At a Glance
- The House Select Committee on the Chinese Communist Party is ramping up scrutiny of Chinese biotech and its influence in the industry.
- The Select Committee sent a letter this week to Treasury Secretary Yellen, Defense Secretary Austin, and Commerce Secretary Raimondo calling for consideration of sanctions on Chinese biotech firm WuXi AppTec, and is also looking to conduct a Congressional hearing with industry leaders on “the bioeconomy and American national security.”
- These follow January’s introduction of the BIOSECURE Act aimed at ensuring biotech companies linked to “foreign adversaries” and identified as a US national security concern do not gain access to US taxpayer dollars.
- Congress and administration policymakers are examining potential economic and security threats posed by biotech applications in medicine, agriculture, and environmental infrastructure, as well as more dangerous uses of such technology.
- As concerns over Chinese biotech threats rise, industry dialogue with Congress and the administration is essential to create a policy response that is nuanced to the types of applications and engagements between US and Chinese entities.
The issue
Chinese biotechnology firms are facing heightened scrutiny from US Congress. On Monday, February 11, the House Select Committee on the Chinese Communist Party (CCP) sent a letter to Treasury Secretary Janet Yellen, Defense Secretary Lloyd Austin, and Commerce Secretary Gina Raimondo requesting review of Chinese biotech firm WuXi AppTec and its affiliates for sanctions. The Select Committee is also planning to conduct a field hearing with leaders of the US biotech industry—“Growing Stakes: The Bioeconomy and American National Security”—to discuss the extent of potential threats posed by the CCP in the sector—a hearing originally scheduled for February 13 in Boston but rescheduled due to inclement weather.
These efforts are part of a broader trend of increased political scrutiny on US business and investment ties with China, particularly in sectors impacting global technological leadership and with implications for national and economic security. In January, the House Oversight and Accountability Committee introduced the BIOSECURE Act restricting federally funded medical providers from engaging with biotech companies affiliated with countries classified as adversaries. The bill names several Chinese entities, including MGI, Complete Genomics, WuXi AppTec, and BGI, which is deeply involved in NIH-funded clinical trials and approved therapies.
Biotech as a newcomer
Biotech is the latest focus of US-China competition. The Boston field hearing was scheduled amid rising concerns over how foreign entities compete with US groups. When it comes to US-China economic competition, regulators are looking at activities both in the collection of relevant data and the application of that data in areas such as medicines, crops, environment, and materials, and increasingly, any support or affiliation with the Chinese military. On September 15, 2022, Presidential Executive Order 14083 directed the Committee on Foreign Investment in the United States (CFIUS) to also consider a transaction’s effect on US technological leadership in areas affecting national security, including biotech, among others. But until recently, the biotech sector had not yet been subject to the same degree of scrutiny and restrictions that apply to companies in the IT and semiconductor space. Monday’s letters regarding WuXi AppTec and the tentative House Select Committee hearing on biotech mark a departure from health R&D biotech’s perceived exemption from corporate-level public scrutiny.
At this stage, the House Select Committee hearing will provide a space for industry leaders to share their insights and perhaps reveal key areas of contention for regulators. And Boston would be a fitting place for such a hearing, as the US’s largest biotech hub and nexus for the best research and development in the sector. The city boasts some 1,000 industry companies, including the headquarters of Takeda, Shire, and Biogen, leaders like Sanofi and Pfizer, and a vibrant mix of smaller companies and start-ups. As the home to three of the four National Institutes of Health (NIH)-funded hospitals, Boston is a logical place for Congress to sound any alarms regarding biotechnology and its interests.
Key complexities
Defining an effective scope is difficult. A key issue for policymakers is identifying the scope of any measures restricting Chinese or other foreign biotech presence in the US, such as which specific technologies and applications of biotech research and development could represent a challenge or threat to US security or economic interests. Biotechnology covers a broad range of activities and applications, including health and medical, agricultural, and environmental, and an increasingly complex and varied landscape of technologies and platforms. In general, US industry may consider collaboration between US and Chinese companies in many of these areas to be mutually beneficial not just to them, but to society in general. This is especially true in areas such as global health and pandemic preparedness, agricultural productivity and market access, and environmental and climate remediation. Moreover, many US companies remain interested in obtaining better market access in these burgeoning sectors in China, which would be facilitated by cross-border business relationships.
Security issues complicate the matter. Some biotech techniques could have applications with security implications. When BGI helped set up genetic-testing sites in 20 countries during the COVID-19 pandemic, for example, concerns over its intentions and practices highlighted the fear of a DNA arms race. Indeed, current congressional scrutiny over Chinese biotech entities, in part, originates from a need to protect American personal data. It is also easy to imagine the dangers of cell manipulation, where the unintended consequences of lab research on vaccines could be usurped by the behavior of nefarious actors. While there may not yet be solid proof of such bad actors, there is unease and skepticism regarding a relaxed sharing of key biotechnological information.
IP protection is a concern. Chinese espionage of US IP and technology and its potential to erode US commercial leadership in biotech is also a concern for some. Chinese hackers have been indicted in the US for attempting to access COVID vaccine IP, with similar cases of Chinese hackers targeting vaccine research data from labs in Spain. Thus, the US administration is tasked with navigating these complexities and responding with a balanced hand on biotech restrictions.
How to move forward
Engage and dialogue for nuanced policy that’s fit to purpose. It is critical that US companies in the biotech sector—whether interested in doing business in China or with Chinese companies, including investing or getting investment—be part of the dialogue with US policymakers in both Congress and the administration. The better policymakers understand the goals, risks, and benefits of such activities, the greater the likelihood that policy can be nuanced to consider different types of deals involving US and Chinese companies, the different technologies involved and their applications, and the potential impact on the US economy and national security.
EGA’s team of China and industry experts are positioned to help companies represent their perspectives and interests effectively with key policymakers and opinion leaders.
Joe Damond leads Edelman Global Advisory, Health Policy and Public Affairs, an international team of professionals dedicated to helping clients achieve their ambitions for a healthier world and a stronger economic stake in the strategic healthcare, life sciences, and innovative biopharmaceutical sectors. Our team is at work in advanced markets as well as within newly emerging regions of the global biopharma ecosystem, including the Middle East, Asia Pacific, Africa, and Latin America.
