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Biotechnology, US will ban contracts with China

U.S. lawmakers plan to make it more difficult for pharmaceutical companies to do business with some Chinese biotech companies because of growing national security concerns

A bipartisan bill introduced in the U.S. House of Representatives would ban Chinese biotechnology companies deemed "of interest," and any company working with them, from obtaining U.S. federal contracts

An updated version of the Biosecure Act was approved in May by the House Committee on Oversight and Accountability.

The current text stipulates that any business relationship with companies placed on the "biotechnology companies of interest" list must be terminated by 2032.


Five companies currently appear on the list, all based in China: BGI Group, MGI, Complete Genomics, WuXi Apptec, WuXi Bio and their affiliates.

What is the Biosecure Act?

The Biosecure Act is the latest of the United States' initiatives aimed at hindering collaboration between companies operating in the country and states considered "foreign adversary forces", in particular China, Russia, Iran and North Korea. The concerns of US politicians behind this bill are two: the potential access to US health data and intellectual property by the Chinese government, and the growing dependence on Chinese companies for the supply of medicines. The risk, they argue, is that China will exploit its position to influence the market – a possibility that would leave US patients vulnerable to foreign government decisions.

Lawmakers also say it is necessary for the United States to remain a leader in biotechnology despite growing competition from Beijing.

The bill, if approved, would prevent the federal government from signing contracts with "biotechnology companies of interest." Not only that: the ban would also be extended to those companies (both in the United States and abroad) that have contracts with the government or receive federal funds. This includes, for example, agreements with Medicare, the federal health insurance for those over 65 or with a disability, which in total covers around 66 million people.

The proposal must be approved by both houses of Congress before becoming law, and November's presidential election could derail it. However, given the bipartisan support, several experts and US experts believe that an agreement will be found by the end of the year.

The law, if passed, could disrupt the relationship between the global pharmaceutical industry and Chinese biotech companies.

Legislative Summary

Members from both parties in the House and Senate have introduced legislation in both houses (H.R. 7085 / S. 3558) to bar federal agencies from entering into:

  • Contracts, loans, or grant agreements for biotechnology equipment or services from “biotechnology companies of concern” due to their relationship with the Chinese government (or the governments of Russia, North Korea, or Iran).

  • Contracts, loans, or grant agreements with companies, including U.S. companies, that use “biotechnology equipment or services” from biotechnology companies of concern acquired after the legislation’s relevant effective date, or enter into contracts that require the direct use of “biotechnology equipment or services” produced or provided by a biotechnology company of concern acquired after the legislation’s relevant effective date.

The legislation directly names four companies as “biotechnology companies of concern”: BGI Group, MGI (a former subsidiary of BGI), Complete Genomics (a U.S. company that is a subsidiary of MGI), and WuXi AppTec. The federal government (led by the Office of Management and Budget, in consultation with agencies such as Defense, Commerce, and HHS) will develop a list of other biotechnology companies of concern based on their relationship to the governments of certain “foreign adversaries” (referring to a statutory definition that covers China, Russia, North Korea, and Iran) and the national security threat the companies may present to the U.S.

The Senate version of the bill contains a provision for existing contracts with biotechnology companies of concern (with restrictions not applying to contracts with biotechnology companies of concern entered into before the legislation’s relevant effective date).

There’s a 70% chance of it passing during the post-election “lame-duck session” before the next president is sworn in, Bloomberg Intelligence analyst Duane Wright said in a June 17 report.

Scope of restrictions

Which contracts with biotechnology companies of interest would be prohibited?

The legislation would prevent “any entity” that enters into certain contracts with biotechnology companies of interest from having certain contracts with the U.S. government. The bill defines “biotechnology equipment or services” broadly, meaning items “designed for use in the research, development, production, or analysis of biological materials” (with some specific items named, such as mass spectrometers) and services relating to "research, development, production, analysis, detection or provision of information, including storage and transmission of data relating to biological materials", including "disease detection, genealogical information and related services" and consultancy, consultancy and support related to biotechnological equipment. OMB would also have the authority to designate any other “services,” “instruments,” software, and a variety of other items to be considered biotechnology equipment or services as “appropriate.”

What U.S. government contracts, grants, and loans would subject a company to the restrictions?

The contractual restrictions would apply to life sciences companies that enter into funding agreements with agencies such as the National Institutes of Health and would likely apply to a broad range of government contracts, such as sales to the Department of Defense or Veterans' Affairs. Under the legislative text, it would not necessarily limit life sciences companies receiving reimbursements for prescription drugs or medical devices covered by Medicare or Medicaid (as these arrangements do not necessarily involve supply contracts with the federal government).

