National Security Controls and the Life Sciences Sector: BIOSECURE Act, Section 1260H, and COINS Act Developments

Executive Summary

The life sciences sector continues to be a growing area of interest for national security controls, as U.S. pharmaceutical companies have increasingly partnered with Chinese firms for development, manufacturing, and licensing arrangements. On June 8, 2026, the U.S. Department of Defense (DoD) added WuXi AppTec — a prominent Chinese drug development and manufacturing services provider — to its list of “Chinese military companies” operating in the United States. The listing sets the stage for WuXi AppTec and other Chinese entities to be designated as a “biotechnology company of concern” under the BIOSECURE Act, which may restrict pharmaceutical companies’ ability to use their biotechnology equipment and services in connection with certain federal contracts. WuXi AppTec has already filed a legal challenge to its designation as a Chinese military company, and other companies may follow suit. Elsewhere, a growing number of lawmakers are calling for biotechnology transactions and licensing arrangements with Chinese firms to be subject to outbound investment screening requirements, as codified under the Comprehensive Outbound Investment National Security (COINS) Act. As the regulatory landscape continues to shift, industry participants should carefully evaluate the impact on their current and future arrangements with Chinese life sciences companies.

BIOSECURE Act and the 1260H List

On June 8, 2026, the DoD issued an updated version of its list of Chinese military companies operating in the United States, known as the “1260H List.” Notably, the new list includes WuXi AppTec Co., Ltd., which DoD described as “indirectly owned by” the State-owned Assets Supervision and Administration Commission (SASAC) and “indirectly affiliated with” the People’s Liberation Army (PLA) and the State Administration of Science, Technology and Industry for National Defense (SASTIND). The list also includes BGI Group (with seven listed affiliates), MGI Tech Co., Ltd., Novogene Company Limited, and Origincell Technology Co., Ltd., as well as companies involved in digital health and related sectors such as Alibaba Group Holding Limited and Tencent Holdings Limited.

The 1260H listing is significant because it lays the groundwork for WuXi AppTec and other listed entities to be designated as potential “biotechnology companies of concern” (BCCs) under the BIOSECURE Act, enacted as part of the FY26 National Defense Authorization Act (NDAA). As explained in our December 2025 Advisory, the BIOSECURE Act prohibits federal agencies from entering into, extending, or renewing any “contract” with an entity that uses “biotechnology equipment or services” from a BCC in performance of that contract. It also prohibits using federal loan or grant funds to procure or use biotechnology equipment or services from a BCC. Accordingly, pharmaceutical manufacturers may soon face restrictions on the use of certain equipment and services from WuXi AppTec or other listed entities in connection with their federal contracts and grants.

A company may qualify as a BCC if it is (1) included on the 1260H List and (2) “involved in the manufacturing, distribution, provision, or procurement” of a biotechnology equipment or service. Whether a company satisfies the second prong is determined through an administrative process involving the Office of Management and Budget (OMB), DoD, and other executive agencies.

Now that WuXi AppTec and others have been identified in the 1260H List, the U.S. government will determine if the listed companies have the required nexus to biotechnology equipment or services. If so, these companies will be included in the initial list of BCCs published by OMB, which must be issued by December 18, 2026. To the extent the U.S. government determines any subsidiary of a listed company also qualifies as a BCC, those subsidiaries would likewise be identified in the initial BCC list. The U.S. government may designate a company that is not on the 1260H List as a BCC, if it determines the company is controlled by the government of a foreign adversary and poses a national security risk.

Importantly, the BIOSECURE Act’s prohibitions do not take immediate effect upon an entity’s designation as a BCC. Companies that have existing arrangements with BCCs can also take advantage of the statute’s five-year grandfathering period for biotechnology equipment or services provided under contracts executed before the statute’s prohibitions take effect.

As previously noted, WuXi AppTec has filed a legal challenge to its addition to the 1260H List, and other newly listed companies may follow suit. In 2021, consumer goods manufacturer Xiaomi Corp successfully litigated the removal of its designation as a “Communist Chinese military company” under Executive Order 13595. Litigation and lobbying efforts by these companies may further complicate or extend the timeline.

Pharmaceutical companies with potentially implicated arrangements can take time now to evaluate the extent to which those arrangements involve “biotechnology equipment or services” used “in performance of” their federal contracts. Companies may also wish to review existing contracts to ensure they are positioned to take advantage of the BIOSECURE Act’s grandfathering provision, or consider negotiating a transition plan away from designated entities to avoid the application of the BIOSECURE Act.

Companies should also consider reviewing their relationships with Chinese companies added to the 1260H list holistically, whether or not the Chinese companies are ultimately designated as BCCs, to consider potential impact on cooperation in digital health, enterprise technology, and other sectors.

Outbound Investment Rules and Biotechnology

Cross-border licensing deals between Chinese biotechnology companies and global pharmaceutical firms have surged in recent years, reaching a record $137 billion in total deal value in 2025 — a nearly tenfold increase from $13.9 billion in 2021. As U.S. pharmaceutical companies have increasingly pursued these development and licensing arrangements with Chinese firms, a growing number of lawmakers have called for the transactions to be subject to outbound investment controls. Much of the discussion has focused on the COINS Act, also enacted as part of the FY26 NDAA alongside the BIOSECURE Act.

The COINS Act codifies and broadens the existing Outbound Investment Security Program established under 31 C.F.R. Part 850. Generally, the COINS Act authorizes the Secretary of the U.S. Department of the Treasury (Treasury Department) to prohibit or impose notification requirements for certain outbound “covered national security transactions” involving a “prohibited technology” or “notifiable technology.” The COINS Act defines “covered national security transaction” to include certain types of transactions with a connection to a “country of concern,” including China.

