Will the BIOSECURE Act sink WuXi AppTec?

Derek has a longer and pretty thorough post about the Congressional goings on with the BIOSECURE ACT that is being pushed through Congress in both the House and the Senate. I feel this summary from Bloomberg from a week or so ago is good: 

The Biosecure Act states that any pharmaceutical company that works with a “biotechnology company of concern” would be ineligible for US government contracts with agencies like the Department of Health & Human Services and the Department of Defense, potentially limiting drug sales for veterans, the national stockpile and perhaps even Medicare and Medicaid.

There are a lot of concerns, but I think the basic concerns are that these specific companies are associated with the Chinese military, and second, that the Chinese government itself is attempting to collect genomic data from the US. I'm not really sure I have enough information on either of these points, but I'm rather skeptical.*

The most important company to talk about in all of this is WuXi Apptec. It's hard to explain how central? important? essential? they are to the US and global industrial biopharma industry is. I guess I mentally think of them as like Sysco, the restaurant services company that brings your favorite local restaurant its sour cream, meat and napkins. Your Pfizers and Mercks do the work, but a lot of basic R&D and essential production is done by WuXi, and done well. 

It also depends on the impact of the paragraph above. If the intent is to say that WuXi can't sell to the US government, well, I don't think that's a very big deal. How much work does WuXi do for DOD, for example? Probably not much. If the intent of the law is to bar federal contracts (including Medicare and Medicaid) for anyone who does business with WuXi (i.e. you have 10 mgs of peptide made by WuXi in Shanghai, and so we're gonna ban you from the Medicare formulary?) that's a very very very big deal. 

What is bad is that no one seems to know exactly what Congress is trying to do, and how this might impact the US. In this case, I think this guidance post from the DC law firm Arnold and Porter from late January is instructive: 

There are two paths for a version of the BIOSECURE Act to progress through Congress: (1) as part of the FY25 NDAA or (2) attached to a larger legislative package this year. Notably, this legislative effort follows the same model that was used to target Chinese telecommunications companies in the late 2010s. Given the pace of movement, for stakeholders wishing to influence or amend the legislation, we recommend initiating outreach as soon as possible.

H.R. 7085 has been referred to the House Oversight and Accountability Committee and further action has not yet been announced. Although the China Select Committee does not have the ability to advance legislation, the Select Committee can build momentum for the bill. In addition, Rep. Gallagher also serves on the House Armed Services Committee, which allows him to include provisions in defense-related bills. We expect Rep. Gallagher to push for the inclusion of a potentially expanded version of the BIOSECURE Act in the FY25 National Defense Authorization Act as early as mid-April. Congressman Gallagher is not seeking reelection and may view this legislative effort as a legacy item.

In the Senate, Sens. Peters, the Chairman of the Senate Homeland Security and Government Affairs Committee (HSGAC), and Hagerty introduced (S.3558), which is substantially similar to the BIOSECURE Act, on December 20, 2023. Sen. Peters listed the bill to be considered during a January 31 HSGAC business meeting, but the bill was held over to the next business meeting. We expect the bill to be considered by the committee in the coming months.

From the Senate perspective, HSGAC has advanced a version of the bill. From the House perspective, Rep. Mike Gallagher (R-WI) accused BIO of acting as a foreign agent, and so BIO then removed WuXi as a member and is supporting a version of the bill. I'm kind of shocked by this level of hardball being played by Gallagher, and further shocked at the quick capitulation by BIO. That is a pretty solid sign on which direction the wind is blowing in DC. 

I am a very boring predictor of events. I tend to say "the trend that is happening will continue" and therefore, I expect Congressional gridlock to slow the passage of any version of the BIOSECURE Act. I guess I will also say that I will be watching the FY25 NDAA very carefully to understand if Rep. Gallagher is successful in appending a version of the act to it. Finally, it will be important to understand what the Biden Administration's position on this bill is. As Derek says, if the result is to sever all ties to WuXi, that will make things very expensive for pharma in the short run. 

*This is the point where I strongly associate myself with Derek's position: against the Chinese government, and in favor of all the Chinese scientists I've worked with over the years. I think I've been fairly transparent that I view the Chinese government with suspicion and as a national security threat to the United States. At the same time, I think the United States is often (including this instance) extraordinarily ham-handed when attempting to address potential and actual threats from China.