The booming trend of China's innovative drugs going global is tearing open a policy crack within the United States.

On one side of the crack are protectionists who advocate for "cutting off the flow". They proposed to include biotechnology in the COINS Act, which restricts US foreign investment in specific sensitive technology fields.

On May 22, John Moolenaar, Chairman of the U.S. House of Representatives Select Committee on China, officially sent a letter to Treasury Secretary Scott Bessent, requesting that biotechnology be included in the COINS Act's prohibited investment scope and restricting the flow of U.S. capital and intellectual property into China's biotechnology sector.

It emphasizes that the flow of US capital to Chinese technology companies through licensing agreements, joint ventures, and equity investments is "fueling" the rapid ascent of China's pharmaceutical value chain. Without restrictions, the US may face long-term strategic dependence risks, similar to those faced in rare earth element and some semiconductor supply chains.

On the other side of the crack, there are sharp rebuttals from the front line of the industry. They believe that the United States should look inward rather than cutting off ties with China.

The CEO of BIO, a biotechnology industry organization in the United States, believes that attempting to prevent the development of biotechnology in China is a "futile move". The United States should reflect on its own shortcomings and enhance competitiveness through reducing clinical research and development costs, optimizing innovation incentive policies, and other means, rather than cutting off the global cooperation chain.

Two investors from RA Capital also pointed out that there is a fundamental difference between biotechnology and rare earths - rare earths rely on physical supply chains, while the core of biotechnology is patents and technology. After American pharmaceutical companies obtain pipeline authorization from China, the supply chain for subsequent research and development, production, and commercialization will be controlled by the US side, and there is no risk of being "choked".

This policy storm reflects not simply the logic of supply chain security, but the deep anxiety of the United States towards China's growing pharmaceutical innovation strength - China's biotechnology industry is transforming at an astonishing speed from a "follower" to a "parallel player" and even a "leader", challenging the United States' long-standing global pharmaceutical innovation dominance.

So, who is ultimately trapped by this barrier that attempts to hinder Chinese innovation through "decoupling"? To whom will the cost of decoupling be shifted?

01. Is the NewCo model most affected?

To understand this matter, one must first understand the ins and outs of the COINS Act.

The COINS Act (Comprehensive Outbound Investment National Security Act) is not a new thing, it was originally born out of anxiety in the United States about the semiconductor industry.

At the end of 2025, the COINS Act will officially come into effect, which is a national level foreign investment control tool implemented by the United States based on the National Defense Act. Its core goal is to control the flow of US capital to sensitive technology fields in specific countries such as China through legal means. Initially, the regulatory list only covered three major fields: artificial intelligence, semiconductors, and quantum information.

Nowadays, the proposal to include biotechnology in the aforementioned regulatory list has been repeatedly mentioned.
FierceBiotech quoted Laurie Burlingame, a lawyer specializing in life science transactions, as saying that based on the current text of the COINS Act, industry level expansion alone may not be enough to regulate the increasing number of pharmaceutical licensing transactions involving Chinese innovation.

However, it also pointed out that the investment types explicitly covered by the COINS Act mainly include equity investments, debt financing, and options and warrants structures. If the COINS Act extends to the biotechnology field, the NewCo based transaction structure may be particularly vulnerable - currently, joint ventures are one of the core categories regulated by the Act.

I think that without equity components or options, pure licensing may not necessarily be covered. "She also mentioned that in the NewCo model, Chinese companies usually hold less than 20% of the shares, which is lower than the 50% trigger point originally set by the Ministry of Finance for foreign investment regulation. But the agency is currently updating policy details in accordance with the requirements of the bill.

Although it is unlikely to be the main target in Burlingame's view, traditional authorization transactions are still difficult to stand alone.

John Moolenaar explicitly requested in the letter to include drug patent authorization, drug discovery platforms, clinical research and development capabilities, and commercialization technologies for biopharmaceutical production in the regulatory scope.

This means that even pure pipeline license out transactions that do not involve equity binding may be required to report to the US Treasury Department in advance.

Burlingame believes that such policies will significantly prolong the due diligence cycle of transactions, slow down transaction speed, increase compliance costs, and even make some US pharmaceutical companies give up cooperation due to fear of regulatory risks.

