When Foreign Investments in Pharma and Biotech Become a National Security Concern
Earlier this year,
Also this year, a bipartisan effort launched in Congress to pass a bill that would add biotech the Treasury’s outbound investment screening list. As part of this initiative, the Treasury would decide if agreements and investments with foreign companies, entities, or governments could pose a national security risk.
Pharmaceutical Executive spoke with John Standford, executive director of Incubate, about the rise of China as an R&D partner and the US government’s responses. According to him, years of investment in biotech innovation is starting to pay off for the country, and the US’ response is going to require a larger effort to solve our own issues first.
Pharmaceutical Executive: When does foreign investments in pharma and biotech become a national security concern?
John Stanford: I like to think of China not as a single problem or opportunity with only one lever. The most impressive conversations I’ve had about how to tackle this moment share a common thread: it’s nuanced, it’s complex, and we have to pull several levers. Most of all, we have to pull the lever that makes us more competitive. We have to stop inflicting wounds on our own ecosystem.
I think of China in three distinct buckets.
The first is supply chain, APIs and our ability to manufacture medicines. We learned this lesson all too well during COVID. I think there is wide consensus that for several decades we have let that capability slip, and it makes sense that we, as a country and as Western allies, should be able to produce the essential medicines our population needs. Making those chemicals domestically is complicated. There are real considerations around sourcing materials and siting chemical facilities in communities that will accept them, but those conversations are beginning to happen under this administration. The consensus in this bucket is clear: we need to be able to make these medicines either here or in countries that are not adversarial.
The second bucket is clinical trials. This isn’t exclusively a China phenomenon, but we have seen a strong and growing desire to run trials outside the US, driven by time and cost realities. Australia has made moves in recent years that make it very attractive to anyone who needs to run trials quickly just to determine whether an asset works. The UK has also expressed significant interest in leading in this area. In the earliest days of an asset, whether you’re the venture capitalist backing the company or the entrepreneur running it, you’re simply trying to flip a card and find out whether there’s anything there before moving on. The question is how we bring those trials back to the US. That is a long-term proposition requiring many levers. We’re not particularly good at enrolling patients into clinical trials, and paradoxically, our high standard of care means that fewer Americans are eager to participate. In countries without that standard of care, clinical trials can actually be more attractive to patients.
The third bucket is licensing, how we feel about acquiring technologies out of China. This is where the conversation gets most complex. There is significant skepticism about whether the US can effectively wall off Chinese science, and doing so would create a real opportunity for Europe, Japan, and others to move in. There is also an ethical dimension that hasn’t been fully reckoned with: if there are promising gene therapies being developed in China, and we say American patients have to wait until a US scientist can catch up, that is a genuine ethical quandary.
So we have three buckets (APIs, clinical trials, and licensing deals) each with different needs, different levers, and different implications for national security.
