Navigating the Pending BIOSECURE Act: Implications for U.S.-China Biopharmaceutical Collaboration and National Security

The BIOSECURE Act (H.R. 7085), which has the potential to severely restrict the ability of U.S. biopharmaceutical companies to collaborate with certain Chinese entities without losing the ability to contract with the U.S. government, has made headlines in recent weeks.

As we have seen previously in the telecommunications field, congressional scrutiny of Chinese companies such as BGI Genomics, MGI, Complete Genomics, and WuXi AppTec has been building over the past several years as federal policymakers have become increasingly critical of China’s biopharmaceutical industry, with a focus on their alleged ties to the Chinese Communist Party and handling of Americans’ personal data, including genetic information. Introduced by the House Select Committee on the Chinese Communist Party (China Select Committee) Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL) on January 25, the BIOSECURE Act would:

• Prohibit federal agencies from:
  
  
  • Procuring or obtaining a “biotechnology equipment or service” from a “biotechnology company of concern”
  • Entering into, or renewing, a contract with an entity that either (1) uses biotechnology equipment or service from a biotechnology company of concern in performing the contract or (2) enters into a contract (with a third party) that will require the direct use of biotechnology equipment or service from a “biotechnology company of concern”
  • Using grant or loan funds to any entity covered by the contract ban
• Direct the Office of Management and Budget (OMB) in consultation with certain other agency heads, to develop a list of “biotechnology companies of concern” and to issue implementing guidance within 120 days of the enactment of the BIOSECURE Act.
  
  
  • The list of “biotechnology companies of concern” must include BGI Genomics, MGI, Complete Genomics, WuXi AppTec, and any subsidiary, parent affiliate, or successor of such entities.
  • The list also should include any entity that (1) is subject to the jurisdiction, direction control, or operates on behalf of a foreign adversary; (2) is involved in the manufacturing, distribution, provision, or procurement of a biotechnology equipment or service; and (3) poses a risk to U.S. national security based on joint research with a foreign adversary, providing “multiomic”¹ data to a foreign adversary, or obtaining human multiomic data without express and informed consent.

For BGI Genomics, MGI, Complete Genomics, and WuXi AppTec, the bill’s restrictions would take effect 60 days after the Office of Management and Budget (OMB) issues the implementing guidance or 120 days after enactment of the legislation, whichever is earlier. However, the restrictions would also apply to any other entities added to the list 180 days after the OMB guidance is issued. In addition, the bill directs the Federal Acquisition Regulatory Council to update the Federal Acquisition Regulations to reflect the bill’s restrictions within one year after the OMB guidance is issued.

The bill defines “biotechnology equipment or services” as “equipment designed for the research, development, production, or analysis of biological materials as well as any software, firmware, or other digital components,” in addition to advising or consulting services related to the use of equipment, disease detection, or genealogical information, or any other services defined by OMB.

Background

The House version of the FY24 National Defense Authorization Act (NDAA) included a prior version of the BIOSECURE Act. Despite efforts to include the bill in the Senate version of the FY24 NDAA, the legislation was not included in the final FY24 NDAA. Instead, the FY24 NDAA directed the Department of Defense to determine whether biotechnology companies headquartered in China should be identified as Chinese military companies operating in the United States. On January 31, the Department of Defense published an updated Chinese military list, but it did not include WuXi-affiliated entities.

On February 12, Reps. Gallagher and Krishnamoorthi, along with Sens. Gary Peters (D-MI) and Bill Hagerty (R-TN), sent a letter to Commerce Secretary Gina Raimondo, Defense Secretary Lloyd Austin, and Treasury Secretary Janet Yellen asking the agencies to consider adding WuXi AppTec and WuXi Biologics to the Department of Defense’s Chinese Military Companies List (1260H list), the Department of Commerce’s Bureau of Industry and Security Entity List, and the Department of Treasury’s Non-SDN Chinese Military-Industrial Complex Companies List.

Status and Outlook

There are two paths for a version of the BIOSECURE Act to progress through Congress: (1) as part of the FY25 NDAA or (2) attached to a larger legislative package this year. Notably, this legislative effort follows the same model that was used to target Chinese telecommunications companies in the late 2010s. Given the pace of movement, for stakeholders wishing to influence or amend the legislation, we recommend initiating outreach as soon as possible.

H.R. 7085 has been referred to the House Oversight and Accountability Committee and further action has not yet been announced. Although the China Select Committee does not have the ability to advance legislation, the Select Committee can build momentum for the bill. In addition, Rep. Gallagher also serves on the House Armed Services Committee, which allows him to include provisions in defense-related bills. We expect Rep. Gallagher to push for the inclusion of a potentially expanded version of the BIOSECURE Act in the FY25 National Defense Authorization Act as early as mid-April. Congressman Gallagher is not seeking reelection and may view this legislative effort as a legacy item.

In the Senate, Sens. Peters, the Chairman of the Senate Homeland Security and Government Affairs Committee (HSGAC), and Hagerty introduced (S.3558), which is substantially similar to the BIOSECURE Act, on December 20, 2023. Sen. Peters listed the bill to be considered during a January 31 HSGAC business meeting, but the bill was held over to the next business meeting. We expect the bill to be considered by the committee in the coming months.

In addition to this congressional activity, we also understand the Biden administration is considering executive actions to limit the distribution of certain “highly sensitive” personal data, including genetic information, to China and other countries of national security concern.

*Dorothy Chen contributed to this Advisory. Ms. Chen is admitted only in North Carolina; practicing law in Washington, D.C. during the pendency of her application for admission to the D.C. Bar and under the supervision of lawyers of the firm who are members in good standing of the D.C. Bar.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.