The Shift in Global Drug Development

America is forps in the world's population. It's about 13% of all the drug buying, but it's also more than half of these sales in terms of dollar amounts. So it's huge. And this is a big advantage, 'cause 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. There's or less likely to have both. The type one and type two aerobatics are both down for China because they run bigger, better trials. China says, "Well, no, we're gonna make you profitable. "We're actually gonna make you money. "If you are a firm that we aren't negotiating with "and you lower those costs, we're gonna help you sell more "so that you don't have a reduction in your profits "and that you become more profitable, "and we pay less money, "and everybody should better off in general." 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 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-jaffee and Gabriel Dickinson speak with Kremu. - Welcome to MTS Kremu Recu-A. How do you pronounce it in the French? - Kremu, okay. - Kremu, okay. - That was pretty good. - We're gonna add to you. - That was a good kid. You have a slight Canadian accent there. - To the tweet wall. - Uh-oh. - Straight out of the tweet wall. - Let me make this bigger a second look at that. - Nothing ever happens, that's what it's. - That's the watch word at MTS. Welcome to MTS, nothing ever happens here in the situations. - What are you? - Great. - So are we live right now? - We are. - We are live right now Krem. We are live on MTS. It's so good to have you on the show. Thank you so much. I'm saying Krem because Kremu, those last like four vowels there, three vowels are just like, they're scaring me. And Australians, we already struggle with that. It's already a challenge for my people. So Kremu, I mean, great to have you on Thea and I. Very pleased to have you on. And we would just like, come on the show. Let's chat. And you will like, I'm gonna come on the show. And I'm gonna talk about clinical trials. (laughing) We were like, sure, sure. Let's learn, we're all gonna learn a little bit. We're all gonna learn a little bit. So, I mean, why don't we start Krem? Do you want to just give us? I suppose in a way, what is the best way to describe Kremu? It's your kind of like this independent research. You have these big, this kind of breadth of, a breadth of interest. On genetics, metrics, and demographics. And-- Oh yeah. Genetics, metrics, and demographics comes a lot. What does the, you feel a lot under metrics? Metrics is just like-- What's the apostrophe before metrics? What does that mean? You say, I write about genetics, metrics, and demographics in your Twitter bio. I'm really glad you asked. So, I use it to refer to both that I do psychometrics and I do econometrics. And sometimes, clear metrics as well, which is, you know, jumping high. Basically the same thing for history, not just economics or genetics or psychologists. Let's plant the applying metrics. We're your metrics, you said? And apply metrics. I like to do, you know, jumping jacks and stuff. It's pretty into job projects. 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, we can kind of riff, we're just interested to hear what you have to say, Theo. I mean, you know, so, so, Kram, 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? Yeah. So, in recent years, ever since 2016, China has been just up and away the big, big leader in bio pharmaceuticals, biotech and producing new drugs, even producing new medical devices. They're getting way ahead of the US for decades. The US has been the top dog by a huge margin. We've證 something like 40% of all of the world's medical innovations 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 changes a lot. And maybe just to even take a further step back, sorry, Theo. But just to take a further step back, Kremau, it's like, okay, so why do we care about that at all? It's like we can see the number, well, I write and saying the number of, and it's not just, 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 like, why does that, you know, in a very like kind of surface of the global, you know, 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. 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, the largest country. India might be, I think, larger population now. I'm not sure I have to check that. India is larger. If they're not, you know what? India is larger. As of recently. India is larger population. Okay. So they've become large. They're number two. They're still enormous. That region of the Asia region, that broader East Asia region, like including Southeast Asia, is something like half the world population. 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 will 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 got the cure for cancer and we're not going to share it with you. Which would be right. This would be really bad. That'd be bad. I would do that, that'd be really bad. Sell it to us. They don't really care about that. Remember, they're communists. They have a bureau of their government, the military civil. So throw around the seaward like that, right? It's a mixed economy, Crem. It is. It is. It's more capitalist than America. It's more capitalist than America in some ways. It definitely isn't in some ways. I actually get to some of those when I get start the presentation. But the thing is, at the end of the day, 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. Who was that CEO a few years ago? They're a very famous billionaire who they basically just totally deposed and from his company. Jack Ma, Avalid Baba. I was thinking Jack Ma, I was thinking Jack Ma, I was thinking that sounds right. Okay, so yeah, they basically took him right out. 