How a US biotech ban could catalyze Chinese health insurance reform

The Trump administration is considering blocking US pharma companies from buying Chinese-developed drug candidates.

Per the New York Times:

• “At the heart of the possible clampdown is a drafted executive order that threatens to cut off the pipeline of Chinese-invented experimental treatments.”
• “The prospect of the order…has set off furious behind-the-scenes lobbying efforts by two diametrically opposed groups — each with billions of dollars at stake.”

The divide is clear:

• On one side are global pharma giants, who buy the rights to Chinese-invented experimental treatments.
• On the other side are the wealthy backers of US domestic biotech and the China hawks, who view China as an existential threat to US industry.

So why is Washington considering such a drastic move, and how might China respond?

The crux of the matter: Chinese biotech has become too good, too fast – and that makes Washington very nervous.  

Global Big Pharma is quickly getting hooked on fast, affordable Chinese drug breakthroughs.

• From 2021 to 2024, China accounted for about 22% of global blockbuster drug licensing deals (those worth USD 1 billion or more).
• In H1 2025, that share shot up to 40% – and once smaller deals are included, US companies made up over half of the buyers.

That represents a “win-win” for the companies involved.

• For global pharma companies, which are facing the prospect of blockbuster drugs losing IP protections in the next few years, China is currently the best place to shop for promising early-stage candidates at a good price to drive pipeline renewal.
• For Chinese biotech startups, which struggle to turn a profit at home (for reasons we discuss below), licensing innovative drug IP internationally is often the only way to survive – and thrive.

Given the tremendous financial boon this arrangement represents, US Big Pharma will fight tooth and nail to keep it in place.

• Their lobbying will underscore the negative impact a ban would have on American patients’ welfare by reducing their access to potentially life-saving drugs.
• They’ll also stress that a ban would boost their European competitors, who’ll snap up whatever the US leaves on the table.

But their opponents will draw on a more powerful, politically resonant narrative: The threat of China taking over.

• The core argument is that without any intervention, China will slowly but surely capture an ever-bigger share of the global drug market, shifting from a fast follower to a leading innovator.

The argument taps into decades of US unease about industrial hollowing:

• Outsourcing manufacturing to China initially looked like a huge win, letting US companies reap fat profits that could be plowed back into cutting-edge technology, supposedly guaranteeing a permanent lead.
• In reality, however, it handed China the scale, skills, and supply chains to eventually dominate global manufacturing at the expense of US companies and, as revealed by rising geopolitical tensions, American security.

The first big question: Which argument will win out?

Our money is firmly on Trump falling into the second camp: The chance to cast himself as the man to stop US pharma from repeating the same mistake – while railing against China and Big Pharma in the process – is simply irresistible.

The next big question: How will Beijing respond if Washington pulls the trigger?

• We wouldn’t rule out some form of direct retaliation.
• But the most important response will be to accelerate domestic health insurance reform.

Back to why the Chinese drug market is so bad for Chinese biotech: It’s all about health insurance.

In a nutshell: China’s health insurance market is structurally unfit for rewarding innovation.

• The government’s Basic Medical Insurance (BMI) program accounts for the vast majority of drug spending in China – but BMI is designed for, well, basic coverage.
• Faced with an aging population and already ballooning healthcare costs, the program simply can’t afford to cover expensive new cutting-edge treatments – leaving those treatments without a viable local market. 

But there’s a solution: Private health insurance.

• Private insurers could cover what BMI can’t, widening patients’ access to new treatments and boosting returns for biotech.

The challenge is that China’s still-tiny private health insurance market is incapable of providing enough coverage to adequately reward innovation.

• Chinese policymakers know this, and have already started taking steps to develop the sector – but these are far from enough.

A US ban could be the wake-up call Beijing needs to fast-track reform – just as chip export controls jolted it into doubling down on semiconductor self-reliance.

• The difference is that biotech isn’t about supply chain dependence, but market dependence.

To break that dependence, Beijing will have to push through reforms – cutting bureaucratic red tape and accelerating the growth of private insurance – or a self-sustaining domestic biotech sector will remain out of reach.