Companies hold back on cutting China ties despite Biosecure Act

Few life sciences companies have taken steps to cut ties with firms named in proposed US legislation, a survey showed, underscoring lingering uncertainty around the bill.
Photo: Pool
Photo: Pool
by bloomberg news

Few life sciences companies have taken steps to cut ties with firms named in proposed US legislation aimed at cutting reliance on China’s drug supply chain, a survey showed, underscoring lingering uncertainty around the bill.

Although 26% of companies are looking to disconnect from those named — including BGI, MGI Tech, WuXi AppTec Co. and related entities — a poll conducted by Boston-based L.E.K. Consulting in June found only 2% of life sciences companies have severed ties, and 11% reported no impact on their partnership decisions.

The Biosecure Act, if enacted, would restrict US federal-funded medical providers from contracting with the companies named and others connected to “foreign adversaries.” The bill, which received bipartisan support when it was introduced in January, was omitted from the National Defense Authorization Act, making it unlikely to be passed by Congress before the US presidential election in November, L.E.K. said in a report this week.

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.

The lack of action in response to the planned legislation reflects the importance of the Chinese companies, which also include WuXi Biologics Cayman Inc., in the global pharma supply chain. A survey by industry trade association Biotechnology Innovation Organization in May reported that 79% of its member-respondents have products or contracts with Chinese suppliers and it could take as many as eight years to switch partners. 

A modified version of the Biosecure Act was approved by the House Oversight Committee in May, giving drug companies until Jan. 1, 2032, to decouple from biotech companies “of concern.”

Medicare and Medicaid were explicitly excluded from the draft, while supply agreements with the Department of Veterans Affairs and Centers for Disease Control and Prevention would still be covered, according to L.E.K.

Confidence in working with Chinese companies has dropped by as much as 50% for US-based life sciences companies, with contract development and manufacturing organizations being the most affected, L.E.K. said. 

It surveyed 73 companies spanning biopharmaceutical manufacturing, development, research contracting and investing of which 83% were from outside China, including 52% in the US. More than two-thirds of the respondents reported taking precautionary actions, including increasing legal and compliance requirements, diversifying partnerships and adding background checks for existing partners.

If enacted, the US law will increase opportunities for suppliers outside China. Evotec SE, based in Germany, and Fujifilm Diosynth Biotechnologies have reportedly received more engagement and exploratory inquires, L.E.K said.

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