The Shift in Global Drug Development

Summary

The a16z Show: The Shift in Global Drug Development

Episode Date: April 29, 2026
Participants: Host(s) from a16z, Theo Jaffe, Gabriel Dickinson, and Co-host

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Episode Overview

This episode explores a pivotal shift in global biomedical innovation: China's dramatic rise as a leader in drug development and clinical trials, surpassing the United States in several key metrics. The discussion centers on the factors underpinning China’s recent surge—systemic reforms, regulatory design, and incentives—and examines what the U.S. and other countries can learn (or fear) from this new balance of power in biotech. Featuring in-depth commentary by researcher Theo Jaffe, the episode is both an accessible primer and a policy deep-dive into the frontlines of 21st-century drug development.

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Key Discussion Points & Insights

1. The New World Order in Drug Development

• China Overtakes US in Biopharma Innovation

  • Since 2016, China has become the global leader in clinical trial volume and novel drug development, outpacing the U.S. and Europe.
  • [03:58] Theo: "China is actually ahead of the US now... Some people haven't realized it yet. It hasn't really leaked to the press at this point... It changes a lot."
  • This extends beyond "me too" drugs—China is leading in completely novel therapies, including first-in-class gene and cell therapies.

• Why This Shift Matters

  • Increased innovation means potentially more treatments and cures worldwide.
  • Strategic risk: If China withholds novel drugs for economic or geopolitical reasons, global health could be affected.
  • [06:42] Theo (on strategic risk): "China could just at some point say, hey, we've got the cure for cancer and we're not going to share with you. Which would be... really bad."

2. Anatomy of a Clinical Trial & US vs China Pipeline

• Trial Phases Explained

  • Four phases: Safety (1), Efficacy (2), Broad Efficacy (3), and Post-approval Monitoring (4).
  • Historically, the U.S. dominated in number and scale of trials, but now China leads, particularly due to larger sample sizes and faster processes.

• Clinical Trial Failures

  • Most trials—over 90%—fail at some point, often due to safety or efficacy issues.
  • [10:38] Theo: "It's more than 90% failures. It's really bad..."

• Rise of China’s Clinical Trials

  • After regulatory reforms in 2016, China’s annual clinical trials skyrocketed, overtaking the U.S. and EU, particularly for pioneering therapeutics.
  • [11:38] Theo: "China's done better. They're definitely rising more... In 20 years, they've managed to go from doing practically no clinical trials to doing more than America."

3. Beyond “Me Too” Drugs: China’s Novelty Edge

• Not Just Copycats

  • China’s reputation for "me too" drugs is outdated; they now lead in cell/gene therapies, innovative drug targets, and entirely new drug classes.
  • [16:05] Theo: "These are cell and gene therapy trials... China is doing tons of these trials. They are going after enormous numbers for things that have just never been touched before."

• Ethics and Policy Differences

  • China has fewer ethical restrictions (e.g., on germline gene therapy), allowing more ambitious trials that are banned in the West.
  • [17:44] Theo: "We don't do [heritable gene therapy] in the West. China's willing to actually cure families forever."

4. Institutional and Policy Differences: Why Is China Winning?

• 2016 Reform as a Game-Changer

  • Pre-2016: Bureaucratic bottlenecks, slow approvals (6+ yrs), and domestic-only trial requirements.
  • Post-2016: Sweeping reforms slashed approval times and opened the system—accepting foreign data, allowing parallel ethics review, and streamlining accreditation.
  • [23:09]: "This is when China really just like starts ripping and roaring..."
  • Market Authorization Holder (MAH) System allows for more continuous data collection and auditing at the end, versus constant scrutiny.

• Streamlining and Abundance-Minded Policy

  • Parallel ethics: One approval at a site quickly enables others.
  • Administrative review is concentrated and made efficient.
  • [24:46] Theo: "One ethics committee already signed off. Yeah, it's great."
  • Remarkably, the Chinese system can "audit you at the end" instead of reviewing every procedural step, cutting months and costs from the pipeline.

• Review Time Compression

  • Approval backlogs shrank from nearly 2 years to ~65 days, with even shorter targets coming.
  • [30:09] Theo: "They have shortened the review times. They've made everything just go quicker. They made everything streamlined."

5. Structural Barriers & Incentives in the US

• Regulatory Bottlenecks

  • Many small, repeated reviews delay U.S. drug approval; regulatory capture also occurs via mechanisms that protect profit for incumbent manufacturers, not consumers.
  • [31:50] Theo: "You might burn through all your capital just waiting on the regulator. That's kind of the intent with some of the regulations in the US..."

• Innovation Pipeline at Risk

  • Funding and “most favored nation” (MFN) policies risk depressing profits below the cost of capital, potentially stifling U.S. innovation.
  • [47:20] Theo: "There has to be money for this. In America, people don't pay enough. The returns for pharmaceuticals are below the cost of capital."

6. China’s Market Design: A Win-Win for State, Consumers, and Firms

• Centralized Negotiation with Positive Spillovers

  • China negotiates public drug prices, increases volumes sold by lowering prices, and ensures firms’ profitability, removing the dynamic where foreign governments drive up U.S. prices by negotiating too hard.
  • [43:15] Theo: "China says, well, no, we're going to make you profitable... If you lower those costs, we're going to help you sell more so you don't have a reduction in profit... everybody's just better off in general."

• Aligning Capital & Competition

  • Clinics and manufacturers facing less bureaucracy and more predictable returns.
  • Market incentives are better aligned with public health needs; targeted negotiations correlate with increased trials and innovation in those disease areas.

7. Looking Forward: Can the US Catch Up?

• Emulation May Be the Path

  • US could benefit from imitating China’s process reforms—streamlining IRBs, adopting “audit at the end” models, and promoting innovative trial designs (e.g., synthetic or shared control arms).
  • [45:13] Theo: "There is no shame in just studying what China did and trying to replicate it."

• But Politics, Awareness, and Funding Gaps Remain

  • Regulatory changes aren't always well-communicated to the industry; bipartisan opportunity exists, but execution lags.
  • [46:12] Theo: "There's an awareness problem in the market... There's a long list of learnings that we could take from Chinese structural reform and apply..."

• The Unknown: Strategic Cutoffs

  • For now, China’s health innovation benefits the whole world, but a future cutoff could be a major geopolitical and health risk.
  • [50:49] Theo: "If they cut us off, then China might just be able to keep pushing ahead because they run cheaper trials... we might just lose an edge entirely."

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Notable Quotes & Memorable Moments

• On the scale and opportunity of Chinese innovation:
  [05:50] Theo: "The Asia region... is something like half the world population... and now they're pulling more than their weight. They're out innovating per capita, Europe now, which is really incredible."

• On streamlining ethics and oversight:
  [24:46] Theo: "Parallel ethics committees... if one site in one region of the country approves the experiment, then every other site suddenly gets the same approval. One ethics committee already signed off."

• On the efficiency of Chinese drug approval:
  [30:09] Theo: "They have shortened the review times... They made everything streamlined."

• On China's market reforms and beneficial negotiation:
  [43:15] Theo: "China is actually doing market design that is really effective and it's... kind of daunting."

• Cautious optimism or concern about the future:
  [54:13] Theo: "You can imagine you can come up with doomer scenarios where we need a strategic cancer drug reserve because China's days away from cutting us off from our GLP-1s... I think the optimistic take is... everyone gets a cheap iPhone. That's a kind of good story to me."

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Memorable Lighter Moments

• Joking about "jumping jacks" during acronym confusion:
  [03:31] Theo: "You said plyometrics. I like to do, you know, jumping jacks and stuff..."

• Regarding gray market drugs for ‘looksmaxxing’:
  [55:48] Gabriel (jokingly): "They said we're mod by tbpm... get me on the gray market peptide plus steroid stack. And you know what? We'll see if we can looksmax, MTS looksmaxing stack."

