In January this year, the US House Select Committee on the Strategic Competition between the US and the Chinese Communist Party introduced the Biosecure Act, which intends to prevent Chinese biotechs and manufacturers from accessing US funding and collaborating with pharma companies. The legislation is intended to protect US national security and prevent companies of high potential risk from conducting business in the US. Several major Chinese biotech and genomics companies were named in the bill as US national security concerns, including WuXi and its subsidiaries, BGI Group, MGI, and Complete Genomics. The legislation has high concern about the impact of R&D and manufacturing for medicines, given the heavy reliance on contract manufacturers like WuXi.

WuXi has one of the largest biologics manufacturing networks globally and has made successful investments to become a major contract manufacturer among big pharma companies. With WuXi targeted in the bill, not only will US companies be heavily affected, WuXi’s revenues will be expected to take a hit, given a majority of its business is conducted with US companies, including the 20  largest pharma companies, and WuXi has helped develop a significant number of drugs in the US in recent years. The other companies of concern will similarly be hit due to a large number of US-based clients. There is a worry that the US pharma and biotech industries will be stunted by the legislation and development of drugs will slow, due to cutting ties with the companies and sourcing alternative manufacturers. Smaller biotechs that rely solely on these companies may also be driven out of business, due to the cost of transitioning to a new location for manufacturing services. Those against the bill also state there is a chance of delays and shortages in drug production, as companies transition manufacturers.

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Pharma reaction to the Biosecure Act and global effects

Though the bill is not law, it has gathered momentum and caused significant concern among the pharma community. The US pharma industry relies heavily on Chinese contract manufacturers to help develop and produce its therapeutics. The collaborations with these companies are hugely attractive due to the low costs associated with producing and sourcing active pharmaceutical ingredients (APIs) abroad. Pharma companies have begun to react to the proposed legislation and taken steps to mitigate the effects of the bill. Companies have reported to review their relationships with these companies or begin to find manufacturing alternatives outside of China. These include looking at European and domestic contract manufacturers. There are concerns that the Biosecure Act could raise drug prices higher due to the pharma companies not having access to cheap manufacturing sources or partners within their supply chain, along with the costs of transitioning to different manufacturing partners.

While many within the pharma industry may see negative consequences from the Biosecure Act, other companies have expressed support and will benefit. Rival contract manufacturers could stand to benefit from the bill as pharma companies look to diversify the supply chains. Some major US life science suppliers and contract manufacturers have commented on the potential business opportunities and partnerships that can be formed to challenge the market. One of these companies, Thermo Fisher, has highlighted the benefits of localizing supply chains and has confirmed it has received more client queries in light of the proposed legislation.

Outlook for the legislation

The bill still needs to pass the full US House of Representatives and US Senate, before being signed into law by the US president. During this process, there is still a chance for the Biosecure Act to be further reviewed and changed. Despite these steps, there is a high likelihood of the legislation passing due to the bipartisan support the bill has gathered. This is also reflected by pharma companies already taking action, with the legislation not yet even law. Even though the pharma companies are against the bill, the industry may also be reluctant to publicly lobby against the Biosecure Act, given the sensitive nature of the legislation and fears the companies could also be targets for lawmakers. The Biden administration has also continually pushed for the domestication of US manufacturing and supply chains and reduced reliance on countries like China for pharmaceutical supplies. Since its introduction this year, the bill has been modified to include a clause to allow existing contracts with the companies of concern to be grandfathered until 2032, giving flexibility for companies to withdraw from their partnerships with Chinese companies of concern and avoid drug shortages. It is likely the bill will not be signed into law until after the US presidential elections this year, given it was not included in the Department of Defense spending bill this year. Additionally, House Speaker Mike Johnson has pledged to vote for and push the Biosecure Act into law later this year.

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The Chinese government has not commented on the act itself and still intends to remain an attractive destination for pharma R&D. However, the Chinese companies of concern, like WuXi, have defended themselves and denied having links to the Chinese government or military. Other Chinese-based companies will also be concerned as there may be a chance to be listed in the future, such as Pharmaron, which is the second biggest contract manufacturer behind WuXi. Other countries, such as Ireland, may benefit from the Biosecure Act, as the Chinese companies of concern could begin to consider foreign direct investment in other countries. India could also be the next logical destination for pharma companies to seek manufacturing services at low costs with an already highly skilled workforce.

This article is produced as part of GlobalData’s Price Intelligence (POLI) service, the world’s leading resource for global pharmaceutical pricing, HTA and market access intelligence integrated with the broader epidemiology, disease, clinical trials and manufacturing expertise of GlobalData’s Pharmaceutical Intelligence Center. Our unparalleled team of in-house experts monitor P&R policy developments, outcomes and data analytics around the world every day to give our clients the edge by providing critical early warning signals and insights. For a demo or further information, please contact us here.