Foley & Lardner LLP special counsel John Strom shared insight on the potential impact of the BIOSECURE Act in BioSpace, The Capitol Forum, Clinical Trials Arena, Endpoints News, In Vivo, and Inside Health Policy.
Strom told BioSpace that the bill, which restricts American companies from working with specific Chinese companies, is highly likely to become law.
He explained that while identifying specific companies in legislation is unusual, it is part of a broader pattern in geopolitical competition with China. “If there are ‘national champions’ that Congress is specifically concerned about, the trend is increasingly to identify them by name,” Strom said.
Strom continued that even if the bill does not become law, the risk for companies doing business with the targeted companies is so high that it makes divestment inevitable, although any sale will be dependent on the Chinese government’s approval. He added that there is a chance China simply decides to “take their product home with them.”
“It is going to be tough to navigate,” Strom said, emphasizing that the process of “disentangling” the relationships between American and Chinese companies “is not that easy.”
Strom added in The Capitol Forum that the legislation will be likely be a net benefit to competitors of the targeted companies, however, he questioned whether U.S. companies will be able to take immediate advantage of the situation given supply chain issues.
In Clinical Trials Arena, Strom said, “The companies most likely to be hit by financial troubles due to the act are those developing drugs for rare diseases. Many rare disease companies tend to be smaller or medium-sized biotechs with limited funding, mostly from investors as opposed to being on the stock market.”
“As a result, they depend on government grants and priority review vouchers, meaning they will have a difficult decision to make,” Strom continued. “Do they take the grants and not work with these companies, or do they decline the grants and retain the ability to work with them?”
As attention around the BIOSECURE Act heightens, Strom emphasized that companies should start preparing themselves now, especially if they are seeking contracts with Chinese contract development and manufacturing organizations (CDMOs).
“It would be a very prudent measure to included because the process for listing biotechnology companies of concern can come extremely quickly,” Strom said of companies including a clause in contracts with Chinese CDMOs that would allow them to terminate the contract should the BIOSECURE Act’s remit expand. “Companies are not even required to be told specifically why they’re being designated as a risk.”
Strom told Endpoints News that neither the U.S. Department of Health and Human Services or Food and Drug Administration have weighed in on the legislation. “At the end of the day, it’s their stakeholders,” he said. “It seems logical that there’s a role for the FDA to ease the decoupling.”
Speaking to Inside Health Policy, Strom said the bill, if passed, would result in administrative burdens on the generic drug industry, ultimately leading to less generic drug availability and more frequent shortages.
“You’ll see more supplier go out of business or get out of producing certain products,” Strom added. Overall, Strom told In Vivo that the BIOSECURE Act represents “a tremendous opportunity for India or other developing countries to attempt to take advantage of what’s ultimately going to be China’s loss of access in a huge consumer market.”
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