Latest / Making Medicine / Is the U.S. Losing Its Biotech Edge to China? Senate Hearing & Innovation Outlook

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Is the U.S. Losing Its Biotech Edge to China? Senate Hearing & Innovation Outlook · Making Medicine

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  Speaker 1: At Making Medicine. We're reporting on the headlines, not making
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  Speaker 1: medical recommendations. For personal health questions, always consult a doctor.
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  Speaker 1: Nothing in this episode constitutes investment, financial, or legal advice,
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  Speaker 1: and please consult your own advisors before making decisions. Hello everyone,
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  Speaker 1: and welcome back to the Making Medicine Podcast or Science
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  Speaker 1: Policy and Innovation Meet. As always, I'm your host, John Stanford.
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  Speaker 1: This week, we're covering yesterday's Senate help hearing on the
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  Speaker 1: future biotech. We're talking about the latest drug pricing announcement
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  Speaker 1: from the White House that's happening as we record. We'll
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  Speaker 1: take a look at Incubate Policy Lab's latest release, and
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  Speaker 1: a sneak peek at our end of year investment analysis.
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  Speaker 1: It's a lot to get through, so let's get right
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  Speaker 1: into the show. Even with the government shut down, the
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  Speaker 1: Senate is still taking actions that are relevant, including a
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  Speaker 1: Senate Health, Education, Labor and Pensions Committee hearing held Wednesday
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  Speaker 1: right around the time of recording, on an important topic quote,
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  Speaker 1: the future of biotech. Maintaining US competitiveness and delivering life
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  Speaker 1: saving cures to patients certainly something we talk about here
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  Speaker 1: a lot on Making Medicine. Here are some of our
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  Speaker 1: top takeaways coming out of the hearing, The first one
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  Speaker 1: has to be China and that China's closing fast. Multiple
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  Speaker 1: witnesses warned US biotech leadership could flip to China in
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  Speaker 1: the next few years without a coherent national strategy out
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  Speaker 1: of the United States. China is investing heavily in R
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  Speaker 1: and D clinical trials and manufacturing, and while IP theft
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  Speaker 1: remains a risk that demands stronger protection and enforcement, there's
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  Speaker 1: also a lot of innovation coming out of China. More
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  Speaker 1: on China in a moment, but we also saw conversations
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  Speaker 1: that competitiveness will require speed and certainty. FDA modernization through
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  Speaker 1: clearer endpoints, biomarkers, AI enabled reviews, adequate staffing, and vacancy
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  Speaker 1: backfilling was a by part theme. Delays widen the so
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  Speaker 1: called valley of death for small companies that drive so
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  Speaker 1: much of the innovation ultimately acquired by large manufacturers. We
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  Speaker 1: also heard points that we need to protect IP at
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  Speaker 1: home and abroad. Witnesses flagged both foreign espionage, especially from
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  Speaker 1: China as mentioned, as well as domestic policy proposals that
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  Speaker 1: weaken patents as threats to an investment and pipeline shout
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  Speaker 1: out to last week's celebration of National IP Month and
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  Speaker 1: Joshua kresh Our guest for more at conversation about those
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  Speaker 1: IP topics. The drug pricing debate dominated a lot of
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  Speaker 1: the conversation. Throughout the hearing, Claims by witnesses that the
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  Speaker 1: IRA price negotiations have no impact were challenged by facts
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  Speaker 1: and concerns that investment capital flight, longer timelines, and shifting
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  Speaker 1: priorities are changing drug development. Incubate and the Making Medicine
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  Speaker 1: podcast have made clear that the effects of things like
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  Speaker 1: the pill penalty is very real, and so it's critically
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  Speaker 1: important that we address some of these misconceptions, even ones
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  Speaker 1: made in the congressional record. We were very disappointed to
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  Speaker 1: see a number of witnesses patently ignoring clear data that
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  Speaker 1: says the IRA and the small molecule penalty are having
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  Speaker 1: negative effects for biotech and investors also coming up with
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  Speaker 1: the NIH and the FDA as strategic assets. But cuts,
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  Speaker 1: layoffs and grant cancelations are tied to trial disruptions in
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  Speaker 1: the short term, and we can talk about fewer breakthroughs
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  Speaker 1: five to ten years out. Witnesses agree that stable multi
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  Speaker 1: year funding is an economic and national security policy not
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  Speaker 1: just a scientific policy, and so it seemed like there
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  Speaker 1: remained consensus. It's important to remember that despite all the
