China is winning the biotech race. Patent reform is how we catch up

A bipartisan 2025 report from the National Security Commission on Emerging Biotechnology warns the U.S. is at risk of losing the biotech race to China and urges urgent action—more federal investment, expanded domestic biomanufacturing, reduced reliance on Chinese suppliers and better interagency coordination—to close a narrow window for response. The commission highlights systemic risks including heavy supply‑chain dependence (nearly 80% of U.S. drugmakers use Chinese contractors), potential denial of critical therapies in a geopolitical crisis, and erosion of the U.S. IP regime—blurred patent‑eligibility standards, repeated patent challenges via the PTAB and weakened injunction remedies—that is chilling investor capital in high‑risk, long‑horizon biotech. Three bipartisan congressional proposals aim to restore patent clarity, reform PTAB procedures and make injunctions easier to obtain; without these IP fixes, the report warns the U.S. could cede not just market share but strategic technological and national‑security advantages despite its remaining research and capital strengths.

Analysis

A bipartisan 2025 report from the National Security Commission on Emerging Biotechnology warns the United States is at acute risk of losing the biotech race to China and calls for urgent action including increased federal investment, expanded domestic biomanufacturing, reduced reliance on Chinese suppliers, and improved interagency coordination. The Commission highlights that nearly 80% of U.S. drugmakers use Chinese contractors for parts of their supply chain, creating strategic vulnerability in a crisis and economic exposure for pharmaceutical producers.

The report identifies a degraded IP framework as a central market failure: court decisions have blurred patent-eligibility standards in diagnostics, synthetic biology and AI-enabled research, the Patent Trial and Appeal Board permits repeated invalidity challenges, and a 2006 Supreme Court ruling has limited injunctive relief. These legal trends materially increase commercialization risk in biotech, chilling venture capital into high-cost, long-horizon programs that require enforceable exclusivity to justify investment.

Technological accelerants such as AlphaFold, which can model hundreds of millions of protein structures in days, make the stakes higher and faster; three bipartisan bills in Congress aim to restore patent clarity, reform PTAB procedures and ease injunctions. If enacted, those reforms would reduce legal uncertainty and improve the investment case for U.S. biotech, while the country’s university research base and capital markets remain structural advantages.

Key Decisions for Investors

• Reassess early-stage biotech and venture allocations with heightened IP-due-diligence standards and demand stronger patent defensibility before committing capital
• Tilt exposures toward companies with verified domestic manufacturing or diversified supply chains and reduce conviction in firms with concentrated reliance on Chinese contractors
• Monitor legislative progress on the three bipartisan IP reforms and key court decisions; increase selective exposure to innovation-led biotech and manufacturing names if reforms reduce PTAB and patent-eligibility risk
• Consider selective positions in AI-platform owners referenced (e.g., Alphabet/DeepMind) that accelerate discovery workflows like AlphaFold, as they may capture disproportionate commercial value from faster R&D
• Use hedges or size positions conservatively to guard against near-term geopolitically driven supply shocks that could disrupt drug availability or margins