U.S.-Japan Technology Linkages in Biotechnology: Challenges for the 1990s

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If an eBook is available, you'll see the option to purchase it on the book page. View more FAQ's about Ebooks. Through analysis of aggregate data and case studies, the book assesses the implications of these linkages for the competitiveness of the U. The National Academies Press and the Transportation Research Board have partnered with Copyright Clearance Center to offer a variety of options for reusing our content. You may request permission to:. For most Academic and Educational uses no royalties will be charged although you are required to obtain a license and comply with the license terms and conditions.

Click here to obtain permission for U. For information on how to request permission to translate our work and for any other rights related query please click here. For questions about using the Copyright. Loading stats for U. Finding similar items Foreign firms also have difficulty prosecuting cases of patent infringement in Chinese courts, including in gaining injunctive relief and, if successful, receiving very small monetary damage awards. FDA has the right to inspect plants in China when the output is to be imported into the United States. However, given the long and systemic efforts by the Chinese government at industrial espionage, including using supposed competition-agency inspections for espionage purposes, this new development could in fact be used to illegally obtain valuable IP for Chinese biopharma firms.

So, the Chinese government has failed to implement many reform proposals, likely because its core strategy is to promote Chinese generics companies, and the current weak IP system helps advance that strategy. Indeed, as is true of so many Chinese economic reforms, they are designed to benefit Chinese firms in particular.

For example, the new rules on data exclusivity favor companies that first launch in China, which are typically not foreign companies. At the same time, it encourages foreign companies to seek approval for their products in China first, ideally by developing drugs in China or at least doing clinical trials there.

In part because biopharma is such a new industry for China, with few established firms, the principal way the government is supporting it financially is through state-supported and guided VC investment. Much of this VC is provided by provincial governments. At the end of , there were a recorded 1, government-led venture funds, with 5. One of these, of course, is the biotech industry. Through the national venture capital investment funds, promote the establishment of a number of professional bio-industry venture capital institutions engaged in different stages of investment, encourage financial institutions to provide financing support for the development of bio-industry, and guide the guarantee institutions to actively provide financing and credit enhancement services.

Innovate financial fund support methods, use incentive guidance, capital injection, and application of demonstration subsidies to support projects with strong public service nature such as application demonstration and public service platform construction; use and guide industrial investment, venture capital and other funds to support Innovative product research and development. These firms have also been making venture investments in U.

According to one article, in , Chinese venture firms invested more into life-sciences and biotech firms in the United States than they did in China, providing VC funding to more than companies. In part, this is because it has become easier for Chinese biopharma firms to go public. The Hong Kong Stock Exchange had prohibited companies without revenue from listing. To help foster biotech, the Exchange removed that restriction. In addition, while Chinese investment in the United States and European Union fell significantly between and , according to the Rhodium group, acquisitions of Chinse firms in the health and biotechnology sector have expanded in both places.

In addition to government support for VC funds, Chinese governments have also provided support to the industry in a variety of key ways. One such way relates to talent. As a result, hundreds of thousands of high-skilled young scholars and entrepreneurs are returning to China every year, providing a significant boost to the development of the Chinese biotech industry.

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For example, Biomics Biotechnologies was founded in by Yuanyuan Zhu, who had previously been a research director at several biopharmaceutical companies in Silicon Valley. In , it was estimated that companies could achieve cost savings of up to 80 percent by conducting biomedical research in China.

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When it comes to biomedical research funding, the Chinese government invests much less overall than the United States. Data will be increasingly important to biopharma innovation, especially in the next wave of personalized medicine, where China has an advantage. In contrast to U. In the State Council issued a circular to promote the application and development of big data in the health and medical sectors, including the construction of national and provincial population health information platforms.

In particular, Chinese law makes it extremely difficult for genomics data or genomics material to leave the nation e. China goes beyond direct support for key inputs into the biomedical innovation process research, talent, and data by using more interventionist forms of industrial policy. The Chinese government believes the industry is made up of too many small, uncompetitive firms, and if it is to gain competitive advantage, it needs to help restructure the industry such that there are fewer firms.

