China's emergence as a second hub of pharmaceutical innovation could trigger massive changes to the global drug market, including how treatments are regulated and priced in the U.S.

Why it matters: More cutting-edge therapies are generally a good thing for patients, regardless of where they come from. But the new world order could spark questions over who'll access those therapies and where money flows.

By the numbers: China went from being the country of origin for just 8% of the world's drug development in 2015 to 32.3% in 2024, according to a new study published yesterday in JAMA.

• The U.S., on the other hand, lost ground. In 2015, 48.2% of new programs originated here. By 2024, that number dropped to 37.4%.
• During that time, the number of U.S. drug development programs grew from around 5,000 to around 7,000 — but the Chinese programs skyrocketed from fewer than a thousand to more than 6,000.

Between the lines: China's still mostly a hub for early-stage drug development. The prevailing model is that successful therapies get licensed and brought to market by big Western pharmaceutical companies.

• We've written before in this newsletter about how China's emerging market power threatens U.S. biotechs and poses national security concerns.
• The more China succeeds at getting drugs beyond early stages of development, the more likely it is that U.S. regulators will have to make tough decisions about how to evaluate the products.
• And Chinese companies could eventually compete with Western ones on price, undercutting today's lucrative financial model.

What they're saying: "China's still some time away from competing on the late-stage development cycles, but we should not assume that will always be the case, and we should assume they will get there sooner rather than later," said USC Schaeffer Institute senior scholar Lowell Schiller, a senior FDA official in the first Trump administration.

• "China's rise as a major center of drug development represents one of the most consequential shifts in the global life sciences landscape in a generation," longtime FDA drug regulator Richard Pazdur and BioCentury Washington editor Steven Usdin wrote in an editorial accompanying the new JAMA study.
• Pazdur was the top drug regulator at the FDA for a few weeks last year before announcing his retirement.

China's rise is both promising and threatening for patients, Pazdur and Usdin argue.

• On one hand, it could lead to more therapies and boost competition, potentially bringing down prices and improving access.
• But at the same time, as more human trials launch in China, "U.S. patients may face delayed access to investigational therapies, and U.S. clinicians may have fewer opportunities to participate in early-stage research."

What we're watching: If the China trends continue, the FDA will face complex decisions around what data it accepts for product evaluations.

• For example, regulators could be confronted with situations in which clinical trials are conducted with only Chinese patients, the results of which may not be generalizable to U.S. populations.
• "As development activity shifts geographically, regulatory systems designed around a different geography of innovation will need to adapt," Pazdur and Usdin write.
• Large trials conducted across multiple geographic regions will be essential, they write.

If Chinese companies shepherd more drugs all the way through the development cycle, one multibillion-dollar question is how they'll price the treatments.

Why it matters: Pharmaceuticals remain cheaper to develop and manufacture in China than in the West, allowing Chinese companies to undercut competitors on price.

• That'd be great news for patients, particularly in the U.S., which has the world's highest drug prices.

But it would be bad news for the U.S. biopharmaceutical sector.

• "Absolutely you could compete on price in a way that makes it untenable to continue the current R&D model that we have," Schiller said.
• Chanse Jones, a spokesperson for the trade group PhRMA, said maintaining U.S. leadership in drug development requires policies that support investment in R&D, strong intellectual property protections and a predictable regulatory environment.

The other side: Beijing's full-cycle drug development could wind up having very little impact on drug prices here.

• Plenty of experts argue that U.S. drug prices aren't tied to research and development or manufacturing costs. Drug companies launch at high prices simply because they can, those experts argue.
• "If China is making ... additional drugs that aren't interchangeable but are in the same class as approved drugs, then I guess I don't see that affecting prices in a major way," said Harvard Medical School professor Aaron Kesselheim.
• "U.S. pharmaceutical companies set prices as high as they want, and the existence of in-class competition for cancer drugs has not lowered prices before," he added.

The intrigue: China could also provide a counterweight to President Trump's "most favored nation" drug pricing deals.

• The goal is partly to get European countries to pay more for drugs. But countries may simply refuse to buy new drugs at higher prices for their health systems.
• And if China can soon offer up viable alternatives, those nations may not have to choose between cost and access.

"China will say we have the solution, and we'll launch it there and we'll launch it a lot cheaper," one senior pharmaceutical executive told me.

• In this scenario, "China's the biggest winner."

The bottom line: Cheaper or not, Chinese drugs are shaping drug markets today.

• Their impact only stands to get bigger over time.