In 2010, China accounted for less than 8% of global clinical trials; by 2020, it had surpassed the U.S. in annual registered clinical trial volume. To study this transformation, we compile a comprehensive, synchronized database spanning the pharmaceutical drug development supply chain: global data on scientific publications, clinical trials, and drug development milestones, combined with data on drug sales and government policies in China over the same period. We provide evidence that China's National Reimbursement Drug List (NRDL) reform dramatically expanded the effective market size for innovative drugs and contributed to the country's rise in biomedical innovation. We document a sharp increase in both the quantity (86%) and novelty of Chinese drug trials post-reform relative to U.S. trials, with similar patterns relative to Europe. This growth is concentrated in reform-exposed disease categories, first- or best-in-class drugs, and domestic firms. A decomposition exercise reveals that the NRDL reform accounts for 59% of the growth in oncology trial activity, comparable to the combined contribution of upstream knowledge accumulation and talent flows (21%) and venture capital investment (19%), while other government policies play a minor role. Finally, dynamic gains from induced innovation exceed the reform's static gains in consumer access to innovative drugs by threefold, underscoring the importance of accounting for the reform's long-run effects on innovation incentives beyond near-term improvements in drug affordability.