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Key Segment Timestamps

• [03:58] – China surpasses the US as leader in drug trials
• [10:31] – Clinical trial attrition and “repurposing” drugs
• [13:28] – The reality of “me too” drugs v.s. true innovation
• [17:00] – Policy drivers behind China’s surge in innovation
• [23:09] – 2016: The decisive year of Chinese clinical trial reform
• [30:09] – The efficiency revolution: Backlog drops from years to days
• [43:15] – China's buyer-negotiated pricing: more drugs, more profit
• [45:13] – On simply copying China’s reforms
• [50:49] – Strategic risks of relying on Chinese clinical trials
• [54:13] – Optimism/pessimism regarding the global landscape

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Summary Takeaways

• China's institutional and regulatory reforms have given it a substantial lead in drug development, not just for existing diseases but for groundbreaking therapies.
• The United States faces challenges from regulatory friction, lack of awareness about reforms, and profit pressures, but has the opportunity to borrow successful strategies from China.
• The risk: If China chooses to restrict access or “pull ahead” geopolitically, the US and the world could suffer from reduced access to life-changing drugs.
• However, for now, global innovation is benefiting from an ‘abundance mindset’ proliferating in China’s policy—potentially a harbinger for broader healthcare gains worldwide.

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[45:13] Theo Jaffe: “There is no shame in just studying what China did and trying to replicate it.”

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Transcript

[Theo Jaffe]

America is 4% of the world's population. It's about 13% of all the drug buying, but it's also more than half of the sales in terms of dollar amounts. So it's huge. And this is a big advantage because, like, you know, innovation does respond to the money, and it has to. We're more likely to have false positives and false negatives in our trials because they are smaller than theirs. Theirs are less likely to have both the type 1 and type 2. Error rates are both down for China because they run bigger, better trials. China says, well, no, we're going to make you profitable. We're actually going to make you money. If you are a firm that we are negotiating with and lower those costs, we're going to help you sell more so that you don't have a reduction in your profits, so they become more profitable and we pay less money, and everybody's just better off in general.

[Podcast Host (a16z)]

What happens when the United States is no longer the leader in biomedical innovation? For decades, the US Dominated drug development, producing a large share of the world's new therapies and setting the pace for clinical research. But over the last few years, that's started to change. China has rapidly expanded its clinical trial system, accelerated approvals, and is now leading in both volume and novel drug development. This shift isn't about scale. It's about systems. Regulatory design, trial structure, funding models, and incentives all shape how quickly new treatments reach patients and where innovation happens. The question now is whether the US can adapt or whether the center of gravity for biotech continues to move. Theo Jaffe and Gabriel Dickinson speak with Cremieux.

[Gabriel Dickinson]

Welcome to mts. Cremeux. How do you pronounce it in the French?

[Theo Jaffe]

Creme.

[Co-host (possibly another MTS host)]

That was pretty good.

[Gabriel Dickinson]

We're gonna add.

[Co-host (possibly another MTS host)]

That was like a. Yeah, slight Canadian accent there to the tweet wall. Oh, straight on the tweet wall.

[Theo Jaffe]

Let me make this bigger so I can look at it.

[Co-host (possibly another MTS host)]

Nothing ever happens. That's what it says. That's the watchword of mts. Welcome to mts. Nothing ever happens. Here are the situations. All right, great.

[Theo Jaffe]

So are we live right now?

[Gabriel Dickinson]

We are.

[Co-host (possibly another MTS host)]

We are live right now. Creme. We are live on mts. It's so good to have you on the show. Thank you so much. I'm saying creme because cremo. Those last, like, four vowels there, three vowels are just like this. They're scaring me. And Australians, we already struggle with vowels. It's already a challenge for my people. So. So cremo. I mean, great to have you on Theo and I very please to have you on. And we were just like, come on the show. Let's. Let's chat. And you were like, I'm going to come on the show and I'm going to talk about clinical trials. Like, sure, sure, let's learn. We're all going to learn a little bit. We're all going to learn a little bit. So, I mean, why don't we start Cramp. Do you want to just give us. I suppose, in a way, what is the best way to describe CROMO is you're kind of like this independent researcher. You have these. This big, this kind of breadth of

[Gabriel Dickinson]

A breadth of interest on genetics, metrics and demographics.

[Theo Jaffe]

Oh, yeah.

[Co-host (possibly another MTS host)]

Genetics, metrics and metrics comes a lot. What is the a lot under metrics,

[Gabriel Dickinson]

Metrics is the apostrophe before metrics. What does that mean? You say I write about genetics, metrics and demographics in your Twitter bio.

[Theo Jaffe]

I'm really glad you asked. So I use it to refer to both that I do psychometrics and I do econometrics and sometimes CL metrics as well, which is, you know, jumping high. Basically the same thing for history, not just economics or genetics or psychology.

[Co-host (possibly another MTS host)]

I'm thinking plyometrics.

[Gabriel Dickinson]

Pliometrics.

[Theo Jaffe]

You said plyometrics. I like to do, you know, jumping jacks and stuff.

[Co-host (possibly another MTS host)]

It's pretty into jumping jacks. Yeah. Yeah. Well, fantastic. Well, so, I mean, it looks like you've got a. You've got a deck to take us through. We're about to get the deck, but feel free to come. We can kind of riff. We're just interested to hear what you have to say, Theo. I mean, you know, so, so, Krem, do you want to, do you want to take us off? What is it? I mean, maybe start by contextualizing it for us. What is, what's the context here? What's the background?

[Theo Jaffe]

Yeah. So in recent years, ever since 2016, China has been just up and away the big, big leader in biopharmaceuticals, biotech and producing new drugs, even producing new medical devices. They're getting way ahead of the U.S. for decades, the U.S. has been the top dog by a huge margin. We've produced something like 40% of all of the world's medical innov. When you, like, talk about, you know, things that are approved and things that actually work, and that is no longer the case. China is actually ahead of the US now, and I'm going to show you some documentation of that. Some people haven't realized it yet it hasn't really leaked to the press at this point. They don't realize that China is actually the top dog now, which upsets things. It's. It changes a lot.

[Co-host (possibly another MTS host)]

And maybe just to even take a further step back. Sorry, Theo, but just to take a further step back. Crimo, it's like, okay, so why do we care about that at all? It's like we can see the number. Am I right in saying the number of. And it's not just medications, right? You could say more generally, it's like interventions. So the number of interventions that are kind of making it through clinical trial and being approved for use, China is leading in that number now. And why does that. In a very kind of surface level, someone might say, who cares who comes up with it? Surely the US is going to be the largest market for it. Surely there's going to be all these process improvements. I mean, GLP1s obviously kind of originally developed overseas. It's driving the trade deficit with that country. But the biggest markets in the US So tell us a little bit more about that.

[Theo Jaffe]

So there's good and bad to this. It's really good that China is actually now innovating because for a long time they, I mean, they've been, they're the largest country. India might be, I think, larger by population now. I'm not sure.

[Gabriel Dickinson]

I have to check that it is larger.

[Theo Jaffe]

I think at least if they're not,

[Gabriel Dickinson]

do what India is larger. As of recently, India is larger population.

[Theo Jaffe]

Okay, so they've become large. They're number two. They're still enormous. That region, the Asia region, that broader East Asia region with like, including Southeast Asia, is something like half the world population. It's, it's enormous. It's so, so many people. And they've not been innovating. I've been pulling their weight, but now they are, now they are pulling more than their weight. I mean, the US is kind of pulling more than its weight too, but I think they're pulling a pretty big share. They're out innovating per capita, Europe now, which is really, really incredible. And that's great. It means we get like more medicines and treatments and things that'll keep us alive too. So it's really good in that respect. If the more innovations, the merrier. The big downside is that China could just at some point say, hey, we've got the cure for cancer and we're not going to share with you. Which would be. Right. This would be really bad.

[Co-host (possibly another MTS host)]

That'd be bad.

[Gabriel Dickinson]

Why would they do that?

[Theo Jaffe]

Though that'd be really bad.

[Gabriel Dickinson]

Sell it to us.

