/>iOn September 9, the US House of Representatives passed H.R. 8333, known as the BIOSECURE Act, targeting WuXi AppTec, BGI, MGI, Complete Genomics, WuXi Biologics and Chinese biotechnology companies more broadly.
Measures & Context
If signed into law, the BIOSECURE Act would prohibit entities that receive US federal funding from doing business with foreign biotechnology companies affiliated with the People’s Liberation Army, including the five Chinese biotechnology companies explicitly named in the bill. The bill also seeks to prevent the transfer of US persons’ genetic information to foreign adversaries.
The bill addresses concerns that foreign biotechnology companies, particularly Chinese companies, could use genetic data for surveillance or espionage.
The bill’s measures are part of a broader set of restrictive measures against China following the passage of the Secure and Trusted Communications Networks Act. This law prohibits federal agencies from purchasing telecommunications equipment from certain foreign companies, including those from China, due to security concerns, and prevents them from contracting with companies that use such prohibited equipment.
Timeline & Potential Impact
The bill passed the House of Representatives by a vote of 306-81 and must now be reviewed and approved by the Senate, which may propose amendments. It could be signed into law by the end of the year, and if so ratified, the BIOSECURE Act could have a significant impact.
Market destabilization – Given that Chinese biotechnology companies are global providers of contract development and manufacturing (CDMO) services, the restrictions laid down in the Act are likely to result in delays, shortages and increased costs.
Reorganization of partner companies – Pharmaceutical and biotech companies that receive federal funding or contract with federal agencies must be prepared to potentially terminate their relationships with Chinese biotech companies or other entities covered by the bill. They should begin to assess the risks to their supply chains, manufacturing capabilities, and R&D projects.
Retaliation measures – The adoption of these measures may trigger a response from the Chinese government, such as export controls targeting US companies and their employees, particularly in the biotechnology sector.
In Depth
Prohibitions – The bill currently prohibits:
- Federal agencies from procuring or receiving biotechnology equipment or services produced or provided by a “biotechnology company of concern” (see below)
- Federal agencies from contracting with a company that uses equipment or services produced or provided by a “biotechnology company of concern,” i.e., companies that use Chinese CDMOs; and
- Recipients of a loan or grant from a federal agency from using federal funds to purchase equipment or services from a biotechnology company of concern.
Definition of “biotechnology company of concern” – The bill directly names five specific Chinese companies: BGI, MGI, Complete Genomics, WuXi AppTec, and WuXi Biologics.
Beyond these 5 directly named companies, the bill defines a “biotechnology company of concern” as any company that:
- Is subject to the jurisdiction, direction, control, or acting on behalf of the government of a foreign adversary (defined as China, Iran, North Korea, and Russia)
- Involved in the manufacture, distribution, provision, or procurement of biotechnology equipment or service; and
- Poses a risk to US national security based on
- Engagement in joint research with, being supported by, or being affiliated with the military, internal security forces, or intelligence services of a foreign adversary
- Provision of multiomic data obtained via biotechnology equipment or services to the government of a foreign adversary; or
- The obtaining of human multiomic data via the biotechnology equipment or services without express and informed consent.
These categories include any subsidiary, parent, affiliate, or successor entity of a covered biotechnology company.
The bill also requires the Office of Management and Budget (OMB) to review the list of biotechnology companies of concern at least annually.
Definition of “Biotechnology Equipment or Service” – The Act has a very broad definition of “biotechnology equipment or service”:
- The definition of equipment includes any machine, device, or component, including software, “designed for use in the research, development, production, or analysis of biological materials.”
- The definition of “service” is similarly broad and includes any service for the research, development, production, analysis, detection, or provision of information, including data storage and transmission, related to biological materials.
Process for listing companies – A company newly designated by OMB as a “biotechnology company of concern” will be notified. The notification will include the criteria relied upon in making the designation only if consistent with national security and law enforcement interests. The notice may, but is not required to, suggest actions the company could take that may result in the rescission of the designation.
After receiving the notice, a company has 90 days to submit information and arguments against the listing. The bill does not require a formal hearing or administrative proceeding.
Exceptions, safe harbor and waivers – The bill contains two exceptions: the prohibitions do not apply to (i) intelligence activities and (ii) health services provided to federal employees, members of the Armed Forces, and government contractors stationed abroad or on official foreign travel.
In addition, the bill provides a safe harbor for biotechnology equipment or services that were previously, but are no longer, provided or produced by a biotechnology company of concern. This may allow a biotechnology company of concern to sell its ownership of a product or service to another company without the prohibitions applying to the new owner.
Finally, the prohibitions may be waived on a case-by-case basis, but any such waivers must be approved by OMB in consultation with the Secretary of Defense.