The existing Outbound Investment Security Program remains in effect until the Treasury Department issues implementing regulations.

COINS Act Implementation

Biotechnology is not currently identified as a “prohibited technology” or “notifiable technology” under the COINS Act. However, the COINS Act authorizes the Treasury Department Secretary to add through regulations additional technology categories that “enable the military, intelligence, surveillance, or cyber-enabled capabilities of a country of concern.” Some lawmakers are now urging the Treasury Department to use this regulatory authority to address biotechnology transactions.

In February 2026, several Republican lawmakers sent a letter to Treasury Department Secretary Scott Bessent, urging the administration to expand the Outbound Investment Security Program to include biotechnology-related investments. The letter contends that continued U.S. investment in the Chinese biotechnology industry could leave the United States “dangerously dependent” on China for advanced medicines and threaten American leadership in biotechnology.

Representative John Moolenaar (R-MI), Chair of the Select Committee on China, penned a separate letter to Secretary Bessent on May 21, 2026, again advocating that biotechnology transactions be subject to outbound investment screening. Moolenaar states that the rise of out-licensing and co-development arrangements between pharmaceutical companies and Chinese biotechnology firms risks “accelerating China’s dominance of the pharmaceutical innovation supply chain.” Moolenaar contends that the BIOSECURE Act “recognized that biotechnology is both a national security asset and a strategic vulnerability.” Failing to apply outbound investment rules to biotechnology transactions, Moolenaar argues, could create “long-term strategic dependency risks” for the United States, analogous to rare earth elements and parts of the semiconductor supply chain. Moolenaar requests that the Treasury Department give particular consideration to out-licensing arrangements involving pharmaceutical intellectual property, drug discovery platforms, clinical research and development capabilities, and biologics manufacturing and commercialization know-how.

Legislative Proposals

On June 2, 2026, Representatives Moolenaar and Debbie Dingell (D-MI) introduced the Biotech Investment National Security Act (BINSA). If enacted, BINSA would officially add “biotechnology” to the list of prohibited and notifiable technologies subject to outbound investment controls under the COINS Act. The bill adopts a broad definition of “biotechnology,” reaching the research, development, manufacturing, or commercialization of all “drugs” as defined in the Federal Food, Drug, and Cosmetic Act and all “biological products” as defined in the Public Health Service Act. It also covers “therapeutic compounds, including drug discovery platforms, clinical research and development capabilities, biologics manufacturing, and intellectual property and know-how relating to therapeutic compounds.” In practical terms, this definition could sweep in nearly the full spectrum of pharmaceutical activity involving Chinese firms, provided the transaction qualifies as a “covered national security transaction.”

Importantly, BINSA would also add licensing arrangements to the list of covered transactions subject to outbound investment controls. Accordingly, if BINSA is enacted, pharmaceutical companies entering into licensing arrangements with Chinese firms could face notification requirements or outright prohibitions under the COINS Act.

The most likely legislative vehicle for the BINSA’s potential enactment this year would be the FY27 NDAA. The FY26 NDAA included both BIOSECURE and the COINS Act. Notably, BIOSECURE received significant floor and committee consideration, over the course of nearly two years, before it was signed into law in December 2025.

Although it is unclear whether BINSA has a path to enactment, it signifies a continued bipartisan focus on the national security implications of commercial relationships between U.S. pharmaceutical companies and Chinese firms. Even absent legislation, the Treasury Department Secretary retains authority under the COINS Act to expand outbound investment controls to biotechnology through rulemaking — a possibility that industry participants should monitor closely.

Looking Ahead

The developments discussed in this Advisory reflect a broader trend toward extending national security controls to the life sciences sector. Industry participants should monitor developments, prepare contingency plans, and negotiate appropriate contractual protections for life sciences controls, including in the following:

• 1260H List Designations. Companies newly added to the 1260H list may contest their designation through lawsuits and negotiations with DoD. Even if companies on this list are not designated as BCCs, industry participants may wish to review their cooperation with these companies to assess potential impact on digital health, enterprise technology, and other initiatives.
• BIOSECURE Act implementation. The release of OMB’s initial list of BCCs, due by December 18, 2026, will be a key milestone. Industry participants should also watch for required guidance and revisions to the Federal Acquisition Regulation that will shape how the statute’s prohibitions are applied in practice.
• COINS Act implementing regulations. As the Treasury Department develops implementing regulations for the COINS Act, there is potential for biotechnology to be added as a prohibited or notifiable technology category — even absent new legislation.
• BINSA and related legislation. Although BINSA’s path to enactment is uncertain, it and similar legislative proposals signal sustained congressional interest in subjecting development and licensing arrangements with Chinese firms to outbound investment controls.
• Congressional Consideration of FY27 NDAA. While not technically in the Armed Services Committee’s jurisdiction, industry participants should monitor whether policies like BINSA, and similar legislative proposals, are discussed or offered as amendments.
• Potential Countermeasures. As the U.S. tightens its national security controls on biotechnology, China may pursue reciprocal measures that limit U.S. pharmaceutical companies’ access to Chinese biotechnology assets. For example, Chinese regulators could add certain biotechnologies to its Catalogue of Technologies Prohibited and Restricted from Export, a regulatory tool governing technology transfer under the country’s export control laws. Chinese regulators may also consider subjecting biotech transactions to China’s own recently announced outbound investment regulations, which will take effect on July 1, 2026.

We stand ready to advise our clients on the evolving national security landscape for the life sciences sector. If you have any questions about the content discussed in this Advisory or would like more information, please reach out to one of the authors or your existing Arnold & Porter contact.

© Arnold & Porter Kaye Scholer LLP 2026 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.