Key Takeaways:
- As Congress returns for the lame duck session, the life sciences industry is closely watching the fate of the BIOSECURE Act, which would limit the ability of U.S. life sciences companies to work with 'biotechnology companies of concern.'
- Congressional leaders have signaled they will try to pass the bill by the end of 2024, likely as part of a larger package.
- Of note, both the House and Senate bills are narrower than earlier versions, posing less of a risk to affected life sciences companies. While earlier versions would have prohibited the government from contracting with any life sciences company that was party to a covered contract with a biotechnology company of concern, this contracting prohibition is now limited to use of biotechnology companies of concern in performance of the government contract.
- In addition, both bills still permit existing contracts with biotechnology companies of concern to be grandfathered in. The House version includes a grandfathering provision for contracts with biotechnology companies of concern, allowing those entered into before the effective date (60 days after regulations are issued) to remain valid until January 1, 2032. The Senate version has no end date for grandfathering of contracts entered into prior to the effective date.
- Life sciences companies doing business with WuXi AppTec, BGI Group, MGI, Complete Genomics, or with WuXi Biologics (listed only in the House bill), as well as other potential biotechnology companies of concern, will want to monitor the developments of this legislation, as additional legislative changes may occur.
Congress is back in session with a loaded agenda for the lame duck period. One of the top issues the life sciences industry is tracking is the potential passage of the BIOSECURE Act. Speaker Johnson has signaled the House will try to pass the legislation through the National Defense Authorization Act (NDAA), which is must-pass legislation that needs to be passed by December 20th, the date government funding is set to expire.
In March 2024, we wrote that the legislation would force a range of companies to modify their work with certain biotechnology companies associated with China or other foreign adversaries. The companies already listed in both versions of the legislation – WuXi AppTec, BGI, MGI, and Complete Genomics (and in the House bill also WuXi Biologics) – have multi-faceted relationships with U.S. life sciences companies, making the next month critical for advance planning and monitoring of the legislation.
Lame Duck Session
The term "lame duck session" describes the time between an election and the start of the new Congress when current lawmakers return to Capitol Hill to conclude the legislative session. Many stakeholders and observers believe the lame duck session is the most opportune time to advance legislation, as members may be more willing to strike deals and tackle issues that could be more difficult to address in the new Congress, especially with party control changing. That is not always the case, as recently Congress has been more willing to pass short-term funding bills that punts pending legislative business months into the fiscal year.
This year, Congress has until December 20, 2024, to fund the government for fiscal year (FY) 2025. This is seen as the end date for this legislative session, and the date to watch for potential passage of the BIOSECURE Act. While the lame duck session started last week, both chambers may adjourn this week without much progress publicly on an end-of-year package. It will be important to keep an eye on the slow moving NDAA package, as House and Senate negotiators look to resolve differences between their bills and release a compromise version in the coming weeks. When Congress returns on December 3, 2024, focus will shift to passing the NDAA and some other end-of-year package or continuing resolution.
Key Differences Between House and Senate Versions
Important differences between the House and Senate versions center on the extent to which agreements will be grandfathered. Both versions include a grandfather exception for contracts or agreements entered into with biotechnology companies of concern prior to the "effective date" of the bill. The Senate version would grandfather all contracts entered into with biotechnology companies of concern prior to the effective date, whereas the House bill contains an eight-year runway for existing contracts. In other words, under the House bill, companies would have until January 1, 2032, before such grandfathered contracts with biotechnology companies of concern would be prohibited.
In both bills, the "effective date" of the Act is 60 days after the issuance of regulations. The regulations are required to be issued within one year of guidance from the Office of Management and Budget, which must issue such guidance no later than 120 days after the enactment of the legislation. In totality, the effective date will be no later than 545 days after the date of enactment of the legislation. These milestones will be important to track should the bill pass in the coming weeks, as the effective date will be a moving target.
Update on Scope of Restrictions
Earlier versions of the BIOSECURE Act would have prohibited executive agencies from contracting (or renewing a contract) with a company that uses services of a biotechnology company of concern, whether or not such services were linked to the federal contract. By contrast, both bills now prohibit this contracting only if such services are used in performance of the contract with the executive agency, or funded by federal loans or grants. The narrower scope of the pending bills will enable companies to continue working with biotechnology companies of concern on projects that are not related to any federal contracts, loans or grants.
In addition, the updated House version clarifies that the restrictions on these federal contracts are limited to contracts subject to the Federal Acquisition Regulation (e.g., government contracts for the procurement of goods and services). This means, for example, that agreements governing reimbursement for prescription drugs or medical devices covered by Medicare or Medicaid will not be subject to the bill.
What's Next
The key question stakeholders are asking is what version of the bill will pass. Several senior lawmakers raised concerns about the House bill prior to passage, noting there is no clear process for how companies are named as a biotechnology company of concern. The duration of the grandfathering provision will also be closely watched. Since drug research and development takes time, and long-term biotech manufacturing relationships are not easily replaced, biopharmaceutical contracting relationships often span years. Even an eight year sunset will have near-term ramifications for U.S. life sciences companies. That is why some observers believe the Senate version is preferable as it will reduce disruption for U.S. life sciences companies.
Conclusion
As noted in March 2024, there is bipartisan support to discourage U.S. life sciences companies from doing business with entities that may present national security concerns. Thus, it is likely the BIOSECURE Act will pass in the coming weeks. However, concerns from key lawmakers about the current draft could lead to revisions. Ultimately, the scope and timeline of the bill will influence planning for life sciences companies that currently do business with entities named in the legislation, or with biopharmaceutical companies that may be included in its prohibitions in the future.
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