[Theo Jaffe]

They don't really care about that. Remember they're communists. They have a bureau of their government, the military civil.

[Co-host (possibly another MTS host)]

Throw around the C word like that. It's a mixed economy. Crap. It is.

[Gabriel Dickinson]

It's a mixed economy.

[Theo Jaffe]

It is more capitalist than America.

[Co-host (possibly another MTS host)]

Pardon?

[Gabriel Dickinson]

It's more capitalist than America in some ways.

[Theo Jaffe]

It definitely is in some ways. I'll actually get to some of those when I get start the presentation. But. But the thing is at the end of the day they all the corporations do serve the government. They have a whole government bureau, the military civil fusion bureau. And if they so wish they can stop exports of things, they can stop production of things, they could totally reorient their supply chains and take control of companies. Fire, kill jail bosses of the companies.

[Gabriel Dickinson]

They've.

[Theo Jaffe]

Who was that CEO a few years ago? Very famous billionaire who they basically just totally deposed him from his company of Alibaba. Is that Jack Ma? I was thinking Jack Ma. I was like that sounds okay. So yeah, they basically took him right out. You can do. They can do whatever they want. If it is in their interest they can just decide that it's over and you're not selling that drug to America for ideological reasons.

[Co-host (possibly another MTS host)]

And so it sounds like without kind of presupposing, you know, without getting ahead of you here, it sounds like the kind of general story here is they're like good aspects to. If we're looking generally, how has the Chinese clinical trial process changed? How is that changing the contribution to kind of global medical research? There are some kind of pros and cons. The kind of like meta story here that you're also interested in cram is like there's a strategic element to being the country that is driving kind of cutting edge medical research. And I suppose again I don't want to get ahead of your conclusion here, but it strikes me that there are probably processes, reasons, kind of internal bureaucratic and policy reasons in the US why China has been able to pull ahead here in what you might think is an area where the US has a natural advantage. So maybe I'll stop stop just predicting what you might be able to say and let you go through and take us through your thoughts here. Yeah, let's do here. Yeah, yeah.

[Theo Jaffe]

All right, so can you guys see the screen and is it like front and center?

[Gabriel Dickinson]

Yep, we're pulled up.

[Theo Jaffe]

All right. So basic general thing, if you don't know what a clinical trial is, they're usually they have four phases that's agreed upon by different countries, this thing called the ICH Council on Harmonization, where tons of different member countries came together and they agreed on some general ways trials are laid out. And those general ways are like, you know, do a phase one, show that it's safe, then do a phase two where you target some group of people that's like a little larger, and then you show that it's safe and it works. And then you go to phase three where you get like a big population representative sample or whatever, you know, the drug population user representative sample is. And then once it works on that, we approve the drug. And then phase four is not really an actual genuine trial phase. It's just post approval monitoring to make sure the drug remains safe and efficacious and whatever else. So it's. Those are the general steps in a clinical trial. And I've simplified there. But that's basically how it works. America runs.

[Gabriel Dickinson]

Did it.

[Theo Jaffe]

Transition slides. Can you guys see that?

[Co-host (possibly another MTS host)]

Looks great.

[Theo Jaffe]

All right, so America runs a lot of phase one, two and three trials. It runs more than, you know, more than 1500 a year in recent years. It used to run fewer than that. It's been increasing somewhat. You can see that it went from like 1300 ish to like 1600 ish in the most recent year. The reason that last year is the 2025 data is marked as like a little different color. It's because it's possibly incomplete. There might be some more filling in of the data sources as time goes on.

[Gabriel Dickinson]

Sure.

[Theo Jaffe]

But basically you can just see where America stands in terms of running clinical trials. A lot. Most of our clinical trial pipeline is in phase twos. That's often where things fail in phase one. They often fail too. I mean, every step. There are a lot of failures. Partly.

[Co-host (possibly another MTS host)]

And what's the total rate like if you take, if you take of all the interventions that go into trials, it's like something like 10% make it through.

[Theo Jaffe]

Yeah. It's more than 90% failures. It's really bad. Like your top reason is, oh, it's just, it's not safe or it like it goes from preclinical to human and does nothing, no efficacy. And then it just dies. And then the pipeline is emptied. And some things can be rescued from the pipeline. That's a different topic throughout repurposing, like, you know, Vivek Ramaswamy's business. You guys really. Roy Vont. No ROI Vods. Basically, he finds drugs that have been abandoned and he looks at them and he goes, oh, this actually helped this, like secondary Endpoint, let's go pick up that drug, buy it for cheap because it was abandoned, and then repurpose it for this other thing. And then, like, it actually seems, isn't

[Gabriel Dickinson]

this kind of what Martin Shkreli did?

[Theo Jaffe]

I don't know if I would call what he does repurposing. Maybe he's done some repurposing, I'm not aware, but he did buy Dara Prim Financial. Repurposing is definitely a term you could use. It's not really the same thing, though, but I'll. Yeah, I'll. I'll definitely give you that. So let's look at how China's done, though. China's done.

[Gabriel Dickinson]

Oh, my God.

[Theo Jaffe]

Better. They're definitely rising more. They're not really. I mean, they haven't been, like, doing this for as long as you can see that. They had, like, a big, big, big jump since 2016 is when they did their big clinical trial reforms. And if you put these side by side, you'll see that China is actually now ahead of the US in terms of running clinical trials. They are. And in the short span of a few years, in 20 years, they've managed to go from doing practically no clinical trials to doing more than America.

[Gabriel Dickinson]

Every single. The west versus China is just this.

[Theo Jaffe]

Yeah, yeah, pretty much. It's like this is what solar panels looks like. This is probably what silicon is going to look like soon. It's everything. And if it's not there yet, it's going to be. It's a really alarming thing, but it keeps happening. If you look at this and, you know, just put it together all together like this, with everything lumped together, you can see. Yeah, they've clearly surpassed the us. They surpassed us during COVID and they were on that trajectory for a little while. During the first year of COVID they had, like, a little slowdown. Everything kind of got, you know, muffed up there, but now it's doing fine, exceptionally. They're running amok. They're going incredibly fast. And this is already more than the EU does as well. The EU does a little less than the US in total. So if you combine the US and the eu, the free world is still, like, ahead of China, but that's not going to last for long because both the EU and the US are on these, like, kind of relatively flat trajectories, whereas China is on the up and up, kind of rough. And this does translate into real things. So these are new drug approvals, and these are drugs first approved in China. China is actually Getting drugs approved. These are drugs that are going to, like, actually show up in drugs people do end up using. These are not just trials that they initiate that do nothing. These matter.

[Co-host (possibly another MTS host)]

They predict people buying them off the dark web, getting them shipped to San Francisco, getting very scary. Yeah, okay. Yeah, yeah, I see it.

[Theo Jaffe]

Oh, the revolution. It's incredible. Yeah. They also aren't just me too drugs. So one of the things China's been accused of for a long time is just doing me too drugs. And a me too drug is where you basically see a new drug get approved and then you copy it immediately. And this happened with the cure for hepatitis C. It was either Amgen or Gilead did it first, but then Amgen or Gilead, whichever one wasn't the first one, copied them the next year with a drug that was incredibly similar to their little retroviral combination thing. And then the actual price on the drug that is paid by the insurers. The net price, not the price. It's, like, listed that you can see.

[Co-host (possibly another MTS host)]

Sure.

[Theo Jaffe]

Like, came down immediately because the number, like when you have like 10 drugs in a space, the, you know, cost of the drug is like 90% down. When you have two drugs, you're like, having the price. This is a pretty expected thing. Another company jumps in, they lower the price. China didn't just do that. A lot of drugs have done this, though. Like, we have all these mabs that are used in immunotherapies. These are all cancer immunotherapy drugs. And they are clearly me too drugs. They just copy the leader. Because the leader here has made so, so much money. Pembroke has made an incredible, incredible amount of money.