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  Speaker 1: talk about cuts to the NIH, there is bipartisan consensus
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  Speaker 1: on the budgeting side. Most of the President's cut to
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  Speaker 1: NIH was rejected by Republicans and Democrats alike. Another takeaway
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  Speaker 1: is that domestic manufacturing needs predictable pathways. The FDA quote
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  Speaker 1: pre check concept and more frequent agency interaction could de
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  Speaker 1: risk US facility buildouts, but capital intensity and regulatory uncertainty
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  Speaker 1: still push production overseas. This will be an area of
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  Speaker 1: ongoing interest, both to incubate and to the massive manufacturer
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  Speaker 1: commitments to the tunes of tens of billions of dollars
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  Speaker 1: to construct in the US. It wouldn't be a congressional
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  Speaker 1: hearing without mentions of PBMs and witnesses on both sides
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  Speaker 1: push that PBM consolidation continues to cause access problems. Senators
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  Speaker 1: in particular highlighted pharmacy deserts and vertical integration, linking PBM
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  Speaker 1: dominance to worse access and misaligned incentives. This hearing will
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  Speaker 1: strengthen the case for PBM reform to lower costs and
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  Speaker 1: expand patient access, while not necessarily the focus of the hearing.
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  Speaker 1: We are seeing, with more direct to patient conversation, a
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  Speaker 1: real exposure of just how much cost PBMs were taking
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  Speaker 1: out of the system. Difference between a direct to patient
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  Speaker 1: cost and the cost we talk about in terms of
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  Speaker 1: net price can largely be attributed to PBMs. Bottom line,
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  Speaker 1: there's urgency to keep innovation in the US. The committee
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  Speaker 1: repeatedly tied leadership, investment, and policy stability to tangible outcomes,
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  Speaker 1: including faster trials, more starts, and sustained pipelines to bring
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  Speaker 1: new treatments to patients. While we'll cover some other elements
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  Speaker 1: of the hearing, we'll close with one notable exchange between
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  Speaker 1: Senator Andy Kim, Democrat of New Jersey, and John Crowley,
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  Speaker 1: the CEO of Bio. Senator Kim asked if the US
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  Speaker 1: right now is the leading country in the world, and
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  Speaker 1: John responded that yes, we are the leader, but that
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  Speaker 1: China is a rising competitive threat. Kim continued asking what
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  Speaker 1: about in ten to twenty years, And this is the
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  Speaker 1: quote that stood out to me. Oh, not at all.
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  Speaker 2: In fact, it's a lot sooner than that. If you
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  Speaker 2: look at the National Security Commission report on Emerging Biotechnology
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  Speaker 2: they have forty nine recommendations to strength and maintain and
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  Speaker 2: advance our lead in biotech chnology. But we need to
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  Speaker 2: act boldly, and we need to act today. We believe
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  Speaker 2: within two to three years we can lose.
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  Speaker 1: This dangling modifiers aside. The CEO of Bio, a critical
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  Speaker 1: partner to Incubate and a leading voice in this conversation,
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  Speaker 1: is making clear that this is not a ten or
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  Speaker 1: twenty year problem. This is a two to three year problem.
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  Speaker 1: At Incubate, we completely agree, and that's why this morning
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  Speaker 1: we released a new report that looks deeper at why
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  Speaker 1: China is giving biotech the green light within its borders
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  Speaker 1: and the US seems to be putting red lights up,
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  Speaker 1: stopping the innovation that we do at home. In the
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  Speaker 1: Senate Hell Hearing, Chair Cassidy shared in his opening remarks
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  Speaker 1: that in many recent conversations with biotech executives and stakeholders
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  Speaker 1: that China has been seen as a collaborator, a competitor,
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  Speaker 1: and a threat, and Incubates own conversations with his office,
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  Speaker 1: we completely agree. Other senators and witnesses also uniformly recognize
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  Speaker 1: China's commitment to establishing itself as a biotech leader as mentioned.
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  Speaker 1: John Crowley from Bio said, we could lose our leadership
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  Speaker 1: in biopharmaceutical development in as little as two to three years.
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  Speaker 1: What's our perspective here at incubate. We recognize China's growing
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  Speaker 1: role in the biotech industry, and we believe the US
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  Speaker 1: must similarly focus on establishing policies that will allow innovators, investors,
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  Speaker 1: and patients to benefit from our leadership in the biotech industry.
