At the end of May, Shanghai-headquartered Junshi Biosciences announced results of their Phase III trial of VV116, an oral COVID antiviral pill. The trial of VV116 showed greater efficacy than Pfizer’s Paxlovid pill in speeding up patients’ recovery. Release of the promising results suggests that Junshi has already filed for regulatory approval to bring VV116 to the Chinese market as soon as possible.
This news has flown under the radar in English-language press. But it could be a game-changer for China. It could allow Beijing to chart an exit from its current COVID Zero limbo, without sacrificing the health of its population. It would constitute both a strategic and a public relations win for Beijing – despite the fiasco of COVID Zero and domestic vaccine efforts.
At the same time, Junshi’s COVID pill underscores the unforced errors that characterize US – and US companies’ – current approaches to research and development (R&D). This is a pill that the United States could have developed with ease. VV116 is based entirely on US pharmaceutical giant Gilead’s GS-441524 antiviral drug, but with slightly modifications that allow VV116 to evade Gilead’s patent. Gilead opted not to push GS-441524 to clinical trials, moving ahead with remdesivir instead, a drug that has proven less effective and accessible. Now Gilead is scrambling to make its own oral COVID antiviral. But the company has lost its head start to a much smaller Chinese competitor.
Right now, America invents the way it trades: On the assumption that free, open ecosystems create win-win dynamics. What those actually do is neutralize one of America’s core strategic advantages.
The goal here is not to criticize Gilead’s choice of remdesivir over GS-441524, per se. It is to criticize an international commercial and technological landscape in which China is able to siphon the breakthroughs developed – and, of course, funded – by US players, invest in their application, and reap the rewards. Gilead, Junshi, and VV116 are just one case this. The asymmetry is pervasive, and pervasive across the entire range of strategic industries, not just pharmaceuticals.
China has captured the global solar energy industry by investing in the large-scale deployment of technologies originally developed in the United States and Germany (and, of course, doing so with State backing that allowed Chinese companies to under-price their international competitors); the same story holds for everything from electric vehicle batteries to commercial aircraft, next-generation telecommunications to semiconductors. The US invests and invents. China reaps the returns. American industry disappears.
If the US is to have any hope of a productive economic future – and if the US is to compete effectively with China – it needs to wake up to this reality, and fix it. From a strategic frameworks perspective, this means shifting from a focus on R&D to a focus on application and industrialization. From a specific policy perspective, it means placing more sophisticated protective guardrails on US innovation, while at the same time shifting investment to deployment over development.
Right now, America invents the way it trades: On the assumption that free, open ecosystems create win-win dynamics. What those actually do is neutralize one of America’s core strategic advantages. That must change. The US government and US companies have to become serious about protecting their intellectual property, as well as the R&D ecosystems that nurture it. That should include updating regulations on patents: Junshi should not be able to commercialize Gilead’s pharmaceutical breakthrough simply because of a few superficial tweaks. The US remains the leading force in international rule-setting. It should use that advantage to get serious about promulgating a more stringent system for international patents, and, especially, enforcing it.
But defense alone is a losing game, especially in a globalized environment where, like it or not, R&D will slip through the cracks. The US also needs to start playing industrial offense; needs to start shifting its focus from development to deployment. In today’s environment, the best R&D does not create winners (look, again, at the Gilead-Junshi dynamic). But large-scale commercialization of that R&D does. US companies – and Washington – would do well to learn from their Chinese counterparts, which a) invest far less, relatively speaking, in early-stage R&D and b) invest far more, relatively speaking, in long-term engineering and production projects. Think new production lines for pharmaceutical companies, networks of base stations for telecommunications players, and large-scale government infrastructure investment projects.
To do all of this, the US will have to change its mindset. It will have to stop patting itself on the back for being the most innovative country in the world. It will have to start recognizing the industrial deficit the past decades have created – and get serious about fixing it. Only then can America make use of its innovative edge.
