Several important things about the US House New Bill Aiming at “Biotech Companies of Concern”
On Jan 25, 2024, US Representatives Mike Gallagher (R-WI) and Raja Krishnamoorthi (D-IL) proposed a new Bill to the US House of Representatives. The Bill, called the “BIOSECURE Act”, aims to ban Executive Agencies from working with Foreign Adversary Biotech Companies of Concern. The proposed Bill caused a significant downturn in the capital market for China's healthcare sectors, including BGI Genomics and Wuxi Apptec groups, whose names were mentioned in the Bill.
Who are the Bill proponents? Representative Gallagher is the Chairman of the House Select Committee on the Strategic Competition Between the US and the Chinese Communist Party. Since its founding in early 2023, the Committee under Gallagher’s lead has put forward a couple of legislative bills on investment, technology, and security issues in the context of US-China competition. The Committee is known for bi-partisan efficiency, as flavored by the present Bill.
Grounds of Concerns Named in the Bill: The Bill fabricated several eye-catching grounds to appeal to the legislators and voters. These include the collection of American citizens’ genetic data by Biotech Companies of Concern, sharing of such data with governments of Foreign Adversary, potential data used to develop bioweapons, and the resultant national security threat to the US. The Bill calls to stop taxpayer dollars from flowing into Foreign Adversary Biotech Companies of Concern.
Both BGI and Wuxi Apptec have issued corporate statements refuting the references made under the Bill.
Scope of the bans imposed by the Bill: The Bill holds federal Executive Agencies responsible for avoiding the following conducts:
- purchasing biotech equipment or services from Biotech Companies of Concern,
- contracting with entities that use biotech equipment or services provided Biotech Companies of Concern, upon the ban becomes effective,
- contracting with entities for activities that will require the use of biotech equipment or services provided by Biotech Companies of Concern, and
- providing loans or funding for access to biotech equipment or services from Biotech Companies of Concern.
The term Executive Agencies includes federal government agencies, and federally funded corporations e.g. medical providers.
Who are Biotech Companies of Concern? The Bill proposes that federal government offices jointly develop a list of Foreign Adversary Biotech Companies of Concern. Foreign Adversaries refer to North Korea, China, Russia, and Iran.
Besides BGI and Wuxi Apptec being expressly mentioned, the Bill defines Biotech Company of Concern as an entity that:
1) is controlled or directed by the government of Foreign Adversary,
2) is engaged in the manufacturing or sale of biotech equipment or services, regardless of degree, and
3) poses a risk to US national security due to: (a) doing joint research with the military or security agency of a Foreign Adversary, (b) sharing genetic and related data derived from biotech equipment or services with the government of the Foreign Adversary, or (c) obtaining genetic and related data derived from biotech equipment or services, absent express informed consent.
Would the Bill develop into a binding and effective law? House representatives and Senators introduce bills of all kinds from time to time, as their jobs. The process of evolving a bill into a law is long (for years), and mutual approvals from both the House and Senate on exact bill language must be in place before a bill can be submitted to the President for signing into law.
That being said, in recent years certain initiatives against China progressed in Congress quite quickly. For example, the Holding Foreign Company Accountable Act (HFCAA), which put on risk the US public trading eligibility of China-based companies if they do not adequately provide audit reports, was signed into law in December 2020, merely 20 months after the relevant bill was first initiated in the Senate.
What should companies do towards the Bill, and beyond? When the US Executive Order was announced in August 2023 which hit semiconductors, quantum computing and AI, the life science sector generally felt relieved about not being included. However, the Introduction of the Bill made biotech players and investors nervous, even though it is still in its early legislative stage.
Companies are suggested to keep the following aspects in mind:
First, in a scenario that the Bill does become a law, it would likely be a “small yard, high fence” situation, meaning the ban would be on a small number of companies, i.e. those being put on the potential list of Biotech Companies of Concern. The ban is not expected to extend to the majority of biotech companies.
Second, Chinese companies that still plan to operate in the US need to apprehend the long-term, new normal nature of risks brought up by US-China geopolitical challenges. US politicians could continuously throw in various initiatives in the name of national security or the like.
Third, in view that data privacy and security, and several other issues are high on the radar in the US (also in China), companies should do self-assessments to spot and correct weak areas. A strategic “health check” may not completely eliminate risks, yet it may help reduce the probability of things going south.
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