pharma is on the cusp of going global.” November 23, 2025. https://www.economist.com/china/2025/11/23/chinese-pharma-is-on-the-cusp-of-going-global.
Young T. “How America Can Win the Biotech Race.” Foreign Affairs. October 25, 2025. https://www.foreignaffairs.com/united-states/how-america-can-win-biotech-race.
Gormley B. “U.S. VCs Race to Tap China’s Biotech Innovation.” Wall Street Journal. May 29, 2025. https://www.wsj.com/articles/u-s-vcs-race-to-tap-chinas-biotech-innovation-836b3dd1.
HUA A, Chen X, and Wei H. “Chinese pharma turns to global deals to cure capital crunch.” February 28, 2024. https://asia.nikkei.com/spotlight/caixin/chinese-pharma-turns-to-global-deals-to-cure-capital-crunch.
Olcott E. “Will the next blockbuster drug come from China?” Financial Times. Dec 2, 2025. https://www.ft.com/content/3bfe96d3-593c-498a-9da4-0c1ed359ff74.
Gottlieb S. “China’s edge over U.S. biotech was never scientific.” The Washington Post. Sept 22, 2025. https://www.washingtonpost.com/opinions/2025/09/22/gottlieb-fda-drugs-discovery-speed-china/.
Nathan-Kazis J. “China Becomes Source of New Cancer Treatments, in Threat to U.S. Drug Development.” Barron’s. https://www.barrons.com/articles/cancer-drugs-china-trade-tariffs-bb316ee5.
Jewett C. “Chinese Company Under Congressional Scrutiny Makes Key U.S. Drugs.” The New York Times. Apr 15, 2024. https://www.nytimes.com/2024/04/15/health/wuxi-us-drugs-congress.html.
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Barnes JE. “U.S. Warns of Efforts by China to Collect Genetic Data.” The New York Times Oct 22, 2021. https://www.nytimes.com/2021/10/22/us/politics/china-genetic-data-collection.html.
21.The Select Committee on the CCP. “Gallagher, Krishnamoorthi Expose Hidden BGI Subsidiary, Innomics, Operating in the US, Call on Pentagon to List Chinese Biotech Firms as ‘Chinese Military Companies.’” April 1, 2024. http://selectcommitteeontheccp.house.gov/media/press-releases/gallagher-krishnamoorthi-expose-hidden-bgi-subsidiary-innomics-operating-us.
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CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
The China Dependence Big Pharma Doesn’t Want Washington to See
KEY POINTS
For months, big U.S. pharmaceutical companies have told U.S. policymakers that the industry doesn’t rely on China for finished medicines. In comments to the Commerce Department, for example, the Pharmaceutical Research and Manufacturers of America (PhRMA) insisted that “most innovative medicines made in America” or imported from “reliable allies” pose no national-security risk – and that tariffs on pharmaceuticals would only undermine U.S. competitiveness (1). AstraZeneca went further, assuring the administration that it “does not import medicines from China” (2).
But this narrative obscures the true dependence of big U.S. drugmakers on China’s biopharma sector: U.S. drugmakers are rapidly shifting the front end of America’s pharmaceutical ecosystem (e.g. discovery, early-stage-development, and the IP engine) to China through a surge of licensing deals and cross-border partnerships (Figure 1).
FIGURE 1
During 2020-June 2025, big U.S. biopharma firms struck $53 billion worth in licensing deals with Chinese partners, led by Pfizer, Merck, AbbVie, Bristol Myers Squibb, and Regeneron (Table 1).
TABLE 1
Five years ago, U.S. pharmaceutical companies licensed virtually no drugs from China; by 2024, roughly one-third of new compounds entering American pipelines originated in Chinese labs, and analysts now project that China could account for 35% of all Food and Drug Administration (FDA) approvals by 2040, up from roughly 5% today (3,4).
In practice, Chinese firms handle the cheap, fast early-stage development, while U.S. multinationals finance the far more expensive Phase 3 global trials required for FDA and European approval. Nearly 80% of surveyed U.S. biotech companies now contract with Chinese-owned or China-based manufacturers, further embedding the American pharmaceutical system inside Beijing’s ecosystem (5,6).
This growing dependence on Chinese-origin intellectual property, early-stage clinical data, and upstream innovation represents a structural vulnerability for the United States. Unlike traditional supply-chain risks, this form of reliance funnels U.S. capital into a biotech ecosystem that U.S. intelligence agencies have already warned is deeply enmeshed in the Chinese Communist Party’s (CCP) military-civil fusion (MCF) strategy.
At the same time, biotechnology has become a core pillar of China’s Five-Year Plans—the 15th of which is set to commence from 2026-2030—with Beijing intentionally building a fully integrated pharmaceutical ecosystem designed to dominate global drug discovery and development. Unless the United States constructs a competitive ecosystem of their own, the next generation of blockbuster therapies will be manufactured in China, eroding Western market share, pricing power, and long-term strategic competitiveness.