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. So it sounds like without kind of presupposing, without getting ahead of you here. It sounds like the kind of general story here is. They're like good aspects too. If we're looking generally, how has the Chinese clinical trial processed chain changed, how has that changed in their contribution to global medical research? There are some pros and cons. The meta-story here that you're also interested in, is there's a strategic element to being the country that is driving 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 process 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 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. Interesting here. Yeah, all right. So can you guys see the screen? Is it like front and center? Yep, we have pulled up. All right, so basic general thing. If you don't know what a clinical trial is, usually they have four phases that's agreed upon by different countries, the Sincolidic ICH, Council and 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, it works. And then you go to phase three, where you get like a big population represented the sample or whatever, you know, the drug population user represented the 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. Did it transition slides? Can you guys see that? Looks great. 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. I used to run fewer than that. It's been. Creasing somewhat, you can see that it went from like 1,300 to 1,600 in the most recent year. The reason that last year is the 2025 data is marked as 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. - So basically you can just see where America stands in terms of running clinical trials. Most of our clinical trial pipeline is in phase two. That's often where things fail. In phase one, they often fail to. I mean, every step, there are a lot of failures. Partly because of what's the total rate? Like if you take, if you take all the interventions that go into trials, it's like something like 10% make it through. - Yeah, it's more than 90% failures. It's really bad. Like your top reason is, oh, it's just not safe. Or it goes from preclinical to human and does nothing, no advocacy, 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 Ramaswami's business? You guys really were weivant? - No. - R-R-I-Pons. - But basically he finds drugs that have been abandoned and he looks at them and he goes, oh, this actually helped this 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 to work. - Isn't this kind of a martenscrelie did? - 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 DaraPrim. - Financial repurposing is definitely a term you could use. It's not really the same thing though, but I'll definitely give that. So let's look at how China's done though. China's done, oh my God. - Better. They're definitely rising more. They're not really, I mean, they haven't been like doing this for as long. You can see that they had like a big, big, big jump since 2016 is when they did their big trick 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. 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. - Every single America was the West versus China's just this. - Yeah, pretty much. (laughing) It's like, this is what solar panels looks like. This is probably what Silicon is gonna 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 just put it together, altogether 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 while. During the first year of COVID, they had like a little slow down, everything kind of got, you know, muffed up there. But now it's doing fine. Exceptionaly, they're running a mock. 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 gonna last for long, 'cause 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 to do nothing, these matter. They predict-- He will bind them off the dock web, getty them shipped to San Francisco, getty very scared. (laughing) Yeah, I say it. Oh, it's translated. It's incredible. Yeah. They also aren't just me two drugs. So one of the things China's been accused of for a long time, is just doing me two drugs. And a me two drug is where you basically see a new drug that is approved and then you copy it immediately. And this happened with the cure for hepatitis C. It was either Amgen or Gilea I did it first, but then Amgen or Gilea, 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 that's listed that you can see-- Sure, sure. Like came down immediately. 'Cause the number, like, when you have like 10 drugs in a space, the 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 maps that are used in immunotherapies. These are all cancer immunotherapy drugs. And they are clearly me two drugs. They just copy the leader because the leader here has made so, so much money. Pembro has made an incredible, incredible amount of money. But China is not-- That's the 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 transiting through to kind of interventions as 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, Kermot? Yeah, this is 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 is the-- What is that? Do you know what they're the PD1? Yeah, so these are immunotherapy checkpoint drugs. They make it so you can-- Your immune system can respond better in the course of cancer treatment. We added on the chemotherapy these days all the time. They're increasing-- there's been a little revolution in cancer treatment where they just layer on in the immunotherapy. And suddenly, people are recovering at rates we've never seen before. 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 GLP ones have overtaken them. Yeah, I think you added together all of these that would probably still be more than GLP ones, but I'm not exactly sure on that's an unquote. Anyway, are these Chinese drugs just me, too? The answer is no. 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 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 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-- I think it's like the same year they come out ahead. Yeah. First ever phase one appearances, they are rushing ahead of the US. The US has had, 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-- Yeah, sure. Fucking-- And also, maybe you're getting here, Krab. But what is the underlying institutional process thing that's driving this? Oh, you're to that. This first, like, third of the presentation is basically just documenting the China is ahead. 