What You Need To Know

• The BIOSECURE Act would prevent companies from using government contracts, grants, or loans to procure certain Chinese technology.
• But it is not a law yet, and it could change significantly on the way.
• Regardless, its bipartisan support signals continued scrutiny of China, meaning biotech companies should consider options for diversifying their supply chains.

A congressional proposal to sever ties between United States and Chinese biopharmaceutical companies is far from a done deal, but its bipartisan support is a concrete reminder to consider options for supply chain diversification amid mounting scrutiny of China.

The BIOSECURE Act (the “Act”) earned bipartisan Senate Committee on Homeland Security approval on March 6, clearing an early hurdle in the long road to becoming a law. The Act would prohibit the government from procuring or providing loans or grant funding to buy: (1) technology or services from a prohibited Chinese biotechnology company or (2) any product that requires direct use of technology or services produced by certain Chinese biotechnology companies, including BGI Group and WuXi AppTec.

The bill is not a law. The Act is still in the initial stages, with no concrete restrictions or requirements, because much will change during the legislative process. The full Senate must debate, negotiate and approve the bill before being rectified with its U.S. House of Representatives counterpart. If it passes both chambers and if President Joe Biden signs the bill into law, only then will the requirements be final. At that point, it will take approximately one year from the signing date for the law to be implemented through the regulatory process.

The bill highlights the U.S. government’s continued scrutiny of China. Significantly, the bill underscores the U.S. government’s continued skepticism and concern about China’s growing influence in the biotech sphere. Since the bill received bipartisan support, it is safe to assume that regardless of which party is in power after the 2024 U.S. Congressional and Presidential elections, China’s influence will remain an area of concern for the U.S. government. Congressional members have recently issued calls to action to various federal agencies, such as the U.S. Departments of Commerce, Defense, and Treasury, to add Chinese companies such as WuXi to their respective export control, sanctions, and defense procurement ban lists. In particular, the House Select Committee on the Chinese Communist Party continues to conduct hearings, send letters, and issue statements targeting Chinese companies that it views as concerning to U.S. national security interests. However, even with the added scrutiny it would likely create, the proposed law is neither a federal boycott of any company that deals with these prohibited companies nor a broader trade ban but does reinforce the U.S. government’s skepticism that Chinese companies are (in)dependent from the Chinese government.

Given the government’s continued interest in China, a prudent course of action for biotech companies would be to examine and analyze their dependence, if any, on Chinese suppliers. Because the proposed law could become more—or less—restrictive, companies should take this time to decide whether diversification in general would be a good buffer against continued government interest in all things China, especially given the long lead time necessary to implement any changes.