RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:USA Inflation Reduction Act (IRA) 2022 Re: Biotech and ChinaMay 02, 2024 - According to co-sponsors of the bill, the BIOSECURE Act aims at addressing concerns stemming from “foreign adversaries’ hostile biotech pursuits”. The Act is also meant to stop the PRC government from acquiring American genomic data, as the Chinese military has allegedly invested in advancing their biotech and AI capabilities through joint business ventures with U.S. companies. As a result, lawyers expect Chinese pharmaceutical companies to be targeted with growing oversight around bulk data transfers from the U.S. On the other hand, U.S. pharmaceutical companies will also want to ensure that their arrangements with Chinese contract parties do not require them to transfer sensitive personal information or biometric data.
In addition, Ropes & Gray’s David McIntosh, a life sciences and intellectual property transactions partner, and Lauren Kimmel, a life sciences licensing associate.believe the White House will continue to pursue a data-oriented regulatory approach restricting foreign adversaries’ potential access to American data.
“Looking ahead, one could imagine future legislative and regulatory attention focusing on any industry that both has access to sensitive personal or genomic information of U.S. citizens (such as healthcare, health insurance, life sciences, social media and technology, telecom, and financial services) and is characterised by interdependencies with Chinese companies,” say McIntosh and Kimmel.
Since the bill’s introduction, many U.S. life sciences companies have spared no time negotiating technology transfer and termination provisions in their contracts with those “biotech companies of concern” to give themselves a clear contractual path to move their business to alternative vendors, according to lawyers. And for those life sciences companies which have or are contemplating strategic arrangements with such a company of concern, McIntosh and Kimmel believe they will likely seek to avoid exclusivity or other commitments that require them to use the equipment or services of the concerned company or prevent them from engaging alternative service or equipment providers.
In a bid to alleviate the financial pressure confronting U.S. biotech companies in finding alternative vendors, the U.S. Senate has added a “grandfathering clause” to the draft bill.
As a result, existing contract manufacturers will be exempted from the bill’s restrictions before the Act takes effect. But lawyers raise concerns that such grandfathering clause could be subject to interpretation.
“For instance, will a grandfathered contract’s subsequent amendments or new statements of work under an existing agreement also be exempted under the clause?” ask McIntosh and Kimmel. “If amendments to agreements benefit from the grandfathering clause, one might expect parties to take advantage of that feature by amending existing agreements rather than entering into new ones, lessening the law’s impact.”