[Co-host (possibly another MTS host)]

But China is not just a context for the audience. If you're just tuning in, we're talking about kind of Chinese changes in Chinese in the clinical trial space and how that's kind of translating through to kind of interventions being approved in China and for the rest of the world. What you've pulled up here, this is. It looks like a table from Wikipedia. Is that right, Kumo? And what we've got is it's a bunch of different compounds that all have the same or a similar target. You said this is a cancer. Yeah, it's a cancer drug. And so this target here, this is the. What is that? Do you know where they were? The PD one? Is that like a. Yeah.

[Theo Jaffe]

So these are immunotherapy checkpoint drugs. They. They make it so you can, like, your immune system can respond better in the course of cancer treatment. We added on to chemotherapy these days, like all the time. They're increasingly. It's been like a little revolution in cancer treatment where they just layer on an immunotherapy and suddenly people are recovering at rates we've never seen before. Like, it's a. It's a really, really good thing. These drugs have been revolutionary and that's why they make so, so much money. They were the top grossing drugs until, I think, last year or the year before, where GLP1s have overtaken them.

[Co-host (possibly another MTS host)]

Yeah.

[Theo Jaffe]

I think if you added together all of these, they would probably still be more than GLP1s, but I'm not exactly sure on that, so don't quote me. Anyway, are these Chinese drugs just. Me toos. The answer is no.

[Co-host (possibly another MTS host)]

Yeah.

[Theo Jaffe]

These are cell and gene therapy trials. Most cell and gene therapy targets have not been done yet. There are very few actually approved gene therapies. I mean, you. Like, very few is relative to whatever your, you know, personal metric is. But I say there's not very many of these drugs yet. And China is doing tons of these trials. They are going after enormous numbers of gene therapies for things that have, like, just never been touched before. And we know this because if you look at novel gene therapies, they're coming out ahead. And this is about like, I think it's like the same year they come out ahead. Yeah. First ever phase one appearances. They are rushing ahead of the U.S. the U.S. has had like, like in 2025, we had like 20 something new gene therapies that have never been done before entering Phase one, and China had six times as many. That's.

[Co-host (possibly another MTS host)]

Yeah, sure. And also, maybe you're getting here crap, but, like, what is the, what is the kind of underlying institutional or process thing that's driving this?

[Theo Jaffe]

I'll get to that. This, this part, this, this first, like third of the presentation is basically just documenting that China is ahead of the. And they are ahead. Not because they're copying anybody, because they're really innovating. And they really are innovating. And they have another advantage when it comes to these gene therapies. In the US we are banned from offering gene therapies that do germline changes, meaning that they affect sperm or eggs. So if you were to like, edit somebody in a way that led to a change in their kids, meaning you like, cured their condition for all time. That's very bad in the US for reasons I don't think they're good.

[Co-host (possibly another MTS host)]

You can see there'd be ethical concerns. You know, there'd be ethical concerns. You can See, yeah, people might get too healthy. Yeah, you wouldn't want to get too healthy. Yeah, exactly.

[Theo Jaffe]

You might make your country a much better place. And that's really bad. We got to prevent that.

[Co-host (possibly another MTS host)]

That's always a risk. It's always a risk.

[Theo Jaffe]

I mean the thing is, it's, it's, all the excuses are kind of bogus. If we can cure a family of like a horrible debilitating disease for all time, why, why don't we. I think we're slowly coming around on this to society and we're going to do that because China's going to do that. In part, I think that might be like a little bit of our motivation to do that. But they don't, they don't have as much resistance to that. So they are willing to actually cure families forever, which is something we don't do in the West. Oh, well, another thing is they are actually ahead in antibody based drug trials. They are also ahead and antibodies have been like a big thing in recent years. They're really, they're really good drugs. Small molecule drug trials. You've been ahead in that those are very easily produced like pills and stuff. When you just look at all novel drug compounds, again, what are they? All molecules. So for example, you know, those new, there are oral small molecule GLP1 drugs now and they are basically just like a pill form, easily mass produced version of the GLP1 drugs you're familiar with. Like tons of drugs are small molecule drugs. It's a very broad category of drugs that can be easily produced in a bioreactor and just like, you know, shoot a lot of pills in a week there. It's a useful modality. If you want to look that up later, you can, it's fine. Anyway, novel drug compounds, again, they're ahead in this novel frontier drugs, like the first drugs to ever be done for some big category of thing. This includes like even MRNA vaccines and stuff. Like they're just, they're ahead in all of it and they're gaining faster actually on totally novel things than they are in general. So they're already ahead of the US when it comes to clinical trials in general. And they're way ahead. They've been ahead for several years when it comes to things that are completely new and novel. Put the US and China next to each other in terms of totally novel things. China's even more ahead than it was for things in general. It is a rough, rough situation. Some other people have documented also that China's trials fail less for statistical reasons because they have Bigger enrollments, they make it easier to enroll and they have a bigger population. It's a lot easier to run a big clinical trial in the US that actually just works.

[Co-host (possibly another MTS host)]

And maybe just to explain that for one second, super naive question. But it seems like that's just a kind of function of if you have a small effect size for a given intervention, you need a much larger population before that becomes statistically significant, right?

[Theo Jaffe]

That's right. Yeah, exactly. And we're more likely to have false positives and false negatives in our trials because they are smaller than theirs. Theirs are less likely to have both the type 1 and type 2. Error rates are both down for China because they run bigger, better trials and they allow them to be organized across.

[Gabriel Dickinson]

What's the Y axis on this graph? The average.

[Theo Jaffe]

Oh, that's the number of people in the sample.

[Gabriel Dickinson]

The number of people in the average clinical trial.

[Theo Jaffe]

That's right, yeah. So like in their biggest year they had like 400 is people in the, the average clinical trial.

[Gabriel Dickinson]

Wow.

[Theo Jaffe]

Clinical trials generally aren't that big. They're bigger when they're closer to phase three. So China's will probably get bigger in coming years as they have more phase threes. We'll see though. But they have, they run bigger antibody trials. This is another like relatively novel novelty filled modality. They run bigger small molecule trials. They don't run bigger on everything, but they do run bigger in general and this helps them to run trials that are more likely to succeed. And we often have drugs that get abandoned for reasons to do with these type one and type two failures. Kind of sad. How did it happen? This is the part that you want to give.

[Co-host (possibly another MTS host)]

So I'm impatient, I'm a simple man, I have low attention span.

[Theo Jaffe]

I got you. So before 2016, China, they required all their clinical trials to go through cfda. It's like their version of the fda. The Chinese FDA basically accredited sites in China. They didn't let you run things abroad, they didn't let you take in foreign data, which is a huge impediment because it was hard to run trials in China. And their investigational new drug reviews, that's the reviews to get like a new drug, you know, approved all that or to start the trial or whatever, anything like that. They took a really, really long time, like most of a year on average. And that meant a lot of drugs actually were taking more than a year. Some were taking like two years to get reviewed, which is just too much. And the approval time for a novel drug or actually for any drug Sorry, Averaged six years, which is absolutely nuts. And there was no fast tracking until they had this committee meeting in 2009 where they were like, oh, we can start doing that later. And then they basically didn't do it until a little later than that.

[Co-host (possibly another MTS host)]

And this is like, I mean, this makes sense, right? If you were to imagine like very naively again, like not to glide over all the differences between present day China and say the USSR during the Cold War, it's like if you imagine just like the words USSR clinical trials, just like that's like a bureaucratic nightmare. You got to imagine that's taking 25 years. So it's like never happening. So it kind of makes sense. This is naively what you would expect of a kind of process driven centralized bureaucracy with a big civil service that's kind of driving this pretty slowly. Right? So this is naively what you expect, but that's pre2016. And so I assume the next slide is Dun, dun, dun 2016. Yes. Not anymore.

