United States: The BIOSECURE Act – A Review Of The Bill, Responses, And Possible Repercussions

OVERVIEW

Background

A bill introduced by a bipartisan group of Select Committee Members in the Senate¹ and the House² could severely impact U.S. companies' ability and desire to contract with biotechnology entities from China, Russia, Iran, and North Korea.³

The bill, called the "BIOSECURE Act" ("the Act"), would prohibit executive agencies from contracting with or extending loans or grants to any company with current or future commercial arrangements with a "biotechnology company of concern."⁴ Generally speaking, a "biotechnology company of concern" is a biotechnology company that is headquartered in or subject to the jurisdiction of a foreign adversary's⁵ government and poses a threat to national security.⁶ The bill also specifically names certain companies related to the People's Republic of China ("PRC")—BGI, MGI, Complete Genomics, WuXi Apptec, and their affiliates—as companies of concern.⁷

In the bill's preamble, the Act's cosponsors assert that the PRC's military has invested in advancing their biotech and AI capabilities and, through business collaborations, the PRC has access to millions of Americans' genetic data.⁸ The Act is meant to confront the concern that U.S. taxpayer money is fueling foreign adversaries' hostile biotech pursuits.⁹ According to the Act's cosponsors, the Act is also meant to sever any pipeline of American genomic data to the PRC government.¹⁰ The House's bill delineates 28 findings in particular that led to the proposed legislation, including PRC laws that offer the PRC government unlimited access to data—including genomic data—collected by PRC entities.¹¹ It concludes by saying "the time has come to (1) stop United States taxpayer dollars from flowing to foreign adversary biotech companies ... and (2) prevent United States taxpayers from buying biotech equipment from foreign adversaries that facilitate the transfer of United States persons['] genetic data to a foreign adversary."¹²

DETAILS OF THE BIOSECURE ACT

What exactly would be prohibited?

As currently drafted, Section 3(a) of the bill provides that an executive agency may not "(1) procure or obtain any biotechnology equipment or service produced or provided by a biotechnology company of concern; or (2) enter into a contract or extend or renew a contract with any entity that (A) uses biotechnology equipment or services produced or provided by a biotechnology company of concern ... in performance of the contract, or (B) enters into any contract the performance of which will require the direct use of biotechnology equipment or services produced or provided by a biotechnology company of concern ... ."¹³ Additionally, executive agencies may not extend loans or grant funds to procure biotechnology equipment or services produced or provided by a biotechnology company of concern.¹⁴

What is considered a "biotechnology company of concern"?

The initial draft of the bill defines a "biotechnology company of concern" with both precision and breadth. First, consistent with the bill's introductory concerns with the PRC, four China-based companies are specifically named: BGI, MGI, Complete Genomics, and WuXi Apptec.¹⁵ This includes any subsidiary, parent affiliate, or successor of those companies.¹⁶ Second, the definition casts a wider net, encompassing any entity that is (i) "subject to the jurisdiction, direction, control, or operates on behalf of the government of a foreign adversary," (ii) is involved in the manufacturing or distribution of a "biotechnology equipment or service" and (iii) poses a risk to U.S. security, either by engaging in joint research with or being supported by a foreign adversary's military, or by providing genetic data to a foreign adversary's government, or by obtaining multiomic data without express and informed consent.¹⁷

What is considered "biotechnology equipment or services"?

The definition of "biotechnology equipment or services" is also broad, encompassing any instrument or service in "research, development, production, or analysis" related to "biological materials."¹⁸ This includes software, data storage, consulting services, support services, and disease detection.¹⁹

What is an executive agency?

As drafted, the bill defines an executive agency as "an Executive department, a Government corporation, and an independent establishment."²⁰ A few examples of Executive departments are the Department of Defense, Department of Energy, Department of Transportation, and Department of Health & Human Services, including the Food and Drug Administration, the Center for Disease Control, and the National Institutes of Health.²¹

If the bill were to pass, when would it go into effect?

As currently drafted, enforcement of this Act would happen in two waves. First, the four listed Chinese-based companies (BGI, MGI, Complete Genomics, and WuXi Apptec) would become restricted either 120 days after enactment of the Act, or 60 days after the Office of Management and Budget ("OMB") issues an implementing guidance, whichever comes first.²² All other biotechnology companies of concern will become restricted 180 days after OMB guidance.²³ The Act instructs the OMB to publish a list of entities that constitute biotechnology companies of concern 120 days after enactment of the Act.²⁴

Are there exceptions?

The bill offers only minimal exceptions. The executive may waive the bill's restrictions on a case-by-case basis with OMB approval for no more than 365 days, with an option for the OMB to extend an additional 180 days.²⁵ There is also an exception for contracts or transactions for the provision of health care services overseas, as long as the service is necessary to support an executive mission.²⁶

AS IT STANDS

Reactions and Commentary

Predictably, market reaction to the bill's introduction was swift. WuXi AppTec and Wuxi Biologics reportedly lost $20 billion from their market capitalizations,²⁷ and Chinese biotech stocks fell to their lowest values since early 2020.²⁸ As to the assertions in the bill's preamble, WuXi has responded that neither the company, nor its CEO Zhinsheng Chen, have any relationship to China's military and do not pose a national security risk to any country.²⁹ MGI Tech responded by saying that all data from its products are "collected, stored, processed and controlled by the customers themselves."³⁰ Privately owned BGI and Complete Genomics have also protested that they are in no way linked to the Chinese government or military and that they comply with all applicable data privacy laws.³¹ They further argued that this Act will only stifle access to technologies and raise health care costs.³² Other commentators expressed concerns that the Act would hinder competition, interrupt treatment pipelines, and inhibit medical advancements.³³

Impact on U.S. Biopharmaceutical Industry

Because the Act would prohibit the U.S. government from entering into, extending, or renewing any contract with an entity that either (a) uses biotechnology equipment originating from, or services provided by, a "biotechnology company of concern," in the performance of the contract or (b) has a contract that requires the direct use of services or equipment from a "biotechnology company of concern," one would expect biopharmaceutical companies with U.S. government contracts to re-evaluate and potentially seek to restructure or transition away from their commercial arrangements with these companies. Given the scale of BGI, MGI, Complete Genomics, and WuXi AppTech, in particular, and their many commercial relationships with life sciences companies of all sizes, if the bill is enacted, one would expect it would have a sizable impact on the industry, as it would require companies that have (or would seek to obtain) contracts with the U.S. government to make significant and often complex changes to their operations and would increase demand for substitute equipment and services.

Legislative Process and Prospects for Passage

The U.S. Senate Committee on Homeland Security and Governmental Affairs will discuss the bill during a procedural hearing on March 6, 2024.³⁴ Such a committee hearing results in either a favorable report of the bill to the full committee (with or without amendment), an unfavorable report, no recommendation, or a recommendation to postpone the action indefinitely.³⁵ Due to its bipartisan, bicameral support—even in a strongly partisan Congress—some commentators believe it's likely that some form of the BIOSECURE Act will become law.³⁶

Footnotes

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