What You Need to Know
- Congress is inching closer to passing the BIOSECURE Act and imposing restrictions on federal agencies and grant recipients related to biotechnology companies of concern.
- If passed, the Act would primarily impact sourcing of equipment from designated Chinese biotechnology companies in the context of federal contracting.
- Companies should prepare by reviewing their supply chains for potential impacts and mitigation opportunities.
The final draft of the FY 2026 National Defense Authorization Act (NDAA) includes the proposed BIOSECURE Act (the Act), which would place restrictions on dealings with certain “biotechnology companies of concern” (BCOCs) by federal agencies and recipients of federal grants and loans. Congress has considered passing a version of the BIOSECURE Act several times in the past few years, and this latest iteration has a good chance of becoming law through passage of the NDAA. If passed, the BIOSECURE Act could curtail transactions with biotechnology companies in China. Companies with relationships to Chinese biotechnology companies should start to consider the potential impacts of the Act on collaboration and other agreements with the Chinese biotechnology sector.
What Are the Key Aspects of the BIOSECURE Act?
The Act would impose federal procurement, contracting, and funding restrictions on a government-wide basis on certain types of dealings with BCOCs. BCOCs will include any entity currently on or added to the Department of Defense list of “Chinese military companies,” known as the 1260H List, and entities that are identified through a review process established in the Act. To be designated as a BCOC under the Act, the review process must find that the entity is: (i) controlled by or operating for the government of a “foreign adversary” (China, Iran, North Korea, and Russia); (ii) involved in making or providing biotechnology equipment or services; and (iii) poses a risk to U.S. national security.
Entities would be deemed to pose a risk to U.S. national security based on: (i) joint research with, support by, or affiliation with a foreign adversary military, internal security forces, or intelligence agencies; (ii) providing multiomic data (meaning data types that include genomics, epigenomics, transcriptomics, proteomics, and metabolomics) obtained by biotechnology equipment or services to a foreign adversary government; or (iii) obtaining human multiomic data via biotechnology equipment or services without express and informed consent.
The Director of the Office of Management and Budget is directed to publish an initial list of BCOCs within one year of the Act’s enactment. The Act would require that prior notice be provided to a BCOC before formal designation and that a BCOC would have 90 days to submit information opposing designation. However, the public would not be notified of a designation until after it is finalized.
The Act would impose the following restrictions on BCOCs:
- Federal agencies cannot procure biotechnology equipment or services produced or provided by a BCOC.
- Federal agencies cannot enter into or renew contracts with entities using biotechnology equipment or services, in performance of the federal contract, that are produced or provided by a BCOC and acquired after the effective date, or where there is reason to know performance of the contract would require such restricted equipment or services.
- Loan or grant funds cannot be used by federal agencies or recipients to obtain or use biotechnology equipment or services produced or provided by a BCOC, or to enter into agreements with entities using such restricted equipment or services.
The restrictions would not apply to equipment or services acquired before the Act goes into effect. If the Act passes, the Federal Acquisition Regulation Council would have one year to revise the