[Theo Jaffe]

So this is when China really just like starts ripping and roaring. They convened a like, you know, central party meeting where they were like, oh, we want to take suggestions from everybody about how to reform the system. And they genuinely let in like tons of professors, academics, even foreign people, like, you know, foreign Chinese nationals, or like just come in and start proposing here, reform this, that, that thing, that. And then like suddenly they were accepting everybody's ideas and implementing stuff. And they've mostly done it in these four waves. So 2015 to 2017, they started accepting overseas clinical trial data. There's the Council on Harmonization stuff I mentioned earlier. They started accepting stuff from other countries that are part of that ich. And just like, because they're all good, they're all reviewed, they're all trustworthy countries, why don't we accept their data? All they required pretty much beyond like, you know, some basic assurances is that, you know, make some effort to show that this will work, the drug will work in Chinese people, and then bam, they'll accept the data. Like it's. They made it a very easy process. There's more to it, but it's incredibly easy in general. They streamline their site management, they change the accreditation criteria so sites no longer have to be like, you know, oh God. They actually had like lots of diffuse regional stuff going on. They made it so there's like one national framework. They allow parallel ethics committees. This is actually one of my favorite things. Basically, if you are running a bunch of sites for your trial and one site in one region of the country approves the experiment, then every other site suddenly gets the same approval. One ethics committee already signed off. Yeah, it's great.

[Gabriel Dickinson]

This doesn't work that way in America. How does ethics approval work for clinical trials here?

[Co-host (possibly another MTS host)]

Don't trigger him yet. Don't.

[Theo Jaffe]

No, it doesn't work that way in America and I really wish it did. There are some cases where it does, but it's quite sadly no. We need IRB reform in America. China has it. Their IRBs, their ethics committees are like much more efficient and streamlined than America's. Which is kind of crazy when you imagine a communist country versus a like, you know, a nominally capitalist country. You would expect the like cutthroat capitalists to be the one to go, ah, fuck ethics. But no, the Chinese women say fuck ethics. They go do everything. And then we will allow you to do it in the most like streamlined, efficient way.

[Co-host (possibly another MTS host)]

And it's very, it's very like Ezra Klein pilled. It's like very abundance filled. It's like they've been closely following Ezra KLEIN and in 2016 they were like, oh, let's do like a very kind of moderate liberal abundance reform about how can we do this sensibly, keep all

[Theo Jaffe]

the safety lines in place given the years. It's kind of like Ezra Klein has been communist Chinese pill.

[Co-host (possibly another MTS host)]

I mean kind of.

[Gabriel Dickinson]

Yeah, like China is a very sort of abundance pilled country in a lot of ways. Like in, in terms of housing, in terms of development, infrastructure. You know, California could use a little bit more Chinese mindset on building high speed trains for example.

[Theo Jaffe]

Oh yeah, absolutely, absolutely. I mean they, they really can, they can do everything so cheaply. They can make tons of infrastructure. They're really amazing. My, there are so many things I can go over there about the reforms there. There's just like, I've written down a lot of stuff here. My favorite thing is the market authorization holder system, the mah. It is, I think the coolest part of the reforms in America. Definitely needs us immediately. Basically, if you were the person bringing a drug to market, you are the holder of the mah and you have to have these assurances that all your pre clinical data is good, that your clinical trials are managed properly, that your manufacturing is done up to some like standard that can be audited at the end of the process of the clinical trial. And if the government says sure, that's good, you can take it to market, they basically make you have all the assurances up to the final phase after which they audit you. And they like, you know, you Go through some basic audits and then suddenly your drug is on the market. But you don't have to go through a bunch of rigmarole the entire time. Like they take out government inspections and steps along the way.

[Co-host (possibly another MTS host)]

Right, right, right. So I should pause there. And so if you're joining us right now, MTS Live, we're here with creme. We're talking about basically progress reform in the Chinese clinical trial space. The headline here from, from CREMO is that China is ahead on all of these, has just. Has kind of just pulled ahead just recently over the last few years on new drug approvals and particularly on new drug approvals for kind of novel clinical targets, which is like, I mean, and the significance here, we can talk about it later, but. But it seems significant in a bunch of different ways. Potentially. The takeaway here is the thing that drove, or at least in part the thing that drove this change has been some major process change, some major reform in China about the actual process of running a clinical trial and taking a target through to approval. And this, I mean, it's good to just, I think it's good to just pick one out. It can get, we can kind of get lost in the detail here. But it sounds like this particular example that you're talking about, creme, is like, how do things work in the U.S. in the U.S. you go through a clinical trial. Throughout that process, you have to provide a bunch of different data and assurances to the regulator. And I imagine there's a review period for that. So they say, submit it by this date. We'll get back to you in 60 days. Oh, you got something wrong. We'll have another request for information. That'll take another 90 days to get back to. So you just have all of these kind of like, kind of stop points in the process of bringing a drug to market. What you're saying is that the model that China is using right now that they've gone to as part of this reform process is that each, if you're bringing a drug to clinical trial or if you're bringing intervention to clinical trial, you kind of keep all of the records throughout the entire process. You abide by a certain set of standards set by the regulator, but they don't check them until you reach the final phase three trial. And then they go, okay, let's audit your entire history here.

[Theo Jaffe]

Or phase two, early approval. They can approve based on earlier trial results too. They, they are impressive. They found tons of ways to shorten the process to go from trials to actually approving the drugs.

[Co-host (possibly another MTS host)]

And so you're just shortening the approval loops, right. And you're just taking a bunch of kind of review periods. I mean, this is the nature of kind of any, if anyone, you know, watching right now. If you've ever worked with. I mean, if you've ever tried to, like, do some minor renovations in your house and it required some approval from a local. It's not. It's not like. It's not a criticism necessarily. It's just like the nature of administrative review is you submit something and then an actual person usually has to sit down and look at what you've submitted, and they have to check it against a bunch of standards. And that itself is like good social technology because it drives a bunch of good outcomes. But the nature of that process is it takes a long time. If you do something wrong or you don't put the right data in, or you label something incorrectly, they have to come back to you, and you just go back to the bottom of the pile and it sounds like you're talking about. Basically, they've streamlined the process in such a way that the actual administrative review process is much faster, but at the same time, they've kind of tried to keep the policy goals of the administrative review process intact. So the outcome is at the same standard, but the process is much improved. Is that right?

[Theo Jaffe]

That's right, yeah. And they have shortened the review times. They've made everything just go quicker. They made everything streamlined. They've reduced the number of people that everything has to go through. So you can have, like, one official who does, you know, three of the things that used to be given, three things that might have been given to three different officials in the past that might have taken way more time. They do so much stuff that has made everything so, so much more efficient. And I mean, it's really. Every step along the way, it's incredible. They even have a system where you can have companies come and, like, bid for production of your. Your API, your active pharmaceutical ingredient, all of your stuff, and you can, like, find ways to lower the costs in that way. And.

[Co-host (possibly another MTS host)]

Interesting.

[Theo Jaffe]

Yes.

[Gabriel Dickinson]

It's.

[Theo Jaffe]

It's tons of incredible things. I love every little bit of it. It's really. It's got a lot of stuff that America should work on emulating and the rest of the world should, too. There's all sorts of crazy things that we just don't do that they have, that are obvious things that they have implemented. And it's been great for them for the reforms. You can see the review backlog Used to be like almost two years. I mean it was really bad, more than, more than a year and a half. Like it was incredibly bad. And now it's 65 days of their target and they're trying to get down even less than that. They're trying to do reviews in like 40 days, which is going to be insane. It's a really good thing that they can. And the way, I mean, I mean

[Co-host (possibly another MTS host)]

it's contextualized again, it's like 600 days. I mean, if you, the thing that drives, the thing that drives this is if you are a pharmaceutical company, you've invested a bunch of different, you know, a bunch of money in developing a drug. A target 600 days might just like make that financially non viable.