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  Speaker 1: Our concern, however, is that recent and proposed policies have
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  Speaker 1: instead weakened our leadership. Without a committed effort to it,
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  Speaker 1: we might eventually seed it all together. So our policy
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  Speaker 1: lab team have put together a one pager that's Washington
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  Speaker 1: speak for something that's supposed to capture attention but also
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  Speaker 1: be quick to get through. That highlights some key policy
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  Speaker 1: roadblocks we're seeing that from our view, give US based
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  Speaker 1: biotech a red light, while on the very same policies
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  Speaker 1: Chinese companies are seeing green lights from their government to
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  Speaker 1: innovate at home. Our analysis looked at three areas regulatory outlook,
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  Speaker 1: intellectual property, and how we value innovation on the Chinese side.
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  Speaker 1: Under regulatory outlook, investment in R and D, talent and
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  Speaker 1: capacity is a green light. There's a commitment to fund
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  Speaker 1: labs and modernize facilities. There's even focus on specific novel
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  Speaker 1: technologies like cart cell therapies, whereas in the US we
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  Speaker 1: gave it a red light FDA and nihppeable and slower
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  Speaker 1: capital movement caused by leadership churn, shifting priorities, and staffing
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  Speaker 1: constraints at our key agencies. Add review friction and planning
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  Speaker 1: risk that stretches timelines, which chills early stage innovation. In short,
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  Speaker 1: prolonged uncertainty leads to fewer new trials and ultimately new medicines.
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  Speaker 1: On the intellectual property side, changes over the last decades
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  Speaker 1: mean that Chinese entities have seen a seven hundred and
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  Speaker 1: twenty percent increase in biotech patents. That's not a typo,
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  Speaker 1: it's a sevenfold increase in innovation, Whereas here in the US,
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  Speaker 1: on both sides of the aisle, we've seen proposals for
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  Speaker 1: policies around marching rights that would weaken patent certainty and
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  Speaker 1: propose patent taxes, a road confidence and a return on
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  Speaker 1: R and D investment. Again, a green light and IP
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  Speaker 1: from China long and antagonists for much IP around the world,
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  Speaker 1: and a red light potentially here at home. And finally,
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  Speaker 1: on valuing innovation, there's a faster approval and review process,
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  Speaker 1: whereas in the US we gave it a red light.
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  Speaker 1: Because drug pricing headwinds like the most favored nations as
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  Speaker 1: well as the tailwinds from the Inflation Reduction Act mean
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  Speaker 1: that both of these effective price controls are saying that
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  Speaker 1: we as a country value innovation less. That has to
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  Speaker 1: be addressed. So what do we do to change that?
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  Speaker 1: From our perspective, the solution is straightforward, restore predictability and
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  Speaker 1: pricing policy by avoiding MFN styled prices and pursue reforms
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  Speaker 1: that lower out of pocket costs that can have success
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  Speaker 1: for patients and the economy without chilling early stage investment.
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  Speaker 1: Let's reinforce IP certainty. We shouldn't be talking about march
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  Speaker 1: in and patent tax experimentation. And finally, let's give clarity
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  Speaker 1: to our agencies that are so critical to the development
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  Speaker 1: of new drugs. The FDA and NIH need to be
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  Speaker 1: able to offer predictable, timely reviews of medicine. American innovation
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  Speaker 1: is at a crossroads. Over the last decade, China paired
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  Speaker 1: long horizon investment with faster reviews and clearer market pathways.
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  Speaker 1: While the US has brought about uncertainty on pricing, IP
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  Speaker 1: and regulation. It's critically important when we talk about China, however,
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  Speaker 1: that we don't dream up fanciful barriers. It's simply ludicrous
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  Speaker 1: to believe that we will cage China in on their
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  Speaker 1: desire to be a meaningful force in the biotech community.
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  Speaker 1: We can't build a great wall around their biotech innovation.
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  Speaker 1: Our isolationist policies that have been proposed to date that
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  Speaker 1: might reduce our ability to invent in their innovation will
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  Speaker 1: not in any way deter or slow China's advancement here.