Why U.S. Drugmakers are Turning to China…
Several structural forces are pushing U.S. drug companies to license an unprecedented volume of Chinese-origin assets. To start, early-stage drug development is dramatically cheaper and faster in China than in the United States. For example, China’s regulatory reforms since 2015 cut first-in-human trial approvals from 501 days to just 87 (7). This has largely driven surging clinical trials in China, which are estimated to be 50-100% faster than in the United States or Europe (8) (Figure 2).
FIGURE 2
These cost and speed differentials reflect a decade of regulatory accumulation, funding instability, and fragmented governance in the United States that has steadily raised the cost of preclinical and early clinical work at home.
Further, Beijing’s heavy subsidies, permissive oversight, and large pool of low-paid scientists allow companies to initiate and scale early-stage trials far faster and at a fraction of U.S. costs (9,10). Crucially, China is no longer limited to copying Western drugs. More than 40 percent of its pipeline now consists of fast-follower or first-in-class therapies, marking a shift from replication to original innovation (11).
China’s biotech market capitalization now exceeds $1.5 trillion—second only to the United States—and Beijing has built more than 100 state-financed biotechnology parks with world-class laboratories, subsidized equipment, and a swelling talent pool driven by reverse-brain-drain incentives (12). This structural advantage makes early-stage development both cheaper and more scalable than in the U.S.
Favorable deal terms also play a role. Venture capital has dried up in China, forcing Chinese biotechs to license assets early to secure cash, often at steep discounts (13). This allows U.S. companies to transfer risk by back-loading milestone payments instead of paying high upfront costs. The U.S.–China Economic and Security Review Commission reports that the total value of drugs licensed worldwide from China surged 15-fold to $48 billion in 2024, with many Western labs—including American firms—now turning to Chinese partners to run early-stage testing because of their price and speed advantages (6).
A looming U.S. patent cliff is also accelerating the trend. Big Pharma faces between $140–$200 billion of annual revenue losses by 2030 as blockbuster drugs expire, forcing companies to aggressively refill their pipelines (6,7). To that end, nearly a third of large licensing deals (worth $50 million or more) struck by U.S. firms last year were with Chinese biotechs—up from virtually none in 2020 (7,9).
This pressure is structural: U.S. multinationals need a constant flow of new assets to sustain revenue growth, and China has become the lowest-cost, fastest source of replenishment. Unless the United States builds a competitive early-stage ecosystem at home, Big Pharma will continue turning to China by default, locking in long-term dependence regardless of policy signals.
…and Why China Needs the U.S.
China depends on the United States for two main reasons. First, despite its status as the world’s second-largest market for drugs after America, China remains a far less lucrative market than America’s. For example, its prescription drug sales are roughly one-sixth of America’s and around 80% of its domestic sales are of generics and older branded drugs (11).
At the same time, China’s state-insurance system suppresses drug prices by pooling hospital demand and forcing manufacturers into winner-take-most bidding rounds, often requiring price cuts of 50 percent or more to gain coverage (11).
In addition, structural pressures are pushing Chinese firms to look to the U.S. for funding (Figure 3). Beijing’s national insurance scheme has forced steep price cuts on innovative drugs, eroding domestic margins. Moreover, multiple economic shocks to the Chinese economy further constrained local financing in recent years, leaving many biotechs reliant on foreign licensing to gain funding (2,14).
FIGURE 3
The incentives now align: U.S. drug companies want cheap, fast early-stage assets, and Chinese firms need outside capital. The result is a self-reinforcing licensing pipeline that is shifting the center of gravity in drug discovery toward China. The country’s share of global innovative drug candidates in clinical trials has climbed from 8% in 2018 to 30% today, while the U.S. share has dropped from 47% to 36% (15).
In practice, Chinese firms handle the cheap, fast early-stage development, while U.S. multinationals pick up the far more expensive Phase 3 global trials required for FDA and European approval. The result is a pipeline where discovery occurs in China, and U.S. companies finance the costly late-stage work—shifting more of the world’s drug-innovation base toward Beijing’s industrial strategy (16,17).
National Security Risks of Deeper U.S.-China Biotech Integration
There are numerous national security risks associated with the entrenchment of the U.S. and Chinese biotech sectors including:
Policy Solutions: How the U.S. Can Reduce Dependence on China’s Biotech System
A credible strategy to counter China’s state-directed biotechnology system must restrict exposure to PLA-linked firms, rebuild the domestic research base, modernize FDA pathways, and limit the flow of U.S. capital and IP into the Chinese ecosystem. The following actions are essential.
1. Implement the ‘BIOSECURE Act’ to Block Federal Contracts With CCP-Linked Firms
Congress has now taken an important first step by enacting the BIOSECURE Act as part of the FY2026 National Defense Authorization Act (NDAA). The law restricts federal contracts and research funding from flowing to biotechnology firms tied to foreign adversaries, including entities linked to the Chinese Communist Party and its military-civil fusion system. Firms such as WuXi AppTec, BGI Group, MGI, Vazyme, and Axbio—identified by Congress and U.S. intelligence as CCP-aligned or PLA-linked—sit at critical chokepoints in the American biomedical supply chain, and U.S. taxpayer dollars should not be reinforcing their market position.
