The Starting Point of Drug Development Controlled by China

Rep. Daniel Moran, a member of the U.S. House China Task Force, emphasized that the threat from Chinese biotech should be addressed not in finished products, but in active pharmaceutical ingredients (APIs), early-stage research and development (R&D), clinical trials, and intellectual property (IP). Chinese companies have been supplying drug candidates based on fast patient recruitment and low development costs, leading U.S. pharma firms to increasingly rely on external sourcing rather than in-house discovery. While this boosts short-term productivity, it risks entrenching a structure where drug candidates and manufacturing capabilities become dependent on China.

Two-Thirds of Licensing Value is Chinese Assets

According to Evaluate data, Chinese-origin drug candidates are expected to account for over 67% of the total value of global licensing deals by 2026, a sharp increase from around 50% in 2025 and less than 5% in 2021. Reports citing data from China’s National Medical Products Administration also indicate that in the first half of 2026, Chinese biotech companies secured 81 overseas licensing deals worth up to USD 110B. While these figures largely include maximum milestone values, they clearly signal China’s transition from a low-cost R&D service provider to a key pipeline supplier for global big pharma.

Changing Bargaining Power Shown in Actual Deals

Merck & Co. (MRK) committed USD 588M upfront and up to USD 2.7B in milestones in 2024 for LaNova Medicines’ Phase 1 PD-1·VEGF bispecific antibody LM-299. AbbVie (ABBV) also offered USD 650M upfront, up to USD 4.9B in milestones, and a double-digit royalty tied to net sales in 2026 for RemeGen’s Phase 1 PD-1·VEGF bispecific antibody candidate. These deals reflect the rising valuation and bargaining power of Chinese assets, driven by the perception that next-generation combination mechanisms could challenge Keytruda’s pembrolizumab in the PD-1 market.

BINSA Creating Barriers to Capital Flows

The Biotech Investment National Security Act (BINSA), introduced by Chair John Moolenaar and Rep. Debbie Dingell, would include major Chinese biotech investments under the Comprehensive Overseas Investment National Security Act (COINS Act) for national security review. The committee has requested data from Pfizer (PFE), Merck & Co. (MRK), Eli Lilly (LLY), and AbbVie (ABBV) on their China-based clinical trials and asked the FDA to halt the use of clinical trial data from China if it has not undergone on-site inspections in the past 12 months. If enacted, BINSA and FDA policy requirements could simultaneously increase due diligence costs, U.S. clinical revalidation costs, and approval timelines for Chinese assets.

U.S. Countering with Tax and Manufacturing Incentives

The 2025 Working Families Tax Cuts allow 100% immediate expensing of eligible U.S. R&D costs and permanent full expensing for equipment and new factory investments. Bristol Myers Squibb (BMY) is building a USD 2.3B, 600,000-square-foot multimodal manufacturing complex in Houston, creating around 500 jobs, as part of its USD 40B U.S. investment plan over five years. Given the difficulty of offsetting China’s speed and cost advantages through regulation alone, the U.S. strategy centers on a long-term supply chain rebuild combining tax incentives, university research, and manufacturing infrastructure.