Dive Brief:

• The U.S. House of Representatives voted Monday to approve legislation that would restrict U.S. companies from working with five China-based biotechnology firms on clinical development, research and manufacturing, in an attempt to secure the pharmaceutical supply chain.
• The Biosecure Act passed 306-81 under a procedure used to pass relatively noncontroversial legislation. It was left out of a large Department of Defense bill that cleared the House in June, but may yet need to be included in a Senate version of that defense bill for it win support in that chamber.
• The legislation would prohibit the federal government from contracting with the five “companies of concern” or any biotech that has a contract with those companies. Drugmakers with current contracts would have until 2032 to allow those deals to expire before being subject to the law.

Dive Insight:

Companies based in China have become major partners of drugmakers in the U.S., Europe and U.K. as the industry has sought their manufacturing expertise and assistance developing clinical programs that recruit volunteers in China. But lawmakers in Congress have concerns about the vulnerability of the U.S. pharmaceutical supply chain due to perceived links between the companies in question and the Chinese government.

The companies specifically named are BGI, MGI, Complete Genomics, WuXi AppTec and WuXi Biologics.

WuXi called the bill “a preemptive and unjustified designation without due process that the company strongly objects to.”

“We firmly believe that WuXi AppTec has not posed, does not pose, and will not pose a security risk to the United States or any other country and it has not been subject to any sanction by the U.S. government agencies,” the company said in a statement.

The legislation allows for the federal government to name additional companies of concern, and gives drugmakers contracting with them five years to terminate contracts.

The expiration period should give biopharmaceutical companies of all sizes time to find new vendors. In public comments and regulatory filings, industry executives have described the changes mandated under the legislation as manageable, although the law has the potential to increase costs for the services provided by the companies of concern.

U.S.-based contractors, meanwhile, could see an increase in business as drugmakers shift their work away from China.

“We want to be careful not to overstate the potential, although we think there is a potential over time,” Jim Foster, CEO of Charles River Laboratories, said during an earnings call Aug. 7.

Foster added that he’d had conversations with representatives from venture capital companies who, because of the potential passage of the law, were instructing their portfolio companies not to contract with China-based partners.

Some biotechs have noted that an industry-wide shift in business to U.S. companies could have knock-on effects, however.

“Significant increases in business at our single source suppliers resulting from such activities could adversely limit capacity at such suppliers to manufacture our products or result in price increases, interruptions or delays of our products,” drug developer Ultragenyx wrote in a securities filing earlier this year.