The Importance of American Biotech to America’s National Security
The direct and indirect economic contribution of the U.S. biopharmaceutical sector is estimated to be $1.65 trillion, including $800 billion in direct output in 2022, and an additional $850 billion through its suppliers and other sectors; this combined output impact represents 3.6% of all U.S. output.
Small and mid-sized biotech firms are the source of the lion’s share of American biotech innovation: all 50 first-in-class (FIC) oncology drugs that were approved by the FDA from 2010 through 2020, large pharma was the sole originator of only 14% of FIC cancer drugs, whereas small biotech’s originated 46%.
China is Threatening America’s Biotech Sector
China’s biotech sector is rapidly expanding – this goal was explicitly laid out in China’s 14th and current Five-Year Plan (2021-25), explicitly prioritizing life sciences and biotechnology as national research priorities. The plan aims for China to lead the global bioeconomy by 2035 and includes commitments to increase biotechnology-related R&D investments by more than 10 percent annually.
Big pharma is increasingly sourcing new product candidates from Chinese firms. Just this year, through June, U.S. drugmakers have signed 14 deals potentially worth $18.3 billion to license drugs from China-based companies.
This risks a cascading effect where investor capital moves to Chinese biotech investments in an accelerating pattern: as more capital moves to the Chinese market and out of U.S. investments, the Chinese market could build momentum by reinvesting those resources in additional projects.
On the flip side, America’s small biotechs will be faced with an increasingly dire capital crunch, as scientists are unable to attract private capital investment. This comes as investors are already wondering if the whole American biotech model—high-risk R&D , costly funding, political uncertainty and long waits for payoffs—is simply broken.
“A malaise hangs over biotech as investors struggle to find reasons for optimism that a biotech rally will begin anytime soon. The macroeconomic factors do not appear particularly favorable, with inflation persistent and concerns about economic growth. Developments from Washington are incessant and most seem more bad than good. Firings, funding freezes, meeting cancellations, and pharmaceutical tariffs suggest there will be disruptions to key pillars of the ecosystem, but few have confidence about when and how they will manifest. Given the uncertainty, it’s no surprise that generalist interest is meager.” - Cowen Biotech Thermometer 2025.
According to National Security Commission on Emerging Biotechnology (NSCEB) report released in April, China is likely to surpass America’s biotech industry within 3 years.