There are a large number of generics producers in China. The U. International Trade Administration estimated that in China had about 5, drug manufacturers, with the largest comprising only one-third of the market. As a result, the State Council plan for the industry proposed to increase the adjustment of corporate organizational structure, promote cross-industry and cross-sector mergers and acquisitions of enterprises. In addition, generic drugs need to show therapeutic equivalence to original drugs.

Companies that comply with the new policy benefit from a lower tax rate of 15 percent instead of 25 percent. All of this is not only leads to industrial consolidation; it improves the quality of Chinese generics, making it easier to reduce the market share of foreign drug companies.


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China hopes this added revenue will continue to be used to develop original drugs. A second way the government influences the industry structure is through state ownership. Approximately 36 percent of major biopharma firms were state owned in , with 35 percent privately owned and the remaining 29 percent foreign owned. The Chinese government also provides an array of incentives and supports, including research grants, for biopharma firms. One key incentive is large-scale biomedicine science parks. Other local governments are also targeting the industry, in part by building research parks and providing tax incentives and direct subsidies.

The central government is also investing in a nationwide network of manufacturing innovation centers, which are modeled on the Manufacturing USA Centers yet funded at significantly higher levels, plans to have almost 40 centers by , and will presumably have some focused on biopharmaceutical technology—given it is a priority center.

In addition, tax incentives the Chinese government has developed for other high-tech sectors such as semiconductors benefit biotechnology. And while the sector is open to percent ownership of foreign facilities, there are still incentives and pressures to form joint ventures, thus helping domestic biopharma firms. As one WHO report notes, most foreign biopharma firms do not enter into joint ventures in other nations, but do in China.

The Chinese government also uses discriminatory procurement practices to favor Chinese-owned firms. Some have argued this was in order to give a domestic pneumococcal vaccine more time to be developed free from competition. The Chinese government also imposes import restrictions. In , the United States did eliminate tariffs on 28 categories of imported cancer drugs, but remaining drug imports remain subject to a 5- to 6-percent import tariff.

Another important policy tool for China to advance its biopharmaceutical industry is IP theft. For example, there have been numerous reports of Chinese biomedical researchers working at American universities, often on NIH grants, taking the IP their labs develop to China.

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Moreover, given the longstanding and widespread Chinese hacking of valuable U. In , a Chinese national was charged with stealing biological materials from Cornell University to bring to China. In the academic sector, researchers have stolen information or samples from their employers at Cornell University, Harvard University, and UC Davis.

In another case, a former Genentech employee was charged with trade-secret theft and passing on critical information to a Chinese competitor. Finally, China is also a major source of fraudulent medicines imported to the United States, allowing its producers to earn revenues for poor-quality or infringed drug products. Customs and Border patrol for IP violations in were from China or Hong Kong, and 8 percent involved pharmaceuticals and personal-care products. Views of Chinese innovation policy tend toward the Manichean: either China is helping global innovation or it is hurting it and U.

Add in the fact that the biopharma industry produces lifesaving treatments and cures for people around the world, and the question becomes even more nuanced and complicated. Resolving this issue is important because it can influence what the U. If, for example, China gains global and U. But drugs are different. If China gains global market share in drugs, it is possible it could significantly benefit the United States and the rest of the world through the production of better and perhaps cheaper drugs. In this regard, the biopharmaceutical industry has much in common with the clean-energy industry e.

In both cases, the global need—better and cheaper medicines in the former case, and better and cheaper clean technology in the latter—may outweigh concerns about global competitiveness. To see why, it is important to distinguish between innovation policies that are fair and legitimate and those that are unfair and illegitimate.

At one level, making such distinctions implies a value judgment, although there is considerable evidence and logic for making such distinctions.

Fair and legitimate policies are those that generally abide by the letter and the spirt of the WTO, including nondiscrimination between domestic and foreign firms; not tying domestic market access to certain behaviors e. Unfair and illegitimate policies include favoring domestic over foreign firms; employing a weak IP regime, coupled with IP theft and forced technology transfer in order to obtain foreign technology without paying market rates for it; subsidies for production and export; and foreign-company acquisition not based on market prices and terms.

If China were to employ fair and legitimate policies to grow its domestic life-sciences industry, it would create direct competition for U. The impact on U. But U. In both cases, overall, U. If China employs fair policies to grow its biopharma industry, it will contribute new or cheaper drugs.