As CPA noted in its statement supporting its inclusion in the NDAA, the BIOSECURE Act correctly recognizes that biotechnology is both a national security asset and a strategic vulnerability. By ensuring that federal funding supports trusted domestic and allied producers, the law strengthens U.S. biomedical supply chains while reducing dangerous dependencies on hostile nations. However, while the BIOSECURE Act closes off federal procurement and research dollars, it does not address the broader private-sector licensing and investment flows that continue to finance China’s biotech ecosystem. As CPA has argued, the logic underpinning BIOSECURE should ultimately be extended across other essential industries – where similar dependencies on China have already hollowed out U.S. capacity—if the United States is serious about restoring economic resilience and strategic autonomy.
2. Create a Committee for Licensing Deals and R&D Partnerships With China
While the BIOSECURE Act restricts federal contracts and research funding, the United States still lacks any mechanism to review private-sector licensing and co-development deals between U.S. drugmakers and Chinese biotechs—the primary channel through which U.S. capital, intellectual property, and early-stage clinical advantages now flow to China. These transactions fall outside existing Committee on Foreign Investment in the United States (CFIUS) authorities, which are limited to mergers and acquisitions.
A CFIUS-style biotech review would close this gap by assessing whether licensing agreements transfer sensitive biological IP, genomic data, or early-stage research advantages to firms embedded in China’s military-civil fusion system. The National Security Commission on Emerging Biotechnology (NSCEB) has already urged outbound-investment rules to prevent U.S. capital from advancing Chinese biotechnologies with national-security implications. Without this oversight, U.S. firms will continue financing China’s biotech rise by default—outsourcing early innovation while retaining only the most expensive downstream risks at home.
3. Invest at Least $15 Billion to Rebuild Domestic Biotech Capacity
Invest at least $15 billion over five years to establish an Independence Investment Fund for early-stage firms and build pre-commercial biomanufacturing facilities similar to ‘CHIPS Act’ fabricators. These investments would anchor U.S. capabilities that are currently drifting offshore and ensure America does not outsource the front end of its drug-innovation pipeline to strategic competitors.
4. Reverse National Institute of Health Funding Cuts and Protect the U.S. Scientific Workforce
China is ramping up STEM training and basic research precisely as U.S. biomedical funding weakens. The National Institute of Health’s (NIH) $48 billion budget is the backbone of U.S. biopharma leadership, generating $94.6 billion in economic activity and supporting 300,000 researchers nationwide (8).
Yet federal proposals to cap universities’ indirect-cost reimbursement at 15%—down from roughly 40%—would remove $4 billion annually from U.S. labs according to the Center for Strategic and International Studies. Since the announcement, 20 universities have imposed hiring freezes and 33 have reduced biomedical PhD admissions. Reversing these cuts and restoring stable NIH funding is essential to maintain the talent pipeline China is aggressively expanding.
5. Reshore Clinical and Biomanufacturing Capacity
The U.S. should use Defense Production Act tools, targeted tax incentives, and procurement preferences to bring biologics manufacturing, cell-therapy production, and clinical-trial material supply chains back onshore. Without reshoring, U.S. firms remain dependent on CCP-linked contract development and manufacturing organizations for essential drug-development steps.
Conclusion
U.S. pharmaceutical companies are shifting the upstream engine of drug discovery to China, channeling more than $53 billion into Chinese biotechs since 2020 and increasingly filling American pipelines with compounds born in Beijing’s state-directed ecosystem. This trend is driven by China’s faster and cheaper early-stage trial environment, steep discounts made possible by China’s capital shortages, and the looming U.S. patent cliff that pushes multinationals to seek new assets abroad.
The national security risks are substantial: nearly 80% of surveyed U.S. biotechs now rely on Chinese manufacturing; China controls the early-stage innovation that anchors future medicines; and the firms at the center of this integration—WuXi, BGI, MGI, Vazyme, Axbio—operate within China’s MCF apparatus and, in some cases, are tied directly to PLA research and genomic-data collection efforts.
Meanwhile, U.S. drug dependence deepens as domestic R&D capacity erodes under stagnant NIH budgets, proposed cuts to research-cost reimbursement, and shrinking biomedical training pipelines. To avoid outsourcing the front end of America’s pharmaceutical ecosystem to its primary strategic competitor, the United States must enforce guardrails on licensing and investment, block federal contracts with CCP-linked firms, rebuild domestic research capacity, and lower the cost of early-stage development for American scientists.
The United States must protect the innovation base that underpins U.S. biopharmaceutical leadership or risk Beijing becoming the world’s default engine for the medicines of the future.
References
21. The Select Committee on the CCP. “Gallagher, Krishnamoorthi Expose Hidden BGI Subsidiary, Innomics, Operating in the US, Call on Pentagon to List Chinese Biotech Firms as ‘Chinese Military Companies.’” April 1, 2024. http://selectcommitteeontheccp.house.gov/media/press-releases/gallagher-krishnamoorthi-expose-hidden-bgi-subsidiary-innomics-operating-us.
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