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 cured their condition for all time, that's very bad in the US for reasons. I don't think there are good reasons. I can see there be ethical concerns. You know, there'd be ethical concerns. You can see-- Yeah, people might get too help. Yeah. You wouldn't get too helpy, yeah, exactly. You might make your country a much better place. And that's really bad. We got to prevent that. It's always a risk. It's always a risk. I mean, the thing is, all the excuses are kind of bogus. If we can cure a family of like a horrible debilitating disease for all time, why don't we? I think we're slowly coming around on this to society. 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 have as much resistance to that. So they are willing to actually cure families forever, which is something we can don't do in the West. Oh, well. The other 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 good drugs. Small molecule drug trials, you're going to head in that. Those are very easily produced like pills and stuff. When you just look at all novel drug compounds, again, they are molecules. What are the smart molecules? So for example, 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 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 shoot a lot of pills in a week. There-- Yes, see. It's a useful modality. If you want to look at it a little later, again, 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 even mRNA vaccines and stuff, but 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 is 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 like, you know, works. And maybe just to explain that for once again, stupid 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 a discreet significant right? 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. And the type one and type two aeratists are both down for China because they run bigger, better trials. And they allow them to be organized across. That's the why access on this graph. The average number of people in the sample. The number of people in the average clinical trial. That's right. Yeah. So like in their biggest year, they have like 400-ish people in the average clinical trial. Wow. Clinical trials generally aren't that big. They're bigger when they're close to the phase three. So China 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. It's 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. 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. So I'm impatient. I'm a simple man. I have low attention span. 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 credit it 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, the review, which is just too much. In 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 they basically didn't do it until a little later than that. And this 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, if the words USSR clinical trials, just like, that's like a bureaucratic nightmare. You go to imagine that's taking 25 years. So it's like never happening. 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 neither what you expect. But that's pre 2016. And so I assume the next slide is don don don don 2016. Yes. 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, you know, foreign Chinese nationals or like just come in and start proposing here reform this that that thing, that thing. 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 harmonization time 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 make some effort to show that this will work, the drug will work in Chinese people. And then bam, they'll accept the data. Right, they made a very easy process. There's more to it, but it's incredibly easy in general. They streamline their site management. They changed 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 up. So there's 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. It's awesome. One ethics committee already signed off. Yeah, it's great. This doesn't work that way. You don't need an America. How does ethics approval work for some of the channels here? Don't trigger him yet, Joan. No, it doesn't work that way in America. I really wish to do it. There are some cases where it does, but it's quite sadly. No, we need IRB reform in America. China has it. There are IRBs. Economics committees are much more efficient in streamline than America's, which is kind of crazy when you imagine a communist country versus a, like, you know, anomaly capitalist country. You would expect the, like, cutthroat capitalists to be the one to go, ah, fuck ethics, but no. The Chinese people can say, fuck ethics. They go do everything. And then we will allow you to do it in the most streamlined, efficient way. 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 without how can we do this? Yeah, keep all the same things in place. Given the years, it's kind of like Ezra Klein has been communist Chinese Pilled. I mean, China is a very sort of abundance-filled country in a lot of ways. Like in terms of housing, in terms of development infrastructure, California could use a little bit more Chinese mindset on building high-speed trains, for example. Yeah. Absolutely. I mean, they really can. They can do everything so cheaply. They can make tons of infrastructure. They're really amazing. There are so many things I can go over there about the reforms. There's just like, I've written out 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 this immediately. Basically, if you were the person bringing a drug to market, you are the whole thing. The older of the MAH. You have to have these assurances that all your pre-clinical data is good. Your clinical trials are managed properly. Your manufacturing is done up to some standard that can be audited at the end of the process of the clinical trial. 