Congress Sets Its Sights on Limiting Access to Chinese Biotech Companies

The BIOSECURE Act Objectives
The goal of the BIOSECURE Act is to ensure foreign adversarial biotech companies do not gain access to U.S. taxpayer dollars. The legislation would restrict federally funded medical providers from contracting with four named Chinese companies, as well as companies to be identified by the Office of Management and Budget (OMB) in the coming year. The named companies are allegedly linked with the use of U.S. citizens’ genetic data by the Chinese military to develop bioweapons and carry out other military operations. The legislation is not authorized to restrict the use of private funds by medical providers but applies to any medical provider leveraging federally awarded funds.

The bill lists four companies, including WuXi Apptec and BGI Genomics, as targets of the funding limitation. It also extends the scope to any “biotechnology company of concern”—any company that is headquartered or subject to the jurisdiction of China, Iran, North Korea or Russia, and that poses a threat to U.S. national security. Specifically, the Act targets any entity, including subsidiaries and parent affiliates, who:

• Is subject to the jurisdiction, direction, control or operates on behalf of the government of a foreign adversary;
• Is to any extent involved in the manufacturing, distribution, provision or procurement of a biotechnology equipment or service; and
• Poses a risk to U.S. security, either by:

- Engaging in joint research with, being supported by or being affiliated with a foreign adversary’s military, internal security forces, or intelligence agencies;

- Providing multiomic data obtained via biotechnology equipment or services to the government of a foreign adversary; or

- Obtaining human multiomic data via the biotechnology equipment or services without express and informed consent.

If enacted, the procurement and funding restrictions would go into effect in two waves. The first wave applies to the four named companies who would be restricted from federal funding the earlier of either (a) 120 days of the Act’s enactment or (b) 60 days of the OMB providing guidance on the procurement restrictions. The OMB must provide guidance, including the list of identified biotechnology companies of concern, within 120 days of the Act’s enactment. The second wave of enforcement will target the entities on the OMB list, who will be subject to the restrictions of the Act 180 days following the OMB’s guidance. The OMB may update the list of biotechnology companies of concern annually.

Waivers may be issued on a case-by-case basis for a one-year period when the head of the agency applies for and receives approval from the OMB Director, the Federal Acquisition Security Council and the Secretary of Defense. Waivers must be necessary to support the mission of the agency and be in the U.S. interest.

Where the Act Stands Today: The House of Representatives
The Act was introduced in the House by the Chair and Ranking Member of the House Select Committee, Mike Gallagher (R-WI-8) and Raja Krishnamoorthi (D-IL-8), respectively. The Act has not moved in the House since its introduction on January 25, 2024, and awaits action by the House Committee on Oversight and Accountability.

While the legislation has not moved in the House, it has received much attention from the House Select Committee. On March 5, Gallagher wrote to Attorney General Merrick Garland, asking him to review the work of a lobbying group representing one of the companies listed in the BIOSECURE Act. Gallagher argued that the Biotechnology Industry Organization (BIO) group’s advocacy on behalf of Chinese biotechnology companies “is aligned with the interests of the CCP and the People’s Republic of China government.” The trade group has since cut ties with WuXi AppTec, one of the companies named in the bill.

On March 7, the House Select Committee held a hearing on “Growing Stakes: The Bioeconomy and American National Security.” During the hearing, the leaders of the House Select Committee emphasized the role private companies in China may play in providing genetic data, including DNA, to the Chinese government and military. Imposing outbound investment restrictions on biotechnology companies was viewed as a way to ensure that biotech innovation reflects U.S. values.

Where the Act Stands Today: The Senate
In the Senate, Senator Gary Peters (D-MI), chair of the Senate Homeland Security and Governmental Affairs Committee, introduced the BIOSECURE Act on December 20, 2023. The legislation successfully passed the Committee on March 6, 2024, with an amendment in the nature of a substitute. The Act now awaits a final vote by the Senate; however, it is unclear whether and when the Senate may take up the bill given the crowded congressional calendar and pressures of an election year.

The bill enjoys strong bipartisan support in both chambers. The supporters have also made comparisons between the named technology companies and Huawei in the telecommunications sector. For context, Huawei has been a frequent topic of congressional attention. In the FY19 National Defense Authorization Act, government entities and grant and loan recipients were prohibited from procuring or using Huawei equipment (similar to the restrictions under the BIOSECURE Act). Huawei is also included on the Department of Commerce’s Entity List. Comparisons between Huawei and the biotechnology companies may indicate that other legislative and administrative actions may be taken to further limit U.S. engagement with the technology companies, as has been done for Huawei.

The legislative push comes amidst a series of legislative proposals and recommendations from the House Select Committee to limit U.S. engagement with Chinese entities. Earlier this year the Select Committee issued a report documenting U.S. private sector support for high-risk Chinese companies—those allegedly providing drones, biometric data, AI technology or semiconductor support to the Chinese government and Chinese military. The Select Committee is expected to continue to push the decoupling of American investments in China as well as restricting U.S. federal funding from flowing down to Chinese manufacturers.

Conclusion
Companies whose supply chains run through China, or other named adversarial countries, should review their partnerships closely to determine if they might come under congressional scrutiny. Pillsbury stands at the ready to evaluate potential supply chain risks and help navigate the ever-changing congressional landscape.