[Theo Jaffe]

Right, Exactly. You might burn through all your capital just waiting on the regulator. That's kind of the intent with some of the regulations in the US like we have a regulation called gdufa, which is the generic version of pdufa, the drug, the Prescription Drug User Fee Amendments, where prescription drug producing companies go to the fda, they pay for the FDA to be the reviewer, they cover the FDA salaries and all that. And they, if the FDA approves the drug, the FDA starts getting paid. But with gdufa, a generic drug that'll compete with the prescription drug, the way it was initially set up is that which was designed by the prescription drug manufacturers was if you want to bring a generic drug to market, you have to pay immediately on the review. And the review, there are all these ways that they kept the reviews going longer and longer. So tons of companies would come and like propose, I want to bring this generic drug to market so I can lower all these costs. And they were like, no, you have to wait. And then you burn through all your capital and your company's gone and there's no actual generic drug production anymore.

[Co-host (possibly another MTS host)]

So it's just raising them, it's just raising the walls to try and compete with a cheap generic. And so like, I mean, again, to contextualize it, it's like if you look at the price of the amount of the percentage of GDP spent on health care, it just kind of goes up. If you look at US drug prices compared to the rest of the world, they're quite a lot higher. There are lots of different reasons for that. This is definitely not the only one. But it seems to me like the big picture here is like, this has effects on what you pay for medication. It has effects on how fast you can get treatment for novel conditions. It's actually kind of flowing through all these different channels as well. Is that right?

[Theo Jaffe]

Yeah, absolutely. And they even have allowed different methods of trial design that are incredibly novel and allow you to get done with a trial quicker. Like, the big proposal now in the US that we've been dealing with for, like, three years now or been trying to do is like, to increase the number of endpoints and to make it easier to monitor trials, like, by updating, for example, the CDC's death index. Let's see, like, do people die at whatever dates, by the way, it's actually surprisingly hard to track deaths. The death index doesn't update immediately on somebody dying. You have to wait. So if you want to, like, backfill your data from your trial and figure out, like, oh, we saved lives, or we didn't say lives, you gotta wait. Some trials actually set up their own call centers to call out to hospitals or call out to people's homes. Like, figure out, are you still alive? It's.

[Co-host (possibly another MTS host)]

I guess you stop. I mean, if you die, just stop replying to texts. You're not gonna reply and be like, yeah, I am dead.

[Theo Jaffe]

Oh, did they leave the trial? Did the doc? Is the doc gonna tell us this person died? Kind of don't know. If the CDC updated the death index, they could save a lot of money during their trials then. But also, if we had novel methods of designing, like, our phase threes, we could, you know, complete them half the time. And, like, the number of these trials that have innovative control arms is radically increasing in China. And, like. Like, not even a thing. In the US we haven't even approved these, like, innovative control arms and stuff.

[Gabriel Dickinson]

So what is this? Y axis measure log points.

[Theo Jaffe]

Yeah, log point increase in the number of trials with innovative control arms. So chain China, basically, you're seeing a big increase in the number of trials that have control arms that are totally novel. Like, you can actually take, for example, Eli Lilly wants to do this. So Eli Lilly has this. These two trials, one where they tested dolaglutide and another where they tested tirzepatide against the terzepatide was tested against. I think it was up. No, it was tested against some other GLP. 1 RA. No, it was tested against I. Some other drug. Anyway, it was an active comparator, and they wanted to get the full placebo effect size. They wanted to get the. What is the effect versus nothing, basically, versus an inert saline shot. So they have these two trials, and they both have the same inclusion criteria, and everybody in one trial is eligible to be in the other trial. So your Control arm for your like novel thing. You don't actually have a control arm, just use the control data from that previous trial. That's an innovative control arm. It's an example of it. You don't have to like enlist so many people. You can save money by not running the placebo thing again. Producing placebo drug is a non trivial cost and monitoring those people is a non trivial administrative bit of overhead. You can cut that out entirely if you have the same eligibility criteria and all that. You could just compare just the treatment group to this old actual group.

[Co-host (possibly another MTS host)]

Yeah, sure. So I mean we're coming up here on like I don't know, half an hour, 40 minutes or something like that cram so. And I think if we can just kind of like bring everyone up to where we are now. It's like we've talked about this a couple of times but it's like clearly on a bunch of different measures, China are producing a lot more, they're kind of pushing more drugs through trials. They're targeting specifically kind of more unique or the frontier of a bunch of different candidates. And there's some kind of, there's like. It seems to me that the, the reasons for that are if you go very granular, they're very complicated. But the high level reason seems to me that they have taken a principled approach to doing some policy reform in the space and they have been careful about trade offs between speed and efficacy, speed and policy goals and how they do this and they've designed good institutions that produce good. I mean this is a classic as reclined liberalism.

[Theo Jaffe]

So really take us through.

[Co-host (possibly another MTS host)]

So take us through. You know, what is there, you know, is the. I assume that you have like, I assume you have a 50 page document for the administration to consider. You know, how does the US catch back up to China? If you would just give us a very high level. Is it, you know, it's obviously not just call as a client but presumably there's like a bunch of experts in this space.

[Theo Jaffe]

Gosh, you know, glad you asked because.

[Co-host (possibly another MTS host)]

Right, go ahead, go ahead.

[Theo Jaffe]

What are some ways China has done this? Well, it's been, you know, they have tons of reforms. It's not just the clinical trials that we've seen so far. That is a huge, huge thing. They've also changed how manufacturing is done, how the assurances for manufacturing are done, the requirements for manufacturing. They've offered people like independence from certain regulations if they're sufficiently innovative. They opened up their capital markets. They've historically been pretty close. I don't know if you know this but like people used to use Bitcoin back in the day to try and leave China. They've opened them up. You're going to do pharma stuff. You're allowed to take VC money in China without restrictions for like pretty much, not without restrictions but pretty much without restrictions for pharma stuff. They've opened everything up, they've reformed everything. They've taken every little good thing that you can imagine and gone of course, let's just do that. And they've eliminated corruption in this as well. Or they're in the process of it. They are actively like, you know, jailing people and I really wish we did in the US like remember that Stanford ex president who did all the fake Alzheimer's stuff.

[Gabriel Dickinson]

We actually just had the anti fraud corporation guy, Alex Shea on MTS earlier.

[Theo Jaffe]

Wonderful, wonderful. I agree with what they're doing. The key tams, we're doing it too. It's a very fun little thing and it's worth a lot. I think it'll be very good. You should actually invite the other guy who did the Dana Farber keytam case on. He is very interesting. It's like one guy filed his own case against Dana Farber for fake images and stuff. Like a three and a half. What's that?

[Gabriel Dickinson]

Sholto David?

[Theo Jaffe]

I think this is it. Yeah, that's the guy. Yeah, bring him on. I think he'll have a lot to say about fraud and stuff but like Eliezer Maslio, the guy who used to run the NIA's neuroscience division, he was the top researcher globally on Alzheimer's and Parkinson's in terms of like his publications and all that stuff. And he basically led to the misallocation of billions of dollars in of money that went to like clinical trials and all this stuff and effort. Tons of people spent time trying to replicate his stuff and it just did not work. So we went down like a tech tree that didn't, shouldn't exist. You spent all your level ups on, you know, bullshit and it's just terrible. China this is. I actually think China will get ahead in a lot of ways because they prosecute frauds and the government is like once they've identified something as fraudulent, they're not going to fund it anymore and the frauds are going to be out and they'll find people who are connected to these fraudsters and they'll also cut them off too. They're willing to do things that take like a lot of, you know, really quick actions and all that. So. But I do want to get to the most important thing, actually.

[Co-host (possibly another MTS host)]

Yeah, please.

[Theo Jaffe]

So this is the big thing. One of America's big advantages comes from the fact that Americans buy the most drugs. Medicare, Medicaid. When those came about, they led to huge increases in funding for conditions that are commonly affected by Medicare Medicaid stuff. So like, if Medicare is buying a bunch of drugs for blah, blah, blah condition, suddenly the research effort for those conditions increased substantially. Like, the elasticities are pretty high there. They lead to big increases in the volume of research for things that matter. America is 4% of the world's population. It's about 13% of all the drug buying, but it's also more than half of the sales in terms of dollar amounts. So it's huge. And this is a big advantage because like, you know, innovation does respond to the money and it has to. And trying to figure this out, they actually learned because.

