A US-China pharma drug war in the making

It can credibly be argued that while China’s economy does have a substantial private sector, ultimately state intervention is never far behind. This makes China, for all practical purposes, a state-controlled economy with on its periphery a private sector operating within limits often undefined but limits nonetheless.

Thus when a private sector firm becomes too visible or powerful, it is reined in. Alternatively, when it needs support, this is often forthcoming in the form of credits, subsidies or more complex means or mechanisms. The end result is that every Chinese economic enterprise is potentially a state entity.

For the international economic order, this would not be a major concern were it not for the fact that with 18 % of the world’s population, China produces as much as 35% of the world’s industrial output making it, for all practical purposes, the world’s factory floor.

And this, in turn, has a major impact on China’s political and economic relations with the industrialized West in general and more specifically with the United States.

China’s manufacturing hub has essentially three components. The first is composed of basically simple consumer products and intermediate technologies, many of which are now migrating to neighboring countries with lower labor costs.

The second includes the likes of solar panels or advanced batteries which are not only more efficient than their Western counterparts but enjoy a lower production cost of some 45%, albeit leaving unanswered the question if and to what extent this is due to disguised state subsidies.

The third results from the part of China’s industrial establishment that has transited from manufacturing to innovation.

It was a given that over the years China would transit from “conceived in California, assembled in China” to “conceived in China, manufactured wherever appropriate.” While telecom giant Huawei was the first to break the mold and expand worldwide, Chinese biotech firms such as WuXi Biologics have become global giants in their own right.

Operating outside the limelight they have revolutionized modern medicine by identifying treatments for the likes of cystic fibrosis and the manufacture of high-quality drugs. By current estimates, WuXi is involved in the development of a quarter of all the drugs used in the United States.

Currently, the Biden administration’s policy of decoupling America’s semiconductor production from China has filtered down to the US Congress, which is now trying to decouple China’s biotech research and drug manufacturing capacity from the American market.

And while the rationale for the move is based on the claim that WuXi sponsors military-civilian events, it is increasingly felt that the move reflects an anti-Chinese bias that is currently spilling into the realm of the irrational.

While the issue is still under debate and the corresponding legislation has not yet been adopted, it has created considerable concern within the US healthcare community where many see it as political interference in the advancement of biomedical research, which could ultimately cost hundreds of thousands of American patient’s lives.

But looking beyond Washington’s current drug war with China, what is at issue is the United States’ inability to deal comprehensively and rationally with an Imperial
China where the state reigns supreme whatever the label its products come under.