Chinese pharma's rapid rise: Why US drugmakers may become more dependent on China despite tensions
Yet when it comes to producing the next generation of breakthrough medicines, US drugmakers and their patients appear poised to grow more, not less, dependent on Chinese innovation
Highlights:
- China now runs one-third of global clinical trials
- US pharma increasingly depends on Chinese innovation
- Major Western firms sign billion-dollar China deals
- China moved into "first-in-class" medicines targeting new mechanisms
- Speeds drug development with vast patient pool
- Worked to lure back its "sea turtles"
- China forming "NewCos"—legally distinct US-based subsidiaries
China has rapidly emerged as a dominant force in global drug development, reshaping a pharmaceutical landscape long led by Western giants.
After the United States, China is now the world's second-largest developer of new medicines, with its companies running about one-third of all global clinical trials last year – up from just 5% a decade earlier.
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Its rise is most visible in critical research areas such as cancer, attracting investors who have driven Chinese biotech shares up by 110% this year, more than triple the gains of American peers, according to an article from The Economist.
In May, Pfizer – America's largest drugmaker – agreed to pay $1.25 billion in fees to China's biotech firm, 3SBio, for the rights to manufacture and sell an experimental cancer drug outside China, pending approval.
A month later, British pharma giant GlaxoSmithKline struck a $500 million deal with Chinese firm Hengrui for a lung-disease treatment, with options to acquire rights to 11 additional drugs that could ultimately be valued at as much as $12 billion if certain milestones are achieved.
Such partnerships are no longer rare. In the first half of this year, nearly one-third of all global licensing agreements signed by big pharma involved Chinese firms – four times the share in 2021.
For much of the past century, drug discovery belonged firmly to "big pharma" - the powerful conglomerate of Western firms headquartered in the US and Europe. But the sector is undergoing one of its steepest transformations.
Yet when it comes to producing the next generation of breakthrough medicines, US drugmakers and their patients appear poised to grow more, not less, dependent on Chinese innovation.
The major Western companies face some of the steepest "patent cliffs," with drugs expected to generate more than $300 billion in total revenue over the next six years, and will lose their patent protection by 2030.
To bridge this looming gap, American and European firms are intensifying their search for promising molecules worldwide, interestingly and increasingly finding them in China amid an awkward geopolitical moment.
The US remains locked in a simmering trade war with China and is pushing to reduce reliance on Chinese supply chains. Washington already worries about China's control over active pharmaceutical ingredients. Meanwhile, rumours continue to circulate that the White House plans to crack down on Chinese pharma, though no concrete steps have been taken.
What is clear is that despite geopolitical strains, and even amid rumours of a looming US crackdown, China's role in global drug discovery is expanding too rapidly for American pharma to ignore.
A decade of reinvention
Historically known for generics, ingredient manufacturing and conducting clinical trials for Western companies, China's drug industry has spent the past decade reinventing itself.
Regulatory reforms accelerated approval processes, giving priority reviews to drugs for critical conditions and aligning rules more closely with international standards.
Between 2015 and 2018, the workforce at China's drug regulator quadrupled, helping clear a backlog of 20,000 new drug applications in just two years. Approval time for human trials shrank from 501 days to 87. The impact was dramatic: in 2015, China approved only 11 treatments, mostly imports; by 2024, approvals had climbed to 93, with 42% developed domestically.
The government also worked to lure back its "sea turtles" – Chinese scientists and entrepreneurs who had studied or worked abroad. They returned with knowledge of foreign regulatory systems, biotech entrepreneurship and investor relations. Their entrepreneurial zeal was bolstered by rules making it easier to raise funds and to list on the Hong Kong stock exchange.
Progress soon followed. In November 2019, BeOne Medicines, formerly known as BeiGene, became the first Chinese biotech to win approval from the US Food and Drug Administration (FDA) for a cancer drug.
More approvals came in subsequent years. But the sector's defining moment arrived last September, when a lung-cancer drug developed by Akeso Bio outperformed Merck's blockbuster therapy Keytruda in clinical trials.
How China moved so fast
China's rapid rise stems from two main factors. First is the speed at which companies innovated to produce "fast followers" – drugs that improve the safety or delivery of existing treatments.
Building on these advances, firms moved into "first-in-class" medicines targeting new pathways and mechanisms. According to research published in Nature Reviews Drug Discovery by Zimeng Chen of Tsinghua University and colleagues, fast-follower and first-in-class drugs now account for more than 40% of China's pipeline.
Wang Xingli of Fosun Pharma said that working on fast-follower drugs gave the industry the "courage to do the first-in-class."
Second is China's unmatched speed, scale and low cost across the drug development process. Chinese firms can take a drug from discovery to human trials in about half the global industry's average time.
Clinical trials, normally the slowest phase, move faster thanks to a vast patient base and a wide network of trial centres. This approach has proven especially effective for developing antibody-drug conjugates, a promising cancer treatment.
One big-pharma executive said China's appeal lies in the sheer number of firms experimenting, adding, "You can pick the winners and improve the odds of approval."
While cancer remains central to Chinese biotech, companies are branching out. Weight-loss drugs have become a major frontier. Patents on semaglutide – the active ingredient in Novo Nordisk's Wegovy and Ozempic – expire in China next year, sparking a surge in generic preparations.
Yet Chinese firms are also innovating. Bloomberg Intelligence estimates that out of 160 obesity drugs in global development, about a third originate in China.
The domestic challenge
Despite its scientific progress, China's domestic drug market remains difficult territory for profits. McKinsey, a consultancy, estimates 2023 prescription-drug sales at around $125 billion – one-sixth of the US market.
Generics still dominate. New medicines make up just a fifth of sales, a figure that could rise to one-third by 2028. Even then, the market will remain highly price-sensitive.
State insurance pools hospital demand and forces manufacturers into aggressive price competition. To win coverage, drugmakers often must slash prices by half or more, or reconcile themselves to a smaller private-market share.
This dynamic explains why Chinese firms seek foreign markets. Licensing to Western drugmakers is the most common route. Increasingly, however, companies are forming "NewCos"—legally distinct US-based subsidiaries backed by international investors.
These entities spin off promising assets for development abroad. For Western partners, Chinese biotech looks attractively priced, the combined market value of listed Chinese biotech firms is less than 15% of their US counterparts. Upfront licensing payments tend to be two-thirds lower, and overall deal sizes are roughly half those of comparable global transactions.
The NewCo model also helps sidestep some political concerns, though challenges remain – especially around data privacy. Sharing patient data from Chinese clinical trials is complicated by privacy rules and extended review processes.
The FDA has taken a restrictive approach to approving drugs based solely on China-run trials. In June, the agency halted new clinical trials that exported Americans' genetic data to China.
Meanwhile, a US congressional committee report published in April 2025, co-authored by former Google CEO Eric Schmidt, warned that China's strength in drug discovery, combined with its advances in artificial intelligence, could enable Chinese firms to eclipse their American rivals.
A competitive future
Still, there are reasons for cautious optimism. Greater competition typically yields more treatment options at lower cost. For patients in poorer countries, long denied access to the latest therapies, China's rise could reduce disparities.
For Chinese firms, however, the true test will be breaking into new markets and clearing regulatory hurdles. As Wang of Fosun Pharma noted, most Western pharma giants took a century to reach their current scale. By that measure, he said, China's industry remains "at a very early stage."