[Gabriel Dickinson]

Is this just because we sell a lot of very sort of high dollar amount expensive drugs?

[Theo Jaffe]

It sort of is. We also just buy more of everything. Like look at, I mean, look at the volume of purchases. A lot of our spending or our volume is on generic drugs. And that's part of why our actual cost delta is not so bad once you count out high dollar items. But. And it's mostly like a volume thing at the end of the day. But yeah, I mean, we pay, we pay more and we pay more often trying to figure this out. They've done some incredible drug reimbursement reform stuff and it's actually been really, really good for them. Basically, you look on the left here, that's the change in price when they negotiate down a drug. So they negotiate down a drug price, which a lot of countries do, and they do it pretty openly. They say what the prices are. Like in other countries, like in Germany, for example, they have hidden little like discount rates. We don't actually know what the real prices are until you get to the point of care and you try and like actually purchase something. China did that and they radically lowered the cost of the drugs. They also increased the quantity of the drugs sold by an even larger amount.

[Co-host (possibly another MTS host)]

Right, right, right, right, right.

[Theo Jaffe]

Look at that. In total, what they do is that is look on the far right there. And that's what they actually did. They cut down government expenditures on drugs and they also increase the profits of the firms they negotiated down. So generally when like a western country negotiates with a firm, they lower their profits, they hurt the profits of the firm.

[Co-host (possibly another MTS host)]

Sure.

[Theo Jaffe]

They have to maybe make up some of that money by charging the US who has a policy of not negotiating in general until very recently with some of our, like Medicare, Medicaid stuff we've done under Biden. But we generally don't negotiate, so they charge us more because these have to make up the costs from other countries. Well, China says, well, no, we're going to make you profitable. We're actually going to make you money. If you are a firm that we are negotiating with and you lower those costs, we're going to help you sell more so that you don't have a reduction in profit so they become more profitable and we pay less money and everybody's just better off in general. Their people are healthier and everything just works better. The firms survive more. It's a good system. They are actually aligning the market and consumer needs. And it's, I don't know if it can be done, a free market. It's actually very alarming to me. And there are seemingly not bad effects on competitors for these companies. You look at the spillover effects on competing firms, like the effects on the competing firms prices or the quantity of drugs they sell, and there's nothing there either. If anything, the coefficients are slightly positive. So these other firms that are not in the negotiations don't seem to lose at all. China's actually doing market design that is really effective and it's.

[Co-host (possibly another MTS host)]

Yeah, right.

[Theo Jaffe]

It's kind of daunting. They figured out that part of why America innovates, because it pays so much. And they've exploited this mechanism and made themselves better off for it. The government's paying less, people are paying less, the prices are just down across the board for all these drugs. It is amazing. To recap it, they lower the prices, they increase the volume sold, the revenue goes up, the companies end up better off and there are no spillovers. It's. It's goddamn amazing. It's, it's really incredible. And the areas that they target with their negotiation, much as America's Medicare, Medicaid mechanisms did, those areas see the biggest increase in clinical trials. The clinical trial effort gets distributed to the areas that China is targeting. And China is targeting really good areas because it's kind of obvious what we should target. If you ask people who are developing drugs what we should target in order to make the population healthier, they kind of know there are lots of hints and indications and they're like, oh, well, we're not spending enough money on these things. And China's regulators are like, oh great, we'll listen. And we will actually put the effort towards those things. And those things are often really expensive because they're often like, you know, places where they have a lot of new drugs and new drugs tend to be expensive. They target them, they lower the price, they increase the quantity sold and it leads to more effort in those spaces, which brings down the cost even more and reduces the earning. It reduces the firm's market power relative to the government and makes. So they can negotiate down further and lower the costing further through competition.

[Co-host (possibly another MTS host)]

And it's a supplier response. There's a supply response on the. On the kind of bringing new candidates to market. So this is, I mean, this makes. It's very interesting. So we've got about 10 minutes left of the show Creme and I think, like, if someone is listening to this, they're in the administration, they're going to clip it and send it to their friend who's in the administration. Or if it's just like, maybe it's out to the think tanks, I'm going to assume people are thinking about this in a whole bunch of different spaces. Is the takeaway here just like there is no shame in just studying what China did and trying to replicate it?

[Theo Jaffe]

I think pretty much, yeah. The FDA is doing a lot too. We have new approval pathways coming out. We have new Bayesian methods are being allowed in clinical trials. We are doing a lot of the things.

[Co-host (possibly another MTS host)]

That's a win for the polycules, Bayesian methods. That's a win.

[Gabriel Dickinson]

We should have talked about that earlier.

[Theo Jaffe]

So true. It's really. There are a lot of great things going on and the CFR is getting pulled all the time. We are doing this massive deregulatory drive and if DOGE has had its way and they hired enough lawyers, which I'm going to be pretty critical of the government, we haven't hired enough people, then you would see America catching up in this deregulation. And to some extent there's like a knowledge problem where there has been more deregulation than you think. Like there's extensive stem cell deregulation that's happened, but nobody knows about it. So the effort being put into it by companies is like, not there. They can do more stuff right now. The Trump administration has been cutting down a lot of barriers, but nobody's aware of this fact.

[Co-host (possibly another MTS host)]

Right.

[Theo Jaffe]

Might have something on that soon. They might be able to come back in like a week or so.

[Co-host (possibly another MTS host)]

Yeah, yeah, yeah. Fantastic. I mean, the takeaway, like, you know, if just on a high level, to me, it's like, there's a political problem here and you Know, there's an information problem, which is the people who say if we take just what the administration, the current administration is doing really well in the space. It sounds to me like there's an awareness problem in the market, which is like you want your pharmaceutical companies to know what's going on here. You want them to be able to take every little D reg that goes through. You want your greedy pharma execs to be absolutely optimizing the hell out of that little deregulation or that change in the rules because you want new drugs coming through the pipeline. Right. And on the other hand, it seems to be there's this long, a long list of learnings that we could take from Chinese structural reform in this space or Chinese policy reform in the space and apply in the slightly different context of the U.S. of course, that seems to me, it seems politically like you could pitch this to the left, you could pitch it to the right. It's quite a bipartisan subject, right?

[Theo Jaffe]

Yeah, it should be. The only issue though is that ultimately you must have the funding element that is crucial. There has to be money for this. I'm going to have to pay. In America, people don't pay enough. Honestly, it's kind of weird. The returns for pharmaceuticals are below the cost of capital. I mean, this last year, it's actually gotten worse since then. And there's a bigger issue with this current administration. This current administration can do all the regulation it wants and it might have. It'll have marginal benefits, it will be good, and it'll have great benefits after this administration is out and all that. But the issue is the mfn, the most favored nation. Pricing is a really huge problem. If you want to actually, and Trump loves this stuff most. Favorination pricing is where you try and make it so America's medications match the like peer country prices. So if Germany pays 100 bucks for medication, America will not pay more than 100 bucks for medication. That's the idea. If you do this comparison with a lot of different countries, you can lower pharmaceutical profits a lot in the process. If you actually, you know, are committed to doing it properly, you will do that. You will hurt those profits. And the profits are already too low to make this stuff self financing. And we have too many structural barriers. And if you cut them all down, we still have the issue of the funding. So America faces a lot of, a lot of headwinds, unfortunately, and very few tailwinds. The pharmaceutical province are actually taking a hit from mfn. The regulators, like at the cber, they were just like approving designs and then going back and not approving the actual trial results when it got done. That was, that's chaotic. It hurts the ability of companies to plan ahead and like actually schedule innovations and all that. Like, they can't, you can't make a clinical trial. Why would you invest money in a clinical trial if the regulator is not going to stick to their word and actually approve it if the thing turns out good?

[Co-host (possibly another MTS host)]

Right, right, right, right.