Over the last few years, the U.S. has taken various other steps to address national security concerns related to China.

For example, the Committee on Foreign Investment in the United States (CFIUS)—an interagency committee with broad authority to review certain transactions involving foreign investments in the U.S.—has continued to ramp up its activities, with a focus on several industries, including life sciences. In 2022, President Biden issued an Executive Order directing CFIUS to specifically consider the risks a transaction poses to U.S. technological leadership in certain key sectors, including biotechnology and biomanufacturing.

Further, in August 2023, the U.S. announced the creation of a new outbound investment program which will prohibit and require notification of certain investments by U.S. persons into entities located in, subject to the jurisdiction of, or owned by persons from China and its Special Administrative Regions of Hong Kong and Macau, if those entities are engaged in activities involving one of three industries: (1) semiconductors and microelectronics, (2) quantum information technologies, and (3) artificial intelligence. While the new outbound investment program does not currently address life sciences investments, it is possible the program will be expanded in the future to include a broader range of industries. We expect the new program to come into effect sometime this year.

Why is this ban introduced?

There are essentially two reasons:

(1) stop United States taxpayer dollars from flowing to foreign adversary biotech companies like BGI that have ties to the PLA;

(2) prevent United States taxpayers from buying biotech equipment from foreign adversaries that facilitate the transfer of United States persons genetic data to a foreign adversary.

According to the United States:

(1) The Government of the People’s Republic of China (PRC) seeks to dominate biotechnology as an industry of the future.

(2) In recent years, the PRC has pursued a strategy known as “military-civil fusion” that merges public and private industries to enable the military modernization of the People’s Liberation Army (PLA).

(3) In the PRC’s 14th Five-Year Plan, the PRC emphasized the use of artificial intelligence for biological discovery and called to accelerate the development of biotechnology.

(4) PRC biotechnology companies have repeatedly collaborated with PLA entities, including Third Military Medical University and the PLA’s Key Laboratory of High-Altitude Medicine.

(5) PRC law requires companies that are controlled by a PRC entity, like BGI, to comply with PRC national security laws, which provide the Chinese Communist Party (CCP) with the power to compel Chinese companies to turn over their data.

(6) Pursuant to the PRC’s laws, the PRC can require a company headquartered in the PRC to surrender all its data to the Government of the PRC, making it an espionage tool of the CCP.

(7) The National Intelligence Law, passed in China in 2017, states that “any organization” must assist or cooperate with CCP intelligence work.

(8) China’s 2014 counter-espionage law also states that “relevant organizations … may not refuse” to collect evidence for an investigation.

(9) The PRC’s Data Security Law of 2021 states that the Government has the power to access and control private data.

(10) The PRC’s counter-espionage law grants PRC state security agencies nearly unfettered discretion, if acting under an effectively limitlessly capacious understanding of national security, to access data from companies.

(11) The executive branch has determined that BGI, formerly known as Beijing Genomics Institute, is a national security threat.

(12) In October 2022, the Department of Defense added BGI Genomics Co., LTD (BGI) to the Department of Defense’s list of PRC Military Companies.

(13) In March 2023, the Department of Commerce added BGI Tech Solutions (Hong Kong) a subsidiary of BGI, to the Entity List for concerns the unit poses a significant risk to contributing to PRC Government surveillance.

(14) In February 2021, the National Counterintelligence and Security Center published a public advisory that the Government of the PRC seeks to leverage access to genetic data to conduct repression and surveillance with mention of BGI’s role in this campaign.

(15) BGI is engaged in global campaign to collect foreign person’s genetic data.

(16) As of October 2023, United States press reports BGI operates genetic collection sites or “Fire-Eye” laboratories, in over 30 countries.

(17) According to a July 2021 United States press report, BGI collected genetic data from millions of pregnant women through prenatal tests. BGI reportedly has worked with the PLA to improve “population quality” in the PRC.

(18) BGI operates the China National GeneBank, the world’s largest repository of genetic data.

(19) MGI and Complete Genomics are subsidiaries and direct affiliates of BGI that have access to the United States market and population.

(20) In 2013, BGI purchased United States genomic sequencing firm Complete Genomics.

(21) According to MGI’s previous Securities and Exchange Commission disclosures, MGI is “part of the BGI” group and BGI “established” MGI.

(22) According to an April 2023 United States press report, BGI founder, Wang Jian, holds 47 percent of MGI shares.

(23) According to corporate disclosures, Complete Genomics is owned by MGI and is therefore owned by BGI.

(24) WuXi Apptec presents a national security threat to the United States.

(25) According to PRC press, WuXi Apptec has sponsored Military-Civil Fusion events in the PRC.

