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Introduction
Introduction Recently, the US government plans to use more than $2 billion to support the development of the local biomedical industry to reduce dependence on
foreign supply chains.
Many analysts believe that it is almost impossible
for the US government to cut China in the entire industrial chain of biomedicine.
Written by | Anna Song is responsible for editing | Qian Wei
Written by | Anna Song is responsible for editing | Qian Wei Metoprolol can fight high blood pressure; Furosemide (a potent diuretic) is used to treat congestive heart failure and liver disease; Midazolam is essential before a doctor puts a patient on a ventilator; Azithromycin, on the other hand, is used to fight infection
.
All of these drugs are classified as essential by the U.
S.
Food and Drug Administration (FDA), but they are not manufactured
in the United States.
Now, the U.
S.
government wants to set about changing that
.
On September 14, the White House hosted a biotechnology and biomanufacturing summit, announcing that multiple departments and agencies would use more than $2 billion to advance an executive order
by President Biden to support indigenous industries.
On September 14, the White House of the United States held the | of the Biotechnology and Biomanufacturing Summit Source: whitehouse.
gov
The White House says the U.
S.
is overly dependent on foreign materials and bioproduction, and past offshoring of key industries, including biotechnology, threatens the U.
S.
ability to
access materials such as vital chemicals and APIs.
"The plan will advance biomanufacturing and replace weak supply chains abroad with strong domestic supply chains
.
"
The news immediately caused a reaction from the domestic capital market, because many Chinese pharmaceutical companies are deeply involved in the pharmaceutical industry
in the United States.
For example, WuXi AppTec, a CRO giant that provides pharmaceutical manufacturing, research and development and other services to multinational pharmaceutical companies such as Johnson & Johnson, fell in stock on September 13
.
The biotechnology industry is becoming another battlefield
in the Sino-US science and technology war.
However, many industry insiders believe that it is almost impossible for the US government to cut off from China in the entire industrial chain of biomedicine, and due to the shortage of industrial talents and the huge scale of investment in factory construction, $2 billion is far from enough to encourage multinational companies to move all outsourcing services to the mainland
.
In fact, just as China wants to solve the technological "neck jam", both governments have begun to put more emphasis on national security issues in industrial development, but can this shake up the highly globalized market structure of the medical industry?
Does the coronavirus make biopharmaceuticals a national security issue?
Does the coronavirus make biopharmaceuticals a national security issue? This spring, when Shanghai, an international hub for biomedical and medical device R&D and turnover, was shut down due to the pandemic, doctors in China and the United States felt first-hand the disruption of global supply
chains.
In China, due to the obstruction of shipping, some doctors said that the artificial blood vessels he needed in daily surgery had incomplete models, longer delivery times and even out of stock, which had a greater impact on the operation, because almost all artificial blood vessels needed to be imported
.
Across the ocean, the Washington Post and other media reported in May that after China temporarily closed a GE Healthcare plant that makes contrast agents, U.
S.
doctors prioritized treating only the most serious patients, and postponed
treatment needs for non-urgent appointments.
Contrast is a solution of iodine that medical personnel inject into blood vessels so that devices such as CT scanners or fluoroscopy machines can see what's going on in the body, and are a very commonly used medical product
.
In a 2021 study, Tony Sardella, a senior research consultant at the University of Washington's Olin School of Business, and others noted that in many cases, drug shortages are not urgent because international supply chains are largely resilient enough to replenish them
.
But during the global pandemic, when borders were closed and governments or private businesses left long-term shortages of medicines within their borders
, the problem began to become acute.
"Once an outbreak occurs, a public health issue becomes a national security risk
.
"
Among them, the volatility of the Chinese market is particularly critical
to the stability of the supply of medical supplies in the United States.
In 2020, an analysis by the U.
S.
Foreign Affairs Committee titled "COVID outbreak could disrupt U.
S.
drug supply" noted that since the 1990s, U.
S.
companies have increasingly imported drugs from India and China, where ingredients are cheaper and production is less
regulated.
As a result, the United States is now heavily dependent on Chinese and Indian drug supplies
.
The article cites FDA data that China is the second largest exporter of drugs, biological products or natural medicines to the United States, while the United States is China's largest export market
for medical devices.
According to inaccurate estimates, about 80% of the basic ingredients used in U.
S.
medicines, known as drug ingredients (APIs), come from China and India
.
Generic drugs account for 90 percent of the drugs Americans take, and the U.
S.
also relies on India and China for generic drugs
.
According to 2018 data from the U.
S.
Department of Commerce, Chinese pharmaceutical companies account for 97% of the antibiotic market and more than 90% of the vitamin C market
in the United States.
Among the drugs imported from the United States, 95% of ibuprofen, 91% of hydrocortisone (also known as cortisol), 70% of acetaminophen, and 40%~45% of heparin are all from China
.