In addition, it is worth noting that Article 809 of the COINS Act grants the executive branch great discretion, and the Ministry of Finance can directly regulate new industries and types of transactions without the need for new legislation from Congress. At present, the Ministry of Finance needs to issue the final rules for implementing the COINS Act before March 13, 2027, or within 450 days from the date of the bill's promulgation.

02. Long term suppression and anxiety

In the past period of time, the United States' political hunt for biotechnology in China has almost formed a nested combination of punches.

Firstly, it is a blow to the supply chain.

In March 2026, Robert Moolenaar, the chairman of the U.S. House of Representatives Select Committee, launched a challenge during a hearing with the aim of directly targeting the deep penetration of China's API industry. According to the statistics of the United States Pharmacopeia, 41% of key starting materials (KSM) in generic drug production in the United States rely entirely on a single Chinese origin, while China accounts for as much as 22% of the overall proportion of API manufacturers.

Compliance at the research and development level has also been heavily emphasized.

In June 2025, the FDA issued a ban aimed at halting clinical trials that send American citizen cells to China for genetic modification before reintroducing them into American patients. The reason given at the time was that "some participants in the experiment may have had their genetic information transferred to foreign laboratories without their knowledge".
Subsequently, restrictions were imposed on Chinese innovative drug BD and clinical trial data in China.

In September last year, The New York Times reported that the Trump administration was drafting an executive order that could overturn the global pharmaceutical landscape - threatening to cut off the channels for Chinese developed drugs to enter the United States, involving "mandatory reviews" of innovative drug BD, and stricter regulation of clinical trial data for Chinese patients.

At the end of April this year, in a federal spending bill report, Andy Harris, a Republican congressman from Maryland and a member of the House Appropriations Committee, demanded under the banner of "national security" that the FDA prohibit the acceptance, review, or even consideration of any clinical data generated by Chinese clinical trial institutions when pharmaceutical companies submit IND applications.

Combined with the expansion of the COINS bill, this "bottom-up" fiscal pressure attempts to completely cut off the lowest level of technology exchange in Sino US biological cooperation - what kind of fear does this almost "carpet like" containment stem from?

In John Moolenaar's letter, he pointed out that the flow of US capital to Chinese technology companies through licensing agreements, joint ventures, and equity investments is "fueling" the rapid ascent of China's pharmaceutical value chain.

It cited a set of data: in 2025, the total scale of cross-border licensing transactions between US and multinational pharmaceutical companies and Chinese biotechnology companies was about 136 billion US dollars, and about 48% of major pharmaceutical licensing transactions with amounts exceeding 50 million US dollars involved Chinese companies. In 2020, this proportion was almost zero, and this trend is accelerating. In the first quarter of 2026, cross-border licensing transactions increased by 73% compared to the same period last year, almost reaching half of the total number of agreements for the whole year of 2025.

John Moolenaar also specifically cited the recent $15.2 billion transaction between BMS and Hengrui Pharmaceuticals as a typical case, believing that the deal between American pharmaceutical companies and Chinese biotechnology companies has gone beyond the licensing model and entered the joint development stage, involving the joint development of early molecules in both parties' pipelines.

The New York Times has also reported that China has conducted more industry funded clinical trials of new drugs than the United States; The US biotechnology industry is in a slump - all of which exacerbates concerns: Shanghai is approaching the replacement of long-standing biotechnology centers such as Cambridge (Massachusetts) and the San Francisco Bay Area, while drug research and development costs in the US are higher.

In other words, behind this game involving billions of dollars in interests is essentially a struggle for global pharmaceutical innovation dominance.

03. Innovation is not a zero sum game

Ironically, the US biopharmaceutical industry itself has a clear understanding of this.

The proposal to expand the scope of this bill immediately sparked a heated debate in the US biopharmaceutical industry: can cutting off the partnership with China maintain US competitiveness? Or is it just depriving patients of the opportunity to access the next generation of therapies?

Biotechnology entrepreneur John Maraganore bluntly stated that the decline in US biotechnology competitiveness is rooted in its own policy mistakes - such as cuts in NIH funding, unstable FDA policies, H1B visa restrictions, anti science sentiment, etc., rather than US China cooperation.