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. You go through some basic audits, and then suddenly your drug is at the legal market. You don't have to go through a bunch of rigmarole the entire time. They take out government inspections and steps along the way. Right. I should pause there. If you're joining us right now, MTS Live, we're here with Krem. We're talking about basically progress reform in the Chinese clinical trial space. The headline here from Kremo is that China is ahead on all of these. It has pulled ahead recently, the last few years, on new drug approvals, particularly on new drug approvals for novel clinical targets. The significance here, we can talk about it later, but it seems significant in a bunch of different ways potentially. Take-away 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 tracking a target through to approval. It's good to just pick one out. We can get lost in the detail here, but it sounds like this particular example that you're talking about Krem is how do things work in the US? In the US, you go through a clinical trial. Throughout that process, you have to provide a bunch of different data and assurances to the regulator. I imagine there's a review period for that. They say, "Simulted by this state, we'll get back to you in 60 days. You've got something wrong. We'll have another request for information. That'll take another 90 days to get back to." You just have all of these 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 if you're bringing a drug to a clinical trial, or if you're bringing these venture to a clinical trial, you 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. Then they go, "Okay, let's audit your entire history." Or phase two early approval. They can approve based on earlier trial results, too. They are impressive. They found tons of ways to shorten the process to go from files to actually approving the drugs. You're just shortening the approval loops. You're just taking out a bunch of review periods. This is the nature of anyone watching right now. If you've ever worked with. If you've ever tried to do some minor renovations in your house and it required some approval from a local, it's not a criticism necessarily. It's just the nature of administrative review. You submit something. 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. That itself is good social technology because it drives a bunch of good outcomes. 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. 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. have 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? That's right. Yeah. And they have shortened the review times. They've made everything just go quicker. They made everything streamline. They produce a 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 in like bid for production of your, your API, your active pharmaceutical and reading, all of your stuff. And you can like find ways to lower the costs in that way. And so interesting. Yes, it's, 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 to two. There's all sorts of crazy things that we just don't do that they have, there 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 a year and a half. Like it was incredibly bad. And now it's 65 days as 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, it's contextualized again. It's like 600 days. I mean, if you, 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 right. Exactly. They 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. With GDUFA, a generic drug that will compete with the prescription drug, the way it was initially set up is that which was designed by the prescription drug manufacturers was that 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 and work. It's like, 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. There's no actual generic drug production anymore. So 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, you know, GDP spent on healthcare, it just kind of goes up. If you look at US drug prices compared to 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 like actually like kind of flowing through all these different channels as well as that right? 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. So to 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 got to wait. Some trials actually set up their own call centers to call out the hospitals and call out to people's homes like figure out, are you still alive? It's I guess you stop right. I mean, if you die, you just stop replying to texts. You're not going to reply and be like, yeah, I'm dead. And then I said, oh, did they leave the trial? Did the doc? Can they tell us this person died? Yeah. Kind of don't know. If the CDC updated the death index, they could save a lot of money during the trials though. But also if we had novel methods of designing like our phase three, 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 not even a thing in the US. We haven't even approved these like innovative control arms and so on. So what is this? Why access measure? Log points? Yeah, a lot of point increase in the number of trials with innovative control arms. So it changed 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 these two trials. One where they tested Dullagluid and another where they tested to Zepatide against. The Zepatide was tested against. I think it was up. No, it was tested against some other GLP1 array. No, it was tested against 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 what 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 have to 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 because 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 can just compare just the treatment group to this old control group. 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, Crem. 