[Theo Jaffe]

They're vested interests. They want you to stop like building manufacturing plants and stuff. It's actually hard to get like a plant set up in the US and there's more about plants that should be talked about too. Running clinical trials is hard. Paying for drugs is getting worse. China is on the other hand doing everything right. They're deregulating. They figured out a way to fund it. They've decided to lower prices while increasing corporate profits. I mean they're, and they're targeting the medicines that everybody knows are like good ideas to target. So, so can America catch up and get ahead is the big question. And the answer is I honestly, I have no idea.

[Co-host (possibly another MTS host)]

I mean, it makes sense to me, cram, that there'd be certain people, and maybe yourself included, who would take a kind of. There is a useful lens here, which is the kind of zero sum lens of global competition, which is to say the US gets a bunch of strategic benefits from being at the cutting edge of medical research. The population of the US gets a bunch of benefits. Americans benefit from being at the cutting edge here. They get the best treatment, they get it fastest, maybe they pay a little bit more money for it. But you know, people are willing to pay. When you, when you're rich, you're willing to pay for an extra year of your life. So yeah, it seems like there's that angle and that makes perfect sense. Stepping back, it seems to me like there's also a kind of positive something happening here, which is, and you said at the start, right, you were like, the rest of the world is not pulling their weight in terms of innovation in this space. And China has rapidly come up to par. And in some ways what you're suggesting seems to me they're kind of pushing past the frontier of the US in terms of drug development here. And the flow on the trickle down benefits, the trickle down benefits of Chinese drug development, that seems like it's going to be real to me. Very naive.

[Theo Jaffe]

I think it'll be real for the foreseeable, like the short term, short to medium term future. I think they will Continue selling the drugs to America. They will allow us to actually run a lot of our trials in China. This increasingly happening, that's a. That we're going to make all our trials Chinese because it's easier to run them there. Like, there are good benefits. There are even benefits or drugs you want to improve in China because we can run those trials for cheaper over there. But if they stop us, if they cut us off, then China might just be able to keep pushing ahead because they run cheaper trials and they might be able to cut us off entirely, and we might just lose an edge entirely and, like, not have any way to catch up.

[Co-host (possibly another MTS host)]

And this is interesting. I mean, like, not to bring everything. I mean, Theo, you probably have a thought here. What's the. What. What is the. What's the Dario Pilled AGI pilled take here, Theo, give it to us.

[Gabriel Dickinson]

The super AGI pill take on. This is just like the way America catches up and gets ahead is we have lots of automated bio researchers who figure all this out for us within the next.

[Co-host (possibly another MTS host)]

But clinical trials, I mean, that's still, you know, you can't automate clinical trials. Right.

[Theo Jaffe]

You can automate, actually put them in people.

[Gabriel Dickinson]

Some things with, like, simulations, you know, this is what Chan Zuckerberg Initiative is working on. They're trying to figure out computational bio on the cell level and then on the organ level and then on the system level. So, like, they'll be able to do some stuff. Yeah, like, yes, you still need to do clinical trials. Maybe we'll have, like, offshore clinical trial shopping. Maybe, like, you'll be able to send a bunch of people to the Cayman Islands to do your clinical trials or something.

[Theo Jaffe]

Or maybe reform for that, too. Maybe America doesn't actually accept a lot of that.

[Gabriel Dickinson]

Yeah. Or maybe we'll just, you know, politicians will see. Oh, we're so far behind China at this point. All right, it's time to switch gears. We need to start allowing clinical trials again.

[Co-host (possibly another MTS host)]

I mean, it just seems to me like what you might like, the obvious bottleneck here is, I mean, imagine we live in a world where a bunch of models get. It seems to me that there's a next step which is very close, which is just like, can we get to the stage where useful targets are being developed by kind of AI models? And I think once you get to that stage, you're probably going to have years in which the path to taking that target to market still involves going through a clinical trial process. That looks pretty much like the clinical trial process today. It sounds like the world you're talking about, Cremon is a world in which America might be developing the models that identify the targets and then they might take those to China to do the clinical trials. And that seems to me to be. I mean, you can imagine you can come up with doomer scenarios where we need a strategic cancer drug reserve because China's days away from cutting us off from our gop. We need a strategic hot people drugs reserve so that we don't get fat when China cuts us off from the latest GLB1s. I think the optimistic take is like, it's just the same. It's a replay of the story of the technology in the hardware industry where something is designed by Apple in California and it's made by Foxconn in Shenzhen and everyone gets wealthy, everyone gets a cheap iPhone. That's like a kind of a good story to me. Cran. This is a good. This is a good smile on your face story.

[Theo Jaffe]

Yeah, I think it'd be nice. I hope it works out that way.

[Gabriel Dickinson]

Krem, before we let you go, I have one last question. You tweeted like an hour ago about this drug NA931 that causes more weight loss than retatrutide without injections or muscle loss and greater gut tolerability. Like, is this, is this real? What is your take on this?

[Theo Jaffe]

There's actually a lot of skepticism of that particular drug. I'm kind of skeptical of that drug.

[Gabriel Dickinson]

Seems too good to be true.

[Theo Jaffe]

Actually is real. Well, the things they've added onto it do actually work like you could basically. The last part is basically taking like steroids pretty much with the drug, which is pretty awesome.

[Gabriel Dickinson]

Yeah, but are there bad side effects?

[Theo Jaffe]

We would expect that they should. They think they figured out a way to reduce side effects. We'll see if this is legit. They say they're going to publish the phase two results soon and if they do, then I assume it'll be legitimate. It's hard to imagine them just like straight up doing fraud. Especially. I don't know if, if they are actually just doing fraud, that'd be really bad. I would hate to see that. How long if it's legitimate, how long

[Gabriel Dickinson]

till you know the San Francisco people can get their hands on illicit gray market NA931?

[Theo Jaffe]

That's a good question. Might have an alternative soon though.

[Co-host (possibly another MTS host)]

Krem's got hit is here. Krem's got some deep knowledge. I will hit you up in the same mts. It's. Yeah, that's right. Drop it in the signal. It's Critical MTS technology for us. Because the biggest feedback I got from day one was like, gabe, no, you're a little too. You're a little too fat to host the show.

[Gabriel Dickinson]

They were calling us ugly man.

[Co-host (possibly another MTS host)]

We need to get you on retract.

[Gabriel Dickinson]

They said we're mod by tbpm.

[Co-host (possibly another MTS host)]

And those are handsome boys. They're handsome and they're over 6 foot. I. I think I agree with them. I think the critical thing here is like, yeah, get me on the gray market peptide plus steroid stack. And. And you know what? We'll. We'll see if we can look smacks, MTS looks maxing stack. Illegal gray market MTS look maxing stack. Maybe we'll put that behind the paywall theory.

[Gabriel Dickinson]

Yeah, we should. I am actually over six foot, but John Coogan is six foot eight, and we can't hope to match that. He's an alien technology.

[Theo Jaffe]

He's a big boy.

[Co-host (possibly another MTS host)]

Yeah, it's kind of stylish. Well, thank you so much for joining.

[Gabriel Dickinson]

Thank you, Cremu.

[Co-host (possibly another MTS host)]

It's been so wonderful to have you on the show.

[Theo Jaffe]

Thank you for having me on, I hope.

[Co-host (possibly another MTS host)]

Yeah, it's such a pleasure. We'll talk. I'm sure we'll talk to you again in the future. And farewell.

[Gabriel Dickinson]

Farewell.

[Theo Jaffe]

All right, ciao, Gun.

[Podcast Host (a16z)]

Thanks for listening to this episode of the A16Z podcast. If you like this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and spot Spotify. Follow us on X1 6Z and subscribe to our [e-mail] thanks again for listening and I'll see you in the next episode. This information is for educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. This podcast has been produced by a third party and may include paid promotional advertisements, other company references, and individuals unaffiliated with a 16 zone. Such advertisements, companies and individuals are not endorsed by AH Capital Management, LLC, a 16Z, or any of its affiliates. Information is from sources deemed reliable on the date of publication, but A16Z does not guarantee its accuracy.