The latest data compiled by Chad Bown of the Peterson Institute for International Economics shows that nearly half of the personal protective medical equipment in the United States, including masks, goggles and medical gloves, comes from China
.
In addition, Pfizer's main suppliers of Paxlovid's new crown drug are China's Clarion and Porton Joint Stock Co.
, Ltd.
, which received production orders
of about 9.
3 billion and 5.
7 billion yuan from Pfizer in 2021, respectively.
In light of this, the aforementioned article suggests that the United States should consider expanding the production capacity
of factories that produce APIs in the country.
In the long run, U.
S.
pharmaceutical companies should also rethink their supply chains, including changing the practice of "instant replenishment" and diversifying the supply of APIs to reduce dependence on
Chinese and Indian manufacturers.
Although the United States has one of the strongest biotechnology industries in the world, some high-tech production has moved abroad
, Bloomberg wrote in an article published on September 13.
According to the "100-day supply chain review" document released by the United States in June 2021, as of March of that year, 52% of the preparation production facilities and 73% of the API production facilities in the United States were outside the United States, of which 6% were preparation production facilities in China and 13%
were API production facilities.
In fact, as the relationship between the United States and China has changed, there has been talk in recent years about how to strengthen the independence of U.
S.
biomanufacturing as part of national security, and the pandemic has heightened the urgency
of the issue.
Back in early 2020, the Financial Times pointed out in an article "US lawmakers push to move the healthcare supply chain back from China" that how the United States will persuade companies to move the production of the pharmaceutical industry to the local area in the face of strong opposition to this idea by local companies is the biggest problem
.
According to the report, while the trade body "Phrma", which represents pharmaceutical manufacturers in the United States, agrees on the need to explore ways to "encourage broader domestic drug development and manufacturing", the agency added that changing just one element of the supply chain could take years and entail significant costs
.
Rosemary Coates, director of the Reshoring Institute, an organization that helps companies move their supply chains back to the United States, said companies will only consider relocating
if it is financially beneficial.
Why $2 billion is a drop in the bucket? "Biomedical production and outsourcing of this high-end manufacturing industry is basically unlikely to be transferred back to the United States, because the industrial chain has been formed for many years, and the dependence of the United States on overseas, including China's
biomedical and chemical API manufacturing industries, is difficult to change.
" Wang Haoran, founder of Nuland Biologics, who once worked for a US pharmaceutical giant, said
bluntly.
Like the industrial chain of other high-tech industries such as mobile phones and electronic products, in the global division of labor, China has undertaken more manufacturing and assembly work
in the middle and lower reaches.
In the pharmaceutical sector, an industry insider said that the United States prefers to engage in core links
of the value chain such as research and development and patent applications at home due to labor costs and environmental regulatory pressures.
Since the beginning of the 1970s, with the complexity of drug research and development in the United States and the fierce competition in the pharmaceutical industry, the professional outsourcing agency CXO in the industrial chain came into being, corresponding to drug research and development, production, sales and other links, CXO is mainly divided into CRO (contract research organization), CMO (contract production organization), CDMO (contract research and development production organization), CSO (contract sales organization) and other different types
.
They are a product of the globalization of the biomedical industry and are slowly moving
from the United States to other countries.
In 1999, Li Ge, who is well-known in the field of global medicinal chemistry, returned from the United States to study the Chinese market, and the following year founded WuXi AppTec, a CRO giant enterprise in Wuxi, Jiangsu Province
.
It was also in those years that CXO companies such as Kanglong Chemical, Tigermed and Clarion were established
.
In the past two decades, this emerging industry has developed rapidly in China and has occupied an important place
in the global industrial chain division of labor.
Zhang Dan, co-founder of Kunling Pharmaceutical, told Intellectuals that China has trained many excellent college students and graduate students, and these personnel have undertaken high-level manufacturing, clinical trials and other outsourcing services
at a lower cost.
In the industry, this is known as China's "engineer dividend"
.
"As an intellectual and technology-intensive industry, the competition of the innovative pharmaceutical industry is the competition
of talents.
" Wang Haoran said that so many universities in China train a lot
of technicians in chemistry, biology and other disciplines every year.
The reserve of industrial workers in China's potential skilled biomedical industry may be more than 10 times that of the United States, and China's biomedical industry chain is still cultivating such high-quality skilled employees, which is huge
.
On the contrary, due to the hollowing out of the relevant industrial chain, the United States lacks the accumulation
of these talents.
Wang Haoran said that if you want to start from scratch, it is difficult to make up for the gap without 5 or 10 years of continuous investment and a virtuous circle
.
For example, last year in the US domestic vaccine manufacturing industry, there were several cases of vaccine raw materials being mixed and the production environment was unqualified, resulting in a large number of vaccine invalidation
.
