The Biosecure Act, discussed in the U.S. Congress, is set to take effect. The bill, which restricts transactions with Chinese life sciences corporations, was handled as part of the National Defense Authorization Act (NDAA) that contains the U.S. annual defense budget, and some provisions were adjusted from the initial draft.
The U.S. House and Senate passed the NDAA budget totaling $901 billion on the 17th (local time), and President Donald Trump signed it on the 18th. The bill is expected to be promulgated and implemented in phases.
The Biosecure Act establishes new regulatory barriers for Chinese life sciences corporations and corporations that work with them. While the ripple effects across the industry are expected to be significant, some observers said the specific impact will gradually emerge during implementation.
According to Hogan Lovells, the revised Biosecure Act, like the previous draft, bans U.S. executive agencies from using equipment or services from "biotechnology companies of concern." After a certain grace period, federal government contracts with pharmaceutical companies that use such corporations' equipment or services will also be restricted.
However, the new bill does not apply comprehensively to benefits and insurance contracts that support federal health programs. Hogan Lovells noted it is not a structure that categorically blocks contracts with public insurance.
Still, analysts said indirect effects will be unavoidable in the process of supplying products that include corporations subject to regulation in the supply chain. If even part of Chinese corporations' production facilities or raw materials is included, it could require a review of the overall contract structure.
There is also a change in the regulatory approach. The initial bill explicitly named some Chinese life sciences corporations, directly targeting them, but this time the Office of Management and Budget (OMB) was tasked with preparing a list of "corporations of concern." The list of China-related military corporations managed by the U.S. Ministry of National Defense (Section 1260H) will also be used.
Amid this trend, expectations are rising that Korea could emerge as a major beneficiary of the Biosecure Act. Once the law is fully implemented, transactions with Chinese firms, including WuXi, the world's largest contract development and manufacturing organization (CDMO), must be halted through 2032, prompting global pharmaceutical companies to seek alternative manufacturing partners.
According to the Biotechnology Innovation Organization, 79% of U.S. biotech corporations currently rely on Chinese CDMO firms. Global big pharma companies have also in recent years adopted a strategy of reducing in-house manufacturing and expanding outsourcing. Mirae Asset Securities Research Center projected that the share of in-house production by global pharmaceutical companies will fall from 71% in 2018 to 48% in 2028.