As U.S. Biosecure Act Passes the House, Four Things Biotechs Can Do to Prepare

The U.S. Senate may still reject the U.S. BIOSECURE Act, but the House of Representatives has now passed a version of the bill. Biotechs in both the P.R.C. and the U.S. therefore need to prepare for the new environment which it heralds. Michael Borden, Andrew Shoyer, and Ruchun Ji set out four steps to take now.

On September 9, the House of Representatives passed the draft BIOSECURE Act over the objections of the House Democratic leadership and the top Democrats on the committees with jurisdiction over health. The proposed law would effectively ban five P.R.C.-based biotech companies from operating in the U.S. (see our previous blog on the process here) and potentially dozens of not-yet-identified firms as well. However, even if the Senate does not pass the BIOSECURE Act and it does not become law, it is possible that the U.S. Administration might use other powers to restrict the operations of P.R.C.-based biotechs.

Undoubtedly, the five biotechs currently named in the draft law and their U.S. partners have been assessing their supply chains and planning for U.S. government restrictions. However, there is a reasonable chance that any P.R.C. or U.S. biotech might be caught in the regulatory dragnet.

Four things to consider now in relation to contingency planning and building new capacity are:

1. P.R.C. biotechs should hedge against being named: If the U.S. BIOSECURE Act does become law, the five P.R.C.-based biotechs named in the law will be impacted. However, the BIOSECURE Act also creates a process for the U.S. government to identify other P.R.C.-based ”biotechnology companies of concern.” P.R.C. biotechs therefore need to evaluate how to protect themselves against potentially being named as company number six, seven, or eight. Seek advice on whether your company fits the four criteria, which, under the U.S. BIOSECURE Act, could render you a “biotechnology company of concern,“ and consider taking steps to minimize these aspects of your business.
2. Market opportunities may arise for other biotechs. While P.R.C.-based companies that are not currently named on the U.S. BIOSECURE Act’s list of five may wish to avoid drawing the attention of the U.S. authorities to their business, there is potentially a need for other companies to step into the gaps left by the five. Any companies considering doing so should seek advice and develop a strategy around how to do so while avoiding tripping the statutory elements that could lead to being named as company six, seven, or eight. U.S. biotechs may need alternative manufacturers. U.S.-based life sciences companies that are currently working with one of the named five companies will need to be thinking through alternatives for manufacturing and analyzing the possible consequences of changing relationships.
3. U.S. biotechs must weigh the risks of alternative countries. U.S. life sciences companies that simply switch their current relationship with one of the named five to an alternative P.R.C. company run the risk of that company ultimately being named. However, switching to a partner in another country also brings risks. Future scenarios such as drug and active ingredient shortages and rising prices need to be stress tested before switching the country in which a manufacturer is located.
4. Lobbying efforts outlets remain restricted. Many life sciences companies would like to see further amendments to the BIOSECURE Act and may therefore wish to lobby and potentially influence the form in which it eventually becomes law, if indeed it does. Some lobbying is undoubtedly occurring behind the scenes, but biotechs will need to seek advice on how to best advance any of their own particular interests.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.