Trump’s drug pricing pressure gives China a chance to cash in

Por Caroline Hug, Stefanie Bolzen — China – POLITICO

Donald Trump wants to bring down medicine prices at home. But his fight over drug pricing is likely to have an unexpected winner — China.

In his push to “rebalance” drug prices in western markets, Trump wants European allies to pay more for medicines. He argues European countries “freeride on American innovation” funded through higher prices in the U.S., while publicly-funded European health systems impose strict price controls.

While EU governments scramble to come up with ideas to appease the Trump administration’s demands, an unlikely beneficiary is emerging.

China is accelerating in discovering new drugs, faster and more cheaply than the U.S. and Europe. Traditionally a producer of basic chemicals for cheap generic medicines, China’s innovative biotech sector is now blossoming.

This makes the country an increasingly attractive alternative souce of more affordable new drugs for western markets.

Despite this, Washington isn’t changing tack.

“It’s a real risk, but not pushing [for higher prices in Europe] … is not the answer,” a Trump administration official told POLITICO. Like others cited in this story, the official was granted anonymity to speak on a sensitive topic.

At the center of the story is a Trump administration policy — known as most-favored nation pricing — to lower U.S. drug prices to match those in other wealthy countries, many of which are in Europe.

To avoid this, pharmaceutical companies warn they will no longer launch new medicines in Europe unless governments are prepared to pay more for them.

Since Trump’s pricing policy began 10 months ago, Europe has seen a 35% drop in the number of new drug launches.

Some in industry worry that heavy U.S. pressure on European governments to pay more for drugs risks accelerating the pivot to cheaper innovation from China.

“Industry keeps telling the White House that they need to be careful,” said one pharmaceutical industry figure. “Because of their tariffs and non-tariff barriers, China will double down on investing in sectors that Europe needs.”

China’s rise

As pharmaceutical companies approach the patent cliff edge — when lucrative drugs lose their monopoly rights and face cheaper competition — they’re no longer looking only West for the next potential blockbuster medicines. 

One in three new drugs in global development pipelines now originates from China, up from 4% in 2015, according to ING Healthcare. The Dutch bank anticipates $250 billion in licensing investment into Chinese biotech this year. 

“There’s a lot of promise, and we think the next Pfizer, meaning the next global pharmaceutical company, will be Chinese,” said Stephen Farrelly, ING’s global pharma and health care lead. 

Today, Chinese drug discovery is broadly concentrated among start-ups and smaller companies, and these promising drug candidates are being snapped up by Western pharmaceutical giants.

European firms are betting billions on Chinese discoveries. In the past month alone, Novartis struck a $7.8 billion mRNA deal with Chinese company Abogen, while Roche concluded a $1.16 billion deal with Chinese biotech firm Rona Therapeutics for obesity drugs. 

“China is very close to being on par with the leading pharmaceutical companies,” said another industry figure. “However, Chinese companies have a comparatively smaller home market and lack a clear strategy to globalize. That is to say, yet!” 

Janis Rinaldi, a senior associate at consultancy Capstone Solutions and former U.K. trade negotiator, said that MFN pricing could further accelerate this trend if more pharmaceutical companies decide against launching in Europe. 

“This could leave an access gap which other pharmaceutical companies may be inclined to fill through licensing deals,” she said. 

European pushback to Trump

As Trump’s MFN policy expands at the beginning of next year, European governments are resisting international pressure to increase spending on new medicines, plagued by their own domestic fiscal constraints. 

The resistance has led the chairs of major pharmaceutical giants including AstraZeneca, Boehringer Ingelheim, Chiesi Group, Ipsen, GSK, Novo, Novartis, Roche, and Sanofi, to write an open letter urging European governments to take notice. 

“China has overtaken Europe in clinical trials, pharmaceutical patents, and the development of new medicines,” they wrote. They urge leaders to “provide fiscal flexibility to Member States investing in health and innovative medicines, recognizing these returns take time to materialize.”

“The diversification into Chinese R&D is happening anyway, but there is surely an acceleration happening because of U.S. pressure on Europe,” the pharmaceutical figure cited first said.

White House shrugs it off 

The Trump administration acknowledges that its drug pricing push could strengthen a strategic rival — but this won’t change its course.

“There are other mitigating changes we can make vis-a-vis China to ensure competitiveness. But we are absolutely focused on both lowering prices and maintaining competitiveness,” said the Trump administration official cited above. 

Washington has been battling Chinese dominance in its industrial supply chains — and is working with allies to counter the threat in other sectors such as steel and critical minerals. But increasingly, it’s also looking at Western reliance on China for the active pharmaceutical ingredients and key starting materials needed to make medicines. 

“Policymakers have a point that there is legitimate national security concerns about where our supply chain is happening with medicines,” said Robert Zirkelbach, public affairs chief at the U.S. pharmaceutical trade group PhRMA. 

The administration is looking at a variety of mechanisms to secure those supply chains, he said, including “more incentives to make it more attractive to develop those medicines, manufacture them in the U.S. or in other countries.” 

But their approach has been aggressive and has come with threats of tariffs through Section 301 investigations in countries like Germany — drawing heavy criticism from the EU. 

One former USTR official said that many have argued that the “administration should not gratuitously punish trading partners who are strong potential allies on non-market economy challenges … But I have seen little indication of the administration softening its treatment of allies in order to keep them on side.”

Fonte: China – POLITICO