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  Speaker 1: So it's important that we ask what can we do
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  Speaker 1: to make ourselves more competitive, and not what can we
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  Speaker 1: do to make them less competitive? As Max bear from
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  Speaker 1: endpoints raised on one of our recent podcasts, there'd be
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  Speaker 1: an ethical concern by saying we want to slow innovation
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  Speaker 1: for others, But there are national security and economic comparatives
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  Speaker 1: that say it would be better for America to remain
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  Speaker 1: dominant in this space, So let's pursue policies that will
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  Speaker 1: allow that dominance to remain. The choice now is whether
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  Speaker 1: we remove the red lights or watch the Green Lights
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  Speaker 1: glow somewhere else. I don't often mention the incredible production
• 11:41
  Speaker 1: team that goes into making each episode of Making Medicine.
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  Speaker 1: They have a difficult timeline when we record usually on Wednesdays,
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  Speaker 1: to post on Thursdays, and sometimes that means news is
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  Speaker 1: breaking as we're recording. So we're going to do our
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  Speaker 1: best to cover the White House announcement from what we
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  Speaker 1: know based on preliminary calls and background sources, and we'll
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  Speaker 1: be sure to cover anything else we left out on
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  Speaker 1: next week's episode. At the time of recording, our Healthcare Leadership,
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  Speaker 1: HHS Secretary RFK Junior CMS Administrator Doctor Oz and FDA
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  Speaker 1: Commissioner Marty McCary are at HHS making announcement right now
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  Speaker 1: about biosimilars. They're announcing a push to streamline regulatory pathways
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  Speaker 1: for biosimilars, with a key change under review waiving or
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  Speaker 1: reducing clinical efficacy, and switching studies that have previously delayed
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  Speaker 1: biosimilar approvals. For those who follow biosimilars, this has always
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  Speaker 1: plagued the ability to bring them to market faster. The
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  Speaker 1: idea here is to treat certain biosimilars more like generic
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  Speaker 1: small molecule drugs, which would lower cost and speed market entry.
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  Speaker 1: The regulatory distinction between biosimilar versus interchangeable is being challenged,
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  Speaker 1: but there's growing momentum to deem many biosimilars automatically interchangeable
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  Speaker 1: without extra testing. This has a strategic significance in the
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  Speaker 1: broader healthcare price pressure landscape. The moves signals that the
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  Speaker 1: FDA is willing to re examine long standing regulatory burdens
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  Speaker 1: to spur innovation and affordability. I think on this one, however,
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  Speaker 1: it's certainly affordability and competition that are winning the day.
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  Speaker 1: There are a lot of scientists far smarter than I
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  Speaker 1: am who can debate whether interchangeability for biosimilars is entirely appropriate.
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  Speaker 1: But this announcements from the White House and from the
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  Speaker 1: FDA and HHS make clear that they want to see
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  Speaker 1: biosimilars come to market much faster. What seems to be
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  Speaker 1: a recurring theme of some of our episodes is a
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  Speaker 1: selling gene therapy update, because there was additional news Senator
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  Speaker 1: Cassidy and the hearing noted that more than thirty selling
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  Speaker 1: gene therapies have been approved by the FDA. However, as
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  Speaker 1: we covered recently, market dynamics continue to make that difficult. Notably,
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  Speaker 1: Biomerin announced it will be exploring ways to divest its
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  Speaker 1: hemophilia a gene therapy Roctavian only two years after it
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  Speaker 1: received approval. Galapagos announced its winding down its cell therapy
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  Speaker 1: division after it couldn't find viable proposals from a buyer.
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  Speaker 1: It continues a string of bad news that we've been
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  Speaker 1: covering here, and it's mainly tied to the reality that
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  Speaker 1: we haven't put forward good reimbursement policy that gives clarity
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  Speaker 1: to how we as a country are going to treat
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  Speaker 1: these medicines. There is, of course, promise scientifically and RPH,
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  Speaker 1: the Advanced Research Projects Agency for Health, recently funded seven
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  Speaker 1: different companies to continue development of NVivo therapies. Starnotherapeutics, a
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  Speaker 1: Chinese biotech, announced that it's raised money to look at
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  Speaker 1: promising clinical data treating lupus and non Hodgkins lymphoma. So
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  Speaker 1: once again China resurfaces in this conversation where they have
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  Speaker 1: a stated preference to advance and become a leader in
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  Speaker 1: cart therapies at a time when American companyanes are struggling
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  Speaker 1: to make them economically viable. This will be something we
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  Speaker 1: keep watching. Those announcements are a good segue into our
• 15:08
  Speaker 1: September investment trends and a sneak peek at what will
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  Speaker 1: be our end of year investment analysis. Earlier this year,
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  Speaker 1: the Incubate team began tracking investments across the early stage
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  Speaker 1: life science industry to better understand where capital is deploying.