According to US consulting firm Frost & Sullivan, the global CRO market size was about $79.
6 billion in 2021, and the global market size is expected to reach $95.
2 billion by 2023, with a compound annual growth rate of 8.
1%; During the same period, China's CR0 compound annual growth rate was 29.
9%, much higher than the global market growth rate
.
In August, McKinsey reported that biotech companies were worth $180 billion in the total market capitalization of China-related companies listed on the world's major stock exchanges, while CRO/CDMO companies had a total market capitalization of $176 billion
.
Kunling Pharmaceutical, of which Zhang Dan is the co-founder, is also a clinical CRO organization
serving biomedical and medical device customers.
He said that compared with other outsourcing institutions, CROs that mainly undertake clinical trial services will not be affected by Biden's policy
.
Some clinical trial data carried out in China can support the marketing approval of a new drug or medical device of multinational pharmaceutical companies and enter the Chinese market, unless a pharmaceutical company completely abandons the
Chinese market, it will not easily decide not to carry out clinical trials in China.
The McKinsey report pointed out that with its advantages in talent pool, drug development and commercialization prospects, China has become an important and closely integrated part of
the global biopharmaceutical industry.
For example, China accounts for a large share
of the R&D trials of the world's 25 largest biopharmaceutical companies.
As of June 2021, China is about 21%
involved in the Phase III clinical trials being conducted by these companies.
Access to a large number of patients who have never been treated is an attraction in China, and more and more clinical trial centers in China meet international quality standards
.
In this case, a number of practitioners in the field of biomedicine told Intellectuals that the Biden administration's latest initiative has not had such an impact
on the industry.
"I think the market is over-reactive in the short term, and in the long run, maybe a little bit of an impact, but not too much
.
Because the $2 billion mentioned by the US government in the initiative is a drop in the bucket for multinational pharmaceutical companies, it is simply not enough to mobilize all companies to move the industrial chain back to the United States
.
Zhang Dan said
.
Rosemary Coates, head of an agency that helps companies move their supply chains back to the United States, explains that one way companies can bring some of their supply chains back to the United States is by automating parts of their supply chains to offset high labor costs
in the United States.
However, this means that a lot of money
is required upfront.
On the other hand, it is not as simple as turning off the lights for multinational enterprises leaving China, and there are follow-up matters
such as the performance of labor contracts.
Tony Sardella, senior research advisor at the University of Washington's Olin School of Business, and others acknowledge that there is some concern about the idea of bringing more of the drug manufacturing industry back to the U.
S.
, not the least of which is that all drugmakers — both foreign and domestic — are dependent on APIs, which requires significant capital investment in large chemical plant facilities
.
People-to-people exchanges should not be decoupled In fact, in the field of globalization, the dependence of the Chinese and American medical industry is mutual
.
For example, while China is taking on more and more clinical trials by international pharmaceutical companies, biopharmaceutical/biotech companies from China are also increasing clinical trials in markets such as Australia, the United States or the European Union to help their products go global
.
Liu Jianan is the CTO
of an innovative medical device company in China.
He told Intellectuals that if you go back five years, it was an era
of globalization and close connection.
According to business logic, his company will source the corresponding parts
in countries around the world as needed.
If it were not for factors such as international relations, considering replacing U.
S.
parts suppliers would not have been a priority for the company
.
Liu Jianan said that by transferring some low-value-added industrial links such as the assembly of medical devices to China, the United States has gradually abandoned this position in the industrial chain, making it dependent on
China.
At the same time, the competitiveness of a certain product industry chain through independent innovation was actually China's weakness
in the past.
In terms of biomedicine, some high-end instruments and equipment, reagents, consumables, etc.
in China also rely on imports
.
Founded in 2011, United Imaging Medical was listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange on August 22 this year, with a market value of more than 150 billion yuan, becoming one of the giants in
the domestic medical device industry.
According to the prospectus of United Imaging Imaging Medical, core components such as tubes and high-voltage generators for the production of CT products, X-ray tubes, high-voltage generators and flat panel detectors for XR products, and magnetrons for the production of RT products still need to be purchased from overseas suppliers such as Philips, Wanrui and Canon, and in the context of intensified international trade frictions, the core components of United Imaging Medical are at risk
of unstable supply and even price fluctuations.
Now, the most cost-effective and efficient solution from the economic point of view, such as social division of labor and complementary advantages, is no longer the only logic, and the external environment has become an important decision-making consideration
outside business.
In addition to looking for alternative suppliers in other countries, some domestic medical device manufacturers, including Liu Jianan's company, have been actively carrying out technical research in recent years to help cultivate domestic upstream parts suppliers, solve the "stuck neck" problem of core devices, and promote the diversification
of the supply chain.
