Insights

The BIOSECURE Act:

Implications for U.S. Biotechnology Companies

 

 

On September 9th, the U.S. House of Representatives passed the BIOSECURE Act, which aims to prohibit federal contracting with certain biotechnology providers. As of late October 2024, the legislation would prohibit executive branch agencies from 1) procuring or obtaining any biotechnology equipment or service produced or provided by a biotechnology company of concern, or 2) entering into a contract or extending or renewing a contract that uses such equipment or service. It also prevents agencies from providing funding, such as loans or grants, which uses these goods and services. 

 

Though the nuances of this legislation’s application require a legal opinion to interpret—which is beyond the purview of Artemis Research—we assess there is a risk biotechnology companies and research entities may lose U.S. government funding if they do not reassess their current partners and service providers to avoid relationships with these companies of concern. This is based on the following:

 

  • This legislation may apply to research funded by grants from institutions such as the Department of Health and Human Services, National Institutes of Health, or National Science Foundation, as well as potentially the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT) grants. It may also apply to technology development intended for U.S. Government contracts. We recommend companies consult an attorney to determine if this legislation will apply to them.
     

  • The companies of concern identified in this legislation—BGI, MGI, Complete Genomics, WuXi AppTec—are major global providers of biotechnology goods and services, which may be used in research funded by these grants. Their services may be difficult to replace.
     

  • There is the possibility that this list may be expanded in the future, and the concepts of “risk to national security” and “foreign adversary” used to identify companies of concern may be defined and decided in such a way that they also encompass other companies used by US Government-funded researchers.
     

  • If this legislation becomes law, BGI, MGI, Complete Genomics, and WuXi AppTec may rebrand or establish joint ventures with other technology companies in such a way that their involvement with those companies may be difficult to identify, causing a risk of inadvertent engagement with prohibited companies.
     

These risks can be mitigated by the following:

 

  • The risk of fines and loss of government funding can likely be mitigated by consulting with an attorney to 1) identify any goods or services provided to your organization by these companies; 2) identify any federal funding—or future plans to sell to the US Government—which funds these services; and 3) determine whether this legislation applies to those relationships.
     
  • Fines and work stoppages can potentially be avoided if companies began to identify replacements for the goods and services provided by BGI, MGI, Complete Genomics, and WuXi AppTec. Similar challenges may also be avoided by identifying potential replacements for other high-risk partners which may be added to this list in the future.
     
  • Inadvertent engagement with these companies can likely be avoided by investigating the true ownership, origins, and prior relationships of potential future partners in the corporate due diligence process. This would lower the risk that they are the same prohibited companies operating under a different name.

 

We note that this legislation may evolve based on Congressional changes following the November 2024 elections, however, these steps will help companies better identify and mitigate potential risk areas regardless of the existence of specific regulations.