Background

The Act was introduced by Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL), and co-sponsored by Neal Dunn (R-FL), Seth Moulton (D-MA), and Jake Auchincloss (D-MA). Corresponding legislation has been introduced in the Senate by Bill Hagerty (R-TN), Gary Peters (D-MI), Mitt Romney (R-UT), and Roger Marshall (R-KS).

The Act finds that the PRC seeks to dominate the biotechnology industry and that companies in the PRC can be compelled by the CCP to turn over the companies’ data. As such, the Act aims to prevent U.S. taxpayer funds from being provided to foreign adversary biotechnology companies and to prevent U.S. persons’ genetic data from flowing to the CCP.

The Act reflects a concerted attempt by lawmakers to put a spotlight on the alleged national security threat from the Chinese biotech industry to the United States. The bipartisan and bicameral nature of this support makes it plausible that this legislation may be passed into law at some point later this year, although both the timing and nature of the legislative vehicle remain very uncertain.

Goals of the Act

The Act prohibits executive agencies from:

• procuring or obtaining biotechnology equipment or service that has been produced or provided by a biotechnology company of concern;

• entering 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, or

  • (b) enters into any contract that will require direct use of biotechnology equipment or services produced or provided by a biotechnology company of concern; or

• providing loan or grants for any of the activities described above.

Targets of the Act

The Act defines “biotechnology companies of concern” to include “BGI, MGI, Complete Genomics, WuXi Apptec, and any subsidiary, parent affiliate or successor of such entities.”

The Act notes that the executive branch has already determined that BGI and its subsidiaries, such as MGI and Complete Genomics, are a national security threat. Specifically, the Act identifies that BGI is on the PRC Military Companies list, and BGI Tech Solutions (Hong Kong), a subsidiary of BGI, is on the Entity List. PRC Military Companies list, maintained by the Department of Defense, highlights companies that are operating in the United States and are key in supporting the modernization goals of the People's Liberation Army ("PLA"). The Entity List, maintained by the Department of Commerce, includes names of foreign persons that are subject to specific license requirements for export, reexport, and/or transfer (in-country) of specified items.

“Biotechnology companies of concern” also include (1) any other entity that is “subject to the jurisdiction, direction, control, or operates on behalf of the government of a foreign adversary,” (2) is involved “in the manufacturing, distribution, provision, or procurement of a biotechnology equipment or service,” and (3) poses a risk to the national security of the United States. The Act uses the definition of “foreign adversary” as set forth in 10 U.S.C. Section 4872(d), which includes: PRC, Russian Federation, Democratic People’s Republic of North Korea, and Islamic Republic of Iran.

Entities that pose a risk to U.S. national security are:

• engaging in joint research with, being supported by, or being affiliated with a foreign adversary’s military, internal security forces, or intelligence agencies;
• providing multiomic data (i.e., data types that include genomics, epigenomics, transcriptomics, proteomics, and metabolomics) obtained via biotechnology equipment or services to the government of a foreign adversary; or
• obtaining human multiomic data via the biotechnology equipment or services without express and informed consent.

The Act defines “biotechnology equipment or service” to include:

• equipment such as genetic sequencers, mass spectrometers, polymerase chain reaction machines, or other instruments (including accessories and components) that is designed for use in the research, development, production or analysis of biological materials;
• software, firmware, or other digital components specifically for use in and necessary of the operation of the equipment; and
• service for the research, development, production, analysis, detection, or provision of information, including data storage and transmission related to biological materials.

Waivers and exceptions

The Act provides for certain waivers to the prohibitions to be determined on a case-by-case basis and exempts from the Act authorized intelligence activities of the United States, or the acquisition or provision of health care services overseas for employees (including the military), contractors, or subcontractors of the United States and commercially or publicly available human multiomic data.

Additional action targeting biotechnology companies of concern

On February 12, 2024, Rep. Gallagher, Rep. Krishnamoorthi, Sen. Peters, and Sen. Hagerty signed a letter to the secretaries of the U.S. Department of Defense, Commerce, and Treasury, urging the agencies to investigate another named company – WuXi Apptec and its subsidiary, WuXi Biologics.

While WuXi Apptec was previously added to Commerce’s Unverified List in February 2022, it was removed in December 2022. Parties listed on the Unverified List “are ineligible to receive items subject to the Export Administration Regulations . . . by means of a license exception.” The letter encourages agencies to add the entities to their respective control lists citing to close affiliations between WuXi Apptec, the PRC, and the PLA.

On February 5, 2024, Rep. Krishnamoorthi discussed lawmakers’ concern that Chinese biotechnology companies, such as BGI Group, can misuse U.S. persons’ genetic data. He also mentioned that Congressional legislation targeting outbound investment could expand to include the biotechnology sector.

Next steps

For further information or assistance regarding the Act, please contact any of the Hogan Lovells attorneys identified below.

Authored by Ajay Kuntamukkala, Timothy Bergreen, Ashley Roberts, Ari Fridman, and Cassady Cohick.