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 couple of times, but it's like the you are clearly on a bunch of different measures, China producing a lot more, they're kind of pushing more drugs through trials. They're targeting specifically a 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 reasons for that are, you know, 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. Yeah. And they have traded, you know, they have been careful about trade-offs between speed and efficacy, you know, speed and policy goals and how they do this. And they've designed good institutions that produce good, I mean, this is like classic as recline liberalism. So take a true. So take a true. So take a true. Well, 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 cool as recline, but presumably there's like a bunch of experts in the space. Got you. You know, because right, go ahead, go ahead. What do 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've opened up their capital markets. They've historically been pretty close. I don't know if you know this, but people use huge Bitcoin back in the day to try and leave China. They've opened them up. MTS earlier. Wonderful. Wonderful. I grew up doing the keytams. We're doing it too. It's a very fun little thing that'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. Sholto David. It's like a three and a half. What's that? Sholto David. I think this is it. Yeah, that's the guy. Yeah. I think he'll have a lot to say about fraud and stuff. But like Elias or Masleo, the guy who used to run the NIA's neuroscience division, he was the top researcher globally on Alzheimer's and Parkinson's and their publications and all that stuff. He basically led to the misallocation of billions of dollars in money that went to clinical trouble and all that stuff. And actually 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. We spent all your level ups on bullshit. Sure. And it's just a lot of fun. Yeah, it's just a giant. 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 really quick actions on that. So but I do want to get to the most important thing actually. Yeah, please. 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 LSTC's 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 innovation does respond to the money and it has to. And trying to figure this out. So does this just, they actually learn because we sell a lot of very high dollar amount, expensive drugs? It's sort of is. We also just buy more of everything. Look at the volume of purchases. A lot of our spending volume is on generic drugs and that's part of why our actual cost else does 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 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 the 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 the point of care and you try and like actually purchase something. China did that and they radically lower the cost of the drugs. They also increase the quantity of the drug sold by an even larger amount. Right. Right. Right. Right. 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. They also increase the profits of the firms they negotiated down. So generally when like a Western country negotiates with the firm, they lower their profits. They hurt the profits of the firm. Sure. And 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 they generally don't negotiate so they charge us more because these have to make up the cost 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 your profits so they become more profitable and we pay less money and everybody should better off in general. There are people who are healthier and everything just works better. The firm survived 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 enough for your market. It's actually very alarming. 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 is actually doing market design that is really effective and it's. Yeah, right. It's kind of daunting. And 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 last 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 got the amazing. It's really incredible. And the areas that they target with their negotiation much as America's medical and 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 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, reduces the firm's market power relative to the government and makes the they can negotiate down further and lower the cost and further through competition. And it's a, it's a, it's a supply response. It says a supply response on the kind of bringing new candidates to market. So this is, I mean, this makes, it's very interesting. I think, so we've got about 10 minutes left to the show, Cram. And I think like if, if someone is listening to this, they're in the administration, they're going to clip it and send it to their friend, it's in the administration or if it's just like, maybe it's after the thing tanks, I'm going to assume people are thinking about this in a whole bunch of different spaces. What is it? Is it just like, is the takeaway here just like, like, there is no shame in just studying what China did and trying to replicate it? 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 that. That's a win for the molecules. Bayesian methods. We should have talked about that out in ALA. It's actually earlier. So true. It's really, there are a lot of great things going on and the CFR is getting pulled all the time. It's massive, deregulatory drive and if Doge has had its way and they hired enough lawyers which I'm going to be pretty critical to government, we haven't hired enough people, then you would see America catching up in this deregulation. 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 areas, but nobody's aware of this fact. Right. Might have something on that soon that might be able to come back in like a week or so. Yeah, yeah, yeah, fantastic. I mean, to take away, like, you know, just on a high level to me, it's like there's a political problem here and 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 dereg that goes through. You want your greedy farmer 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 the space or Chinese policy reform in the space and apply in the slightly different contexts of the US, 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 like quite a bipartisan subject, right? 