(26) WuXi AppTec has received investments from a “Military-Civil Integration Selected Hybrid Securities Investment Fund”.

(27) According to PRC press, WuXi AppTec has granted awards to PLA researchers and invited PLA institutes to participate in the selection process of company awards.

(28) Chris Chen, CEO of WuXi Biologics, was previously an adjunct professor at the PLA’s Academy of Military Medical Sciences.

US lawmakers have already called for an investigation into other Chinese biotech companies. According to a report from STATnews, a media company covering the healthcare sector, some companies are already looking for alternatives to replace their Chinese partners, concerned that other companies will be blacklisted by the United States.

In March, AstraZeneca said that it plans to separate drug production for the United States and China in light of current geopolitical tensions. German pharmaceutical company Merck also appeared to be intent on moving production for the Chinese market directly within the country.

Why is biotechnology important?

Synthetic biology is a fast-growing field with the potential to revolutionize many different industries, including food, agriculture, medicine and energy. Ginkgo Bioworks, one of the world's largest biotechnology companies, has predicted that this type of biology will one day be able to produce "virtually any physical good."

An immediate application of synthetic biology there was during the Covid-19 pandemic with the development of vaccines and test kits. While advances will produce benefits for global consumers, the greatest benefit will go to the countries that secure the leadership. There will be economic gains, increased job opportunities, and opportunities to play a leading role in the global governance of synthetic biology.

Achieving leadership in this area, however, has important implications for the national security of states, both for the development of new materials with military applications and for the possible creation of more virulent biological weapons.

U.S. scientists agree that while the United States remains the world leader in synthetic biology, their lead is shrinking because of China's rapid advances. Jason Kelly, CEO of Gingko Bioworks, said that China's BGI, the world's largest genomics company, has now reached parity with U.S. companies in gene sequencing.

China's 14th Five-Year Plan listed biotechnology, including synthetic biology, as one of seven fields of science and technology where the CCP will focus resources and strategic planning. According to some estimates, China's central, provincial and local governments would collectively invest more than $100 billion in research and development (R&D) in the life sciences. Government support has also been essential for some of China's leading synthetic biology companies, including BGI, which received substantial regulatory support from the government immediately after its founding in 1999 and continues to receive subsidies.

In fact, in 2010, BGI received $1.5 billion in financing from the China Development Bank, a state-owned bank, to expand its operations. As part of China's efforts to become a global industry leader, Chinese companies and researchers have also sought access to foreign expertise. In some cases, purchases of foreign companies by Chinese companies have brought significant advances in Beijing's synthetic biology capabilities. In 2013, BGI purchased Complete Genomics, a U.S.-based gene sequencing company. In 2020, Complete Genomics announced that it would be able to sequence a human genome for $100, compared to the $600 required by most of its competitors. The Chinese government has also supported investments in non-U.S. companies. In 2017 ChemChina, a state-owned company, bought Syngenta, a Swiss agrochemical company, for $43 billion; it was the largest Chinese acquisition ever of a foreign company.

The CCP has set ambitious goals to collect and catalog genomic data both within China and from other countries. Genomic data, regardless of whether they come from humans, other animals, or plants, provide crucial inputs for advances in synthetic biology. For example, using genomic data from SARS-CoV2, the virus that causes Covid-19, scientists were able to develop prototype Covid-19 vaccines for human testing in less than a year.

Moreover, as has been pointed out, while Beijing places strict restrictions on sharing Chinese health data with foreign companies or researchers, Chinese entities have gained access to health data in many countries. This has been the case in the United States through investments in companies such as 23andMe, sales of gene sequencing equipment and services, and partnerships with universities and hospitals. China does not offer a condition of reciprocity. In fact, its human genetic resources regulations prohibit foreigners from collecting, storing, using, transferring or exporting human biological samples obtained in China. Instead, all foreign entities are required to enter into a collaboration with a Chinese partner, and such collaboration must be approved by the Office of Human Genetic Resources Administration, which is part of the Ministry of Science and Technology. While many countries regulate access to citizens' medical data and genetic information, Chinese regulations are significantly stricter and involve greater procedural hurdles, and international researchers have expressed concern that these limitations risk slowing scientific research.

Chinese state-sponsored groups have also targeted the health data of foreign countries through hacking of health workers and businesses. In addition, the international sale of certain medical products manufactured by Chinese companies has provided Beijing with potential access to the genomic data of populations around the world.

Genomic data collection has also been used to monitor citizens and persecute ethnic minorities. Early efforts in the mass collection of genomic data focused on ethnic minority groups in Tibet and Xinjiang, where Chinese scientists collected tens of millions of samples during what the government had described as free annual medical checkups.

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