As U.S. lawmakers continue to scrutinize the consequences of China’s expanding role in biotech innovation, industry insiders have been left debating how they can navigate this shifting landscape—or even whether biotechs should abandon China altogether.
The latest complication comes from Rep. John Moolenaar (R-MI), chair of the U.S. House Select Committee on China, who fired off letters to four Big Pharmas last week. The allegations in the letters ranged from human rights violations in a specific region of the country to concerns about inadvertently aiding China’s military.
The letters are the latest salvo in the political debate about China’s growing prominence as a source of new drugs for U.S. companies. Other strategies to temper this growth have included an ongoing discussion about limiting investment in Chinese biotechs via an amendment to the COINS Act.
“Most investors have viewed what China's done in terms of enabling a rapid path to clinical development and clinical proof of concept as positive,” Omar Khalil, managing director at early-stage life sciences VC firm Santé Ventures, told Fierce.
“On the other hand, the longer-term implications on U.S. competitiveness from a biotech standpoint and losing that capability here in the U.S. has created some polarization,” Khalil added. “Certainly, every investor I've talked to has been wrestling with it.”
Last week’s letters went out to four U.S.-headquartered Big Pharmas, namely Pfizer, Merck & Co., Bristol Myers Squibb and AbbVie. In the letters, Moolenaar noted that, according to the federal trials database, these companies all operate clinical trials in the Xinjiang region.
The committee’s letter to BMS described the autonomous Xinjiang territory in northwest China as the “epicenter of the [Chinese government’s] genocide targeting Uyghurs and other ethnic and religious minorities.” In 2021, Congress responded to the allegations of human rights abuses by passing the Uyghur Forced Labor Prevention Act to prevent goods made with forced labor in that region from entering the country.
The committee’s letters also allege that some trial sites are at medical centers and hospitals affiliated with China’s military. These studies “raise significant questions related to how data developed through clinical trials at those hospitals could fuel the [Chinese Communist Party’s] military biotechnology research, experimentation and capability development,” Moolenaar wrote in his letter to Pfizer.
While Pfizer, BMS and AbbVie hadn’t responded to questions from Fierce about the letters by time of publication, Merck said in a statement that “patient safety and ethical integrity are the foundational priorities of our clinical research program worldwide.” The company also explained that it follows global human rights standards such as Good Clinical Practice (GCP) and the Council for International Organizations of Medical Sciences.
“We look forward to a collaborative discussion with the Committee on advancing U.S. biotechnology innovation and continuing to ensure ethical clinical trials worldwide,” Merck added.
While the letters detail dozens of trials conducted in the Xinjiang region by those four Big Pharmas, a quick search of the federal trials database shows that these companies are far from alone. Other major U.S.-headquartered drugmakers like Johnson & Johnson, Eli Lilly, Amgen and Regeneron appear to have done the same, as well as European Big Pharmas like Bayer and Novartis.
Beyond these household names, it also appears that Chinese companies that have secured licensing deals with U.S. companies have been running trials in Xinjiang. They include Hengrui, which signed a $15 billion licensing deal with BMS in May for 13 early-stage assets, as well as supplying the obesity therapies behind Kailera Therapeutics’ record-breaking IPO in April.
However, Moolenaar explained in the letters that the current scrutiny does not stretch to early-stage clinical trials conducted by Chinese biotechs who have since licensed drugs to U.S. companies.
‘Wasting time and money’
Still, not all companies that have dealings in China have the resources to navigate these newly choppy waters, and the increased oversight risks limiting smaller companies’ ability to do business there.
A spokesperson from a biotech industry group—who spoke on condition of anonymity for fear of political repercussions—pointed out that it’s easier for Big Pharmas to absorb the costs of responding to changing political winds relative to their smaller biotech counterparts.
“It is difficult for any business to deal with mass uncertainty and constant changing of goal posts and what's acceptable,” they told Fierce. “If every time you turn around there's a new restriction and you have to start all over, that's wasting time and money.”
Santé Ventures’ Khalil agreed that responding to the shifting political rhetoric is “going to be a huge distraction and a huge expense” for smaller drug developers who are focused on raising capital.
“It's one thing for these letters to go to a big company, but for biotech startups, their goal is trying to get to clinical proof of concept so they can survive,” he said.
“Spending a lot of time, effort and money [to] avoid legal implications for running those trials is going to be a huge distraction and a huge expense,” Khalil added. “One may question whether the savings that you expect from running the trial in China are even worth it.”
While Khalil said he isn’t aware of anyone definitively stopping dealing with China, the scrutiny raises the diligence bar for biotechs to be confident that their trial site won’t end up on a blacklist at some point down the line.
Khalil said he is already hearing conversations with other VC funders and small biotechs about what it would look like to move trials to Australia, Japan, Singapore or Europe.
“That's becoming more of an emerging dynamic, and I think letters like this will probably accelerate some of that thinking,” he said. “Instead of doing that initial clinical trial in China, does it make sense to do it in Australia, South Korea or Japan, where there will be less geopolitical risk?”
One of the major attractions of running trials in China is their relative speed and cost compared with the U.S. While the FDA is attempting to speed up the domestic trial process, Khalil suggested that in the meantime the money will flow to where it can be spent most efficiently.
RA Capital Managing Partner Peter Kolchinsky, Ph.D., told Fierce that there are still plenty of options for those who want to do business ethically in the Chinese trial market.
"There are clinical trial sites in China that 1) abide by China’s own GCP standards, which are largely harmonized with FDA standards, and 2) are subject to inspection by the FDA,” Kolchinsky said.
“These therefore represent viable and ethical options for clinical development,” he added.
AI-driven drug discovery company Insilico has extensive dealings with Chinese biotechs and has bases in both China and the U.S. The company’s CEO and founder Alex Zhavoronkov, Ph.D., said that handcuffing innovation by limiting business in clinical trials is no way to get ahead. He also voiced skepticism that the Big Pharmas’ trials had anything to do with human rights abuses.
“Allegations of human rights violations are absolute nonsense,” Zhavoronkov told Fierce. “It's just a reason to explain to your own people why you are not making drugs cheaper and faster with a higher probability of success.”
“You cannot compete in the UFC by restricting certain punches,” he added. “If you want to compete with China, you need to compete on innovation, so you need to genuinely invent and deregulate.”