House Committee Votes in Favor of Revised Language in BIOSECURE Act

Legislative Update on the BIOSECURE Act

On May 15, 2024, the House Committee on Oversight and Accountability approved an amended version of the House’s draft of the BIOSECURE Act (the “House bill”) that seemed intended to assuage concerns regarding its potential impact on the life sciences industry. The committee voted 40-1 in favor of the bill, HR 8333¹ (formerly HR 7085).²

As previously reported in our March 1 Alert, among other things, the BIOSECURE Act (the “Act”) would prohibit executive agencies from contracting with any entity where the biotechnology equipment or services of “biotechnology company of concern” would be used in the performance of that contract. Generally speaking, a “biotechnology company of concern” is a biotechnology company that is headquartered in or subject to the jurisdiction of a foreign adversary’s government and poses a threat to national security. Both the House and Senate’s version of the bills name WuXi Apptec, MGI, BGI, and Complete Genomics as biotechnology companies of concern. The new House bill also names WuXi Biologics.

During the May 15 meeting, Representative Jamie Raskin expressed that the bill was “an effort to strike a balance between recognizing the very real national security threat posed by efforts to imbed the PRC³ in the U.S. healthcare system while also ensuring the stability and continuity of our healthcare supply chain.” He also encouraged the Chairman and bill sponsors to continue to address concerns about unintended consequences that “might affect the American people or our nation’s drug supply.”

Mr. Raskin’s comments appeared to be in response to concerns that the biotechnology companies of concern are so intertwined with the U.S. biopharmaceutical industry that severing such relationships would cause supply chain disruption. Survey results from the industry trade group Biotechnology Innovation Organization (BIO) state that 79% of their members report at least one contract with a Chinese CDMO, and 85% said that changing vendors would take between six months and six years.⁴

The amended language, which was released earlier this week, seems intended to assuage such concerns, by adding in a grandfathering clause and a safe harbor provision and clarifying the types of contracts to which the Act would apply.

A Closer Look at the Revised Language of the Bill

The House substituted language contains a handful of key revisions, some which match the Senate’s amended version of the bill (the “Senate bill”),⁵ and some which add additional elements. We discuss each in kind below.

1. Companies are given an eight-year grandfathering window. Aligning with the Senate bill, the House bill offers a grandfathering clause for contracts that entities enter into with biotechnology companies of concern prior to the effectiveness of the Act. However, where the Senate bill gives no end date for grandfathered contracts, the House bill would apply to any grandfathered contract that was still in place by January 1, 2032.⁶

2. A safe harbor provision is added. The House bill offers a “safe harbor” provision which clarifies that “biotechnology equipment or services” will not include those that “were formerly, but no longer, produced or provided by biotechnology companies of concern.”⁷ The Senate bill does not contain such a provision.

3. “Contract” is defined using the Federal Acquisition Regulation. The House bill amendment provides a definition for “contract,” which was a previously undefined term in the House and Senate bills. The definition states that “contract” means “any contract subject to the Federal Acquisition Regulation issued under section 1303(a)(1) of title 41, United States Code.”⁸

   The Federal Acquisition Regulation, or the “FAR,”⁹ is the primary regulation used by executive agencies when they are acquiring supplies and services with government funds.¹⁰ The FAR broadly defines “acquisition” as “the acquiring by contract with appropriated funds of supplies or services (including construction) by and for the use of the Federal Government through purchase or lease.”¹¹

   This is an important clarification, as Medicaid national drug rebate agreements and Medicare Part D manufacturer discount agreements are not FAR-based contracts, as they do not provide for federal government procurement of goods or services. However, FAR applies to nearly all government contracts for the procurement of goods and services, including potentially supply agreements with the Department of Veterans Affairs (“VA”)¹² and certain contracts with the Centers for Disease Control and Prevention (“CDC”).¹³

4. The Operative Scope of the Prohibition Was Clarified. The House bill makes it clear that executive agencies may not enter into a contract with an entity in situations where the equipment or services of a biotechnology company of concern will be used in the performance of that contract with the executive agency. This was not entirely clear in the House’s January version of the bill, and the new language makes the House bill and Senate bill substantively consistent. In particular, Section 2(a) of the House bill now reads as follows:

   “The head of an executive agency may not … (2) enter into a contract or extend or renew a contract with any entity that (A) uses biotechnology equipment or services produced or provided by a biotechnology company of concern … in performance of the contract with the executive agency; or (B) enters into any contract the performance of which such entity knows or has reason to believe will require, in performance of the contract with the executive agency, the use of biotechnology equipment or services produced or provided by a biotechnology company of concern...”.¹⁴

5. WuXi Biologics is named a biotechnology company of concern. The House bill adds WuXi Biologics as a named entity of concern, along with the previously named WuXi Apptec, MGI, BGI, and Complete Genomics.¹⁵ WuXi Biologics is not named in the Senate bill, though it was potentially already implicated by the bill as being an affiliate of WuXi Apptec.

Assessing the Impact of the BIOSECURE ACT with the Revised Language

The revised language of the House bill was clearly meant to mitigate its impact on biotechnology and pharmaceutical companies that are reliant on biotechnology companies of concern for equipment and services and to avoid shocks to the supply chain for life sciences products and services. When the bill was originally introduced in January, some commentators feared it could have a dramatic impact on the industry and even potentially lead to drug shortages or delays in launching innovative drugs in the United States.

The grandfathering clause, safe harbor provision, and the new definition of “contract” all seem to be intended to lessen the impact of the bill, by giving companies time to transition away from dependencies on the services and equipment of biotechnology companies of concern. Nonetheless, the House bill is still intended to incentivize companies to transition their business to alternative equipment and service providers, and, given the scale of the biotechnology companies of concern, one would expect that in-and-of-itself to have a sizable impact, both on the individual biotechnology companies of concern and on the biotechnology ecosystem generally. That said, the exact size and nature of that impact is still uncertain, as much will depend on how the Act is interpreted by the implementing federal agencies. Both the House bill and Senate bill would require the Office of Management and Budget, in coordination with other agencies, to establish guidance as necessary to implement the Act within 120 days of its enactment.¹⁶