Chinese Using Unfair Practices to Challenge US Dominance in Biopharma, Report Says

By Cathy He, Epoch Times
August 21, 2019 Updated: August 27, 2019

The Chinese regime is seeking to challenge U.S. dominance in biopharma by using a range of unfair means, a strategy that threatens global drug innovation, according to a recent report.

The regime has slated the biopharmaceutical sector for global expansion, as part of its ambitious “Made in China 2025” industrial plan, a report by Washington think-tank Information Technology & Innovation Foundation (ITIF) said. The plan aims to have the country become a high-tech manufacturing powerhouse by 2025.

To this end, the regime has deployed a “suite of unfair practices,” such as weak intellectual property (IP) protection for foreign drug makers, industrial policies that favor domestic firms, and stealing trade secrets, report author Robert Atkinson, president of ITIF, told The Epoch Times.

“It’s time to recognize that China is engaged in a race for competitive advantage in life sciences and seeks that advantage through unfair—as well as fair—means,” the report said.

Building Generics

According to Atkinson, China’s strategy involves two stages: In the short term, it will build a world-class generics industry to generate revenue. Then it will develop its own indigenous industry, eventually becoming a global leader in biotechnology.

The growth of the country’s generic industry has been fueled in part by weak IP protections, the report said.

For example, to gain approval for new drug in China—unlike in the United States and other developed countries—a company does not need to show that their drug doesn’t infringe on an existing patent.

“They have intentionally created an IP system that is biased in favor of Chinese generic firms,” Atkinson said.

“Their court system is stacked in a way that systematically is biased [against foreign firms]. When a foreign company would take a case for patent infringement, it’s striking … how little they win. Most of the time the Chinese generic company will win,” he added.

Such Chinese firms, Atkinson said, are “free-riding” off the investment of foreign biopharma companies and taking away their market share. This results in less U.S. investment for new drugs, to the detriment of global drug innovation, he said.

The Chinese generics market is “built upon the tens of billions dollars that Western drug companies have invested to develop new drugs.”

“That’s … a big challenge not just to U.S. drug companies, but ultimately to the pace of global and medicine innovation,” he said.

IP Theft

According to the report, economic espionage is also another tool employed by the regime to drive the development of their biopharma industry.

U.S. biopharma companies, including Abbott Laboratories and Wyeth, have also found themselves the target of Chinese hackers, while others have been victims of IP theft by rogue employees who then sell the information to Chinese competitors.

For instance, Chinese-American Yue Xue, a leading biochemist working at GlaxoSmithKline in 2018, pleaded guilty to stealing trade secrets from a research facility in Philadelphia in the hopes of launching a rival firm in China, funded in part by the Chinese regime.

In January, a former Chinese employee at a leading medical device company was convicted of stealing trade secrets. After stealing the IP, the former employee traveled to China and obtained financing from the Chinese government to open up a rival firm using the stolen information.

Keep Innovating

U.S. authorities should further crackdown on instances of trade theft by Chinese nationals, including those who do research at academic and research institutions, Atkinson said.

The report recommended more funding be directed to the National Institute of Health (NIH) so it can better police abuse by Chinese nationals who transfer IP from NIH-funded research to China.

The ongoing U.S.-China trade negotiations, Atkinson said, should also include regime’s trade abuses in the biopharma sector.

Critically, U.S. biopharma companies need to innovate faster to stay ahead of China, according to the report. Any measures to ensure affordability of medicines should thus not limit the ability of firms to invest in R&D to develop new drugs, the report said.

“The primary way the United States can compete with China and remain the world leader in life sciences is to continue rapidly developing new drugs,” said Atkinson.

“Developing the latest and best drugs requires robust investments in research and development, which policies like drug price controls would weaken.”

Atkinson said that since the regime’s strategy is currently largely based on copying, the more U.S. firms can do to develop better drugs, the more they can stay ahead.

In this way, “the Chinese could have all the generics they want, and it wouldn’t make a difference,” he said.

Follow Cathy on Twitter: @CathyHe_ET