The founder of a medical company that aims to break through a certain "stuck neck" technology in China told Intellectuals that not only in the medical industry, but also in many other industries, China and the United States are complementary and mutually demanding
.
But national security has always affected business activity
.
For example, textiles are completely uncompetitive in the field of manufacturing in the United States, but the US Congress and government still fund the textile departments of several universities in the country every year, and support a very small number of textile enterprises, aiming to retain the fire of the textile industry in the United States
.
In his opinion, in the field of medicine, due to cost considerations, the commission of research and development by Chinese enterprises may not be completely canceled, but the gradual reduction may be a high probability trend
.
Similarly, China will adopt a similar approach, for example, many hospitals now require medical device procurement to be skewed towards domestic products, even if the quality of domestic devices is temporarily different
from imported products.
Although domestic substitution in the field of medical devices has been carried out for a decade or two, Fan Yubo, dean of the Institute of Medical and Engineering Inter-innovation of Beijing University of Aeronautics and Astronautics and director of the Beijing Center for Advanced Biomedical Engineering, said in an interview with the media this year that more than 80% of China's high-end medical equipment still relies on imports
.
Some medical devices seem to be localized, but they are mainly at the "assembly/assembly" level, and their core technology, materials or core components are still imported
.
In May this year, the National Development and Reform Commission pointed out that by 2035, the comprehensive strength of China's bioeconomy should be in the forefront of the world, and it is necessary to coordinate the development of the bioeconomy and biosecurity guarantees, and strive to prevent and respond to biosecurity risks
that may affect the development of the bioeconomy.
In the "Made in China 2025" issued by the State Council in 2015, biomedicine is listed as a strategic priority together with a new generation of information technology, high-end equipment, new materials, etc.
, specifically, including the development of new products of chemical drugs, traditional Chinese medicine, and biotechnology drugs for major diseases, and improving the innovation ability and industrialization level of medical devices
.
For this new situation, which needs to reduce its dependence on US technology, Liu Jianan believes that it is a new opportunity for companies to re-examine their position in the industrial chain and accumulate more technology to cope with risks
.
But he also said that on a larger level, globalization is still the best solution for the whole, especially for multinational companies, to limit the industrial chain to their own country, the challenges and costs are completely different from small innovative companies like him
.
"What the U.
S.
and China are doing is the opposite: the U.
S
.
wants to move this low-end industry back home, and China needs to develop high-end industries at home, both of which are very difficult and equally difficult.
" Wang Haoran bluntly said that the core is the talent problem, China lacks enough real high-end talents, while the United States does not have a large number of personnel
to undertake low-end jobs.
If the two sides do not flow in industry and talent, this status quo is difficult to solve.
In that atmosphere, Mr.
Wang said, it has become increasingly difficult
for his company to communicate with its American counterparts these days.
For example, he originally hoped to have technical exchanges with American companies in terms of nucleic acid drug loading and peptide drug delivery and look for possible cooperation opportunities, but now the other party is becoming more and more cautious.
"Now due to various factors such as the epidemic, people-to-people exchanges have almost stopped, which is a pity
.
"
Ding Sheng, founding dean of Tsinghua University's School of Pharmacy and director of the Global Health Drug Research and Development Center (GHDDI), told Intellectuals that the field of medicine and health is related to the life and health of individuals, and it is difficult to truly achieve forced decoupling, because the industry and the private sector want to actively cooperate
.
For example, a few years ago, some large biomedical and biotechnology associations and universities in Europe and the United States issued public statements, emphasizing the need to strengthen exchanges and oppose decoupling
.
However, he also pointed out that in the future, in terms of innovative drugs, China should contribute more "0 to 1" breakthroughs, and share some basic platform resources for the world, instead of always following behind to do some follow-up and amplification research and development
.
In this way, developed countries will not feel that they have done the most difficult part, but they have not received the corresponding value reflected in the industrial chain, so that China can better participate in global cooperation
.
As this article was written, a piece of good news came: on the evening of October 7, the official website of the U.
S.
Department of Commerce's Bureau of Industry and Security (BIS) showed that nine companies would be removed from the "unverified list" on October 13, 2022, including WuXi Biologics
.
Companies included in this list will face restrictions
on the export, re-export, and domestic transfer of U.
S.
-related items.
This move means that the "sanctions risk" that WuXi has suffered for more than half a year has been lifted
to a considerable extent.
(Liu Jianan is a pseudonym in the article)
References:
References: References:[1]
[1] [2] [2] [3] [3] [4] https://olinblog.wustl.
edu/2021/06/olin-research-incentivize-domestic-drug-production-to-combat-medicine-shortages/ [4] https://olinblog.
wustl.
edu/2021/06/olin-research-incentivize-domestic-drug-production-to-combat-medicine-shortages/
[5]
[5] [6] [6] [7] [7] [8] [8]
