The forthcoming U.S. BIOSECURE Act is already making an impact on the China business strategy of global pharmaceutical companies. What are the implications for your China risk exposure?

Biopharmaceutical companies worldwide have expressed their intentions to continue investing in China. However, the forthcoming U.S. BIOSECURE Act means that many are proactively reassessing their China business strategies. Pamir has been working with pharmaceutical companies for decades. Find out how we can guide you through the implications of the BIOSECURE Act.

The forthcoming U.S. BIOSECURE Act proposes new safeguards against the CCP’s concerning stated goals in biotech development by implementing new limitations on commercial biopharma engagement with Chinese entities. Several biopharma companies in Europe and Japan have already expressed their intentions to continue investing and operating in the China market in spite of the cautionary tone set by the act. For the many companies worldwide sensitive to the concerns espoused in the act yet eager to maintain their indispensable Chinese operations and markets, navigating the China market going forward poses a strategic challenge.

Proposed U.S. BIOSECURE Act targets ties with specific companies

While the act has passed the first hurdle – earning bipartisan approval from the Senate Committee on Homeland Security on 6 March 2024 – it still has a long way to go to become law. But it has already raised concern from U.S. biopharma companies, many of which are deeply embedded within the Chinese supply chain.

The act aims to sever ties between U.S. and Chinese biopharmaceutical companies in response to concern about China's growing influence in the biotech sector.

Specifically, it is intended to prevent U.S. companies and government from procuring or funding the purchase of technology or services from prohibited Chinese biotechnology companies. Prohibited companies include WuXi AppTec (Shanghai) and its parent WuXi Bio (Jiangsu, China), BGI Genomics (Shenzhen, China), MGI (Shenzhen, China) and its subsidiary Complete Genomics (San Jose, CA), and any subsidiary, parent affiliate or successor of these entities.

The inclusion of WuXi AppTec in the proposed list of prohibited companies has proven especially attention-grabbing. WuXi AppTec is deeply embedded in the biopharma industry, servicing such prominent players as Merck, Iovance Biotherapeutics, and Kyverna Therapeutic.

The draft bill also bans entities from entering into new agreements with these Chinese companies – or extending or renewing existing contracts – but has a clause that would allow existing contracts until 1 January 2032.

House Select Committee letter echoes BIOSECURE Act’s concerns

Additionally, on 1 April 2024, a letter from the House’s Select Committee on the Chinese Communist Party recommended the addition of five biotech companies to the Pentagon’s list of firms that are allegedly working with the Chinese military, including Innomics (Sunnyvale, CA) and Axbio (Santa Clara, CA).

The letter implied that some of these companies have obscured their affiliation with BGI Genomics (Shenzhen, China), including Complete Genomics, Innomics, and STOmics.

Large biopharmas are reassessing their China business strategy

The embryonic act is already making an impact well beyond U.S. borders, causing European and Japanese pharmaceutical companies to reassess their China business investment strategy and risk exposure.

For example, on 23 April 2024, the CFO of Swiss biopharma Novartis, Harry Kirsch, told the press that the company is now “actively” weighing changes to its contractual relationships with Chinese companies “so that we are fully aligned” with potential U.S. regulations. Novartis has major ties in China, rendering such a realignment far from simple. In December, the company announced plans to build a new radiotherapy production plant in China with an investment of more than 600 million Chinese yuan ($84.6 million).

China is also a significant market for UK-based AstraZeneca. The company recently revealed that it is setting in place plans to manufacture drugs for the U.S. and Chinese markets independently from one another in order to maintain separate supply chains that comply with the BIOSECURE Act while still serving the Chinese market. Germany-based Merck also has significant research and manufacturing operations in China, including its work with WuXi AppTec.

The complexity of ongoing international interest in China’s biopharma market was evident at the annual China Development Forum (CDF) in Beijing, held on 24-25 March 2024. The CEOs of AstraZeneca, Bayer (Germany), Bristol Myers Squibb (New Jersey), GSK (UK), Novartis, Pfizer (New York) and Takeda (Japan) all expressed their continued interest in China market opportunities, while also acknowledging challenges such as the protection of intellectual property, the need to simplify regulatory processes, and data security risks.

Though the BIOSECURE Act will undergo many changes before it becomes law, it is already clear that its final version will require biopharmaceutical companies globally to secure and diversify their supply chains.

Pamir Consulting is an expert in strategic advisory consulting and risk assessment in the Chinese business market. We specialize in China market opportunities and have decades of experience helping healthcare and pharmaceutical companies optimize their China market investment opportunities.

We can help you navigate the risks created by the BIOSECURE Act, ensuring compliance at all local levels, while maximizing the opportunities offered by China. To find out more, contact us today.