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  Speaker 1: Through the first nine months of the year, we've seen
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  Speaker 1: more than fourteen billion dollars invested. We've seen a rise
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  Speaker 1: in investment in companies utilizing AI in their drug development
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  Speaker 1: throughout the year. Most recently, that included an one hundred
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  Speaker 1: and fifty million dollars series D raised by Boulder, Colorado
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  Speaker 1: based in Veda, which is utilizing AI to boost nature
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  Speaker 1: based drug discovery. That's one of a handful of AI
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  Speaker 1: companies that seemed to be attracting a lot of capital
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  Speaker 1: for their progress and leveraging the AI everyone is talking
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  Speaker 1: about in drug development. That's just one of the September
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  Speaker 1: deals we saw, which had more than one hundred investments
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  Speaker 1: across the early stage ecosystem for about two point eight
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  Speaker 1: billion dollars. The top districts in September, the California eleventh,
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  Speaker 1: Former Speaker Nancy Pelosi's district received eight investments of more
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  Speaker 1: than one hundred and sixty million. Repcatherine Clark from the
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  Speaker 1: Massachusetts fifth had seven investments for staggering four hundred and
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  Speaker 1: nine million, and just down the road in Massachusetts, Representative
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  Speaker 1: Ayana Presley had six investments for forty two million dollars.
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  Speaker 1: It'll be no surprise that the two top states were
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  Speaker 1: California with just shy of nine hundred million and Massachusetts
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  Speaker 1: was seven hundred and eighty three million. Notably, Texas had
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  Speaker 1: four hundred and twenty four million. These are the kinds
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  Speaker 1: of analytics that you can be on the lookout for
• 16:44
  Speaker 1: for our end of year report, which we'll be releasing
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  Speaker 1: in early January. I'm glad we mentioned releasing that in
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  Speaker 1: early January because we did have a couple questions this
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  Speaker 1: week from listeners. The first was asked very pointedly if
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  Speaker 1: Incubate would be doing their policy event at JPM twenty
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  Speaker 1: twenty six. Yes, the Incubate team will be in San
• 17:02
  Speaker 1: Francisco for JPM week and will be hosting our policy
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  Speaker 1: Breakfast on January twelfth from eight thirty to ten thirty.
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  Speaker 1: Send us a DM on LinkedIn to be added to
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  Speaker 1: the invite list. The other question we had ask what's
• 17:15
  Speaker 1: going on at the FDA during the government's shutdown. They
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  Speaker 1: felt like there wasn't enough detail in last week's episode.
• 17:21
  Speaker 1: Biospace recently had an article that Incubate contributed to that
• 17:25
  Speaker 1: talked about what twenty eight days into a shutdown looks like.
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  Speaker 1: There seems to be continuing operations, but companies are beginning
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  Speaker 1: to complain about delays or slowed communication. Viking Therapeutic CEO
• 17:38
  Speaker 1: reported on potential delays ahead of a Phase two meeting
• 17:41
  Speaker 1: due to the slowdown. The FDA, which partly uses user
• 17:44
  Speaker 1: fees outside of appropriations, continues to cover a lot of
• 17:48
  Speaker 1: its work, but with new applications halted, user fee revenue
• 17:52
  Speaker 1: is not flowing. Some work continues because the FDA is
• 17:55
  Speaker 1: using carryover funds, which gives it a buffer about four
• 17:59
  Speaker 1: to eight weeks of operations without new income. Well, that
• 18:03
  Speaker 1: four weeks is up, so we'll continue to watch and
• 18:05
  Speaker 1: you can read more from Biospace's great article about where
• 18:09
  Speaker 1: the FDA stands amid the shutdown. That's all for this
• 18:12
  Speaker 1: week's episode of the Making Medicine Podcast. Have a thought
• 18:16
  Speaker 1: or question about today's topics. Drop a comment and we'll
• 18:18
  Speaker 1: feature it in next week's episode, just like we did
• 18:21
  Speaker 1: in this episode. Don't forget to subscribe on YouTube and
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  Speaker 1: in the description. Thanks for listening, and as always, keep innovating.