John Crowley, CEO of BIO, a biotechnology industry organization in the United States, also pointed out that attempting to prevent the development of biotechnology in China is a "futile move". The United States should reflect on its own shortcomings and enhance competitiveness through reducing clinical research and development costs, optimizing innovation incentive policies, and other means, rather than cutting off global cooperation links.

Peter Kolchinsky, founder and managing partner of RA Capital, and his colleague Tess Cameron, Managing Director of RA Capital's venture capital team, have published a lengthy article online, publicly opposing the United States' policy of suppressing China's biotechnology sector.

They believe that if the United States prohibits cooperation with China in biotechnology and clinical trials, it will hand over global pharmaceutical leadership to European pharmaceutical companies and investors, slow down the speed at which American patients can access new drugs, and accelerate the kind of dependence on China that protectionism claims to prevent.

The article proposes a core concept of "Euro fashion": once the US ban is introduced, Chinese biotechnology companies will license their innovation pipelines to European pharmaceutical companies, which will submit their drugs for FDA approval after completing critical clinical trials outside the US. For the FDA, these drugs are completely "made in Europe" and legally enter the US market, but profits, employment, and taxes all flow to Europe, and US companies are completely excluded.

In other words, the cost of protectionism is not 'America has won', but 'America has been bypassed'.

RA Capital also refuted the "rare earth analogy" often cited by protectionists in the article: new drugs are different from rare earths, electric vehicles, chips, and batteries. China's leverage in the "innovative supply chain" for discovering and developing new drugs is fundamentally weaker than its leverage in the key physical supply chain of heavy industry.

Firstly, rare earths are commodity raw materials, and their processing capabilities have collapsed in the West, with slow reconstruction. And drugs are molecules protected by intellectual property rights. When an asset discovered in China is authorized to a Western company, manufacturing processes, supply chains, distribution, and intellectual property enforcement are all transferred to Western control, subject to FDA's cGMP, US courts, and US payment contracts. The supply chain follows the authorizer, not the discoverer.

Secondly, if a company discovers and clinically validates a cancer cure drug and refuses to allow it to be sold to the United States, it is only intellectual property - anyone can freely manufacture the molecule for the US market through administrative orders or judge's rulings, which is a common practice in the generic drug industry.

In summary, the core is one sentence: what truly threatens the leadership position of the United States in biotechnology is not the rise of China, but the self isolation chosen by the United States due to fear.

The cooperation between American companies and Chinese biotechnology companies does not result in dependence on China. It creates the influence of the United States on drugs discovered in China in the Western market. Removing American sponsors does not remove dependence, because you only remove the influence that American companies have, "RA Capital concluded.

In addition, they also proposed other policy recommendations, including increasing FDA funding to expand overseas inspection capabilities; Exclude compensation for clinical trial patients from their total income, so that they are neither taxed nor affected in their enjoyment of benefits; Make federal R&D tax credits freely tradable and provide funding sources for early R&D.

04. The higher the wall, the wider the road

American politicians are trying to build a "biotechnology iron curtain" with the COINS bill, but they overlook a fundamental fact: the logic of innovation never conforms to political boundaries.

While Washington is busy setting obstacles, Europe is quietly receiving dividends.

The Medicines and Healthcare Products Regulatory Authority (MHRA) in the UK has made it clear that it will open its mind to "embrace" more clinical research results from China to accelerate the country's new drug approval process; EMA and MHRA have also successively approved new drugs based mainly on clinical data in China for market launch, and the "EU dual reporting" strategy of Chinese pharmaceutical companies is becoming a routine path.

This is exactly what RA Capital warns of as' Euro fashion '- every wall built by the United States increases the possibility of being bypassed. Profit flows to Europe, patients are still waiting, while Chinese innovation continues to move forward as usual.

Perhaps those American politicians who are enthusiastic about "decoupling" need to understand that whether it is artificial walls or political iron curtains, they will not be able to stop the profit seeking and scientific truth seeking instincts of capital, and instead make it show greater tension in long-term games.

Reference material:
1.FierceBiotech，As calls for COINS Act expansion grow, will new rules sweep up China biotech licensing?
2.RApport，The paradox of biotech protectionism: Why walling off China biotech weakens America
3. When FDA wants to 'block' clinical data in China
4. Are new drugs facing an "iron curtain" when going global?
5. R&D clients, turning away Chinese biotech actually harms the United States itself: rational voice of American investors