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 deregulation 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, basically most favored nation pricing is where you try and make it so. America's medications match the like peer country prices. So if Germany pays a hundred bucks for medication, America will not pay more than a hundred 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 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 self-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 profits are actually taken to hit from MFN. The regulators like at the CBR, 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? Right, right, right. Their invested interests, they just want you to stop 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 can America catch up and get ahead? Is the big question and the answer is I, I honestly, I have no idea. I mean, like, it, it makes sense to me, Kram, that there'd be certain people and, 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 lot. - I don't know what's the benefit. Americans benefit from being at the cutting edge here. They get the best treatment. They get the fastest. Maybe they pay a little bit more money for it, but you know, people are willing to pay. When rich, you're willing to pay for an extra year of your life. So it seems like there's that angle and that makes perfect sense. I'm 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 power. 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 nice. - I think it'll be real for the foreseeable, like the short term, short term, medium term future. I think they will continue selling the drugs to America. And they will allow us to actually run a lot of our trials in China, this is increasingly happening. That we're gonna make all our trials Chinese. 'Cause it's easier to run them there. Like there are good benefits. There are even benefits with drugs that want to prove in China, 'cause we're gonna 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 'cause they run cheaper trials and they'll be able to cut us off entirely. And we might just lose an edge entirely and like not have any way to catch up. And this is interesting, I mean, like not to bring everything. I mean, Theo, you probably have a thought here. What's the, what is the, what's the Dario Pilled, AGI Pilled take here, Theo? Give it to us. - The super AGI Pilled 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 shit out for us within the next. - But clinical trials, I mean, that's still, you know, you can't automate clinical trials, right? - Ah, you can automatically actually put a piece of 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 we'll, like you'll be able to send a bunch of people to the Cayman Islands to do your clinical trials or something. Or maybe-- - Be reform for that too. - Maybe-- - America doesn't actually accept a lot of that. - 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. - 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 the, 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 gonna 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, Cran 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 doing this scenarios where we need a strategic cancer drug reserve 'cause China's days away from putting us off from our gelbie. We need like a strategic hot people drugs reserve so that we don't get fat when China cuts us off from the latest gelbie ones. 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 for it. - Yeah, I think it'd be nice. I hope it works out that way. - Cran 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 and retotry tide without injections or muscle loss and greater guttolerability. Like is this real? What does your take on this? - There's actually a lot of skepticism of that particular drug. I'm kind of skeptical of that drug, but it seems to be true. - Seems to be true. - Well, the things they've added on to it do actually work. Like you could, basically the last part is basically taking steroids pretty much with the drug, which is pretty awesome. - Yeah, but are there bad side effects? - You would expect that. They think they figured out a way to reduce side effects. We'll see if this is legit. If they say they're gonna publish the phase two results soon and if they do, then I assume it'll be legitimate. It's hard to imagine them just straight up doing fraud, especially if they are actually just doing fraud, they'd be really bad. I would hate to see that. - How long? - If it's a legitimate. - How long 'til the San Francisco people can get their hands on illicit gray market, any 931? - That's a good question. Might have an alternative soon though. - Crems got hit as he, Crems got some deep knowledge. - I will hate you up in the signal. - Critical MTS, yeah, that's right. Drop it in the signal. It's critical MTS technology for us, 'cause the biggest feedback I got from day one was like, "Gay though, your little tooth, "your little tooth fat to host the shot." - They were calling us ugly, man. - We need to get you on retraturty. - They said we're mocked by TBPM. - Really? - And those are handsome boys. They're handsome and they're over six foot. I think I agree with them. I think the critical thing here is like, yeah, get me on the gray market, peptide plus steroids stack. And you know what, we'll see if we can look max. MTS looks maxing stack, illegal gray market, MTS looks maxing stack. Maybe we'll put that behind a pay wolf in here. We should, I am actually over six foot, but John Cougan is six foot eight and we can't hope to match that. - He's an alien technology. - He's a big boy. - Yeah, it's kind of stylish. Well, thank you so much for joining us. - Thank you, Kremu. - It's been so wonderful to have you on the show. - I hope. - I hope. - Yeah, it's such a pleasure. I'm sure we'll talk to you again in the future. - And farewell. - Farewell. - All right, check out. Thanks for listening to this episode of the A16Z podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or a review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcast, and Spotify. Follow us on X, A16Z, and subscribe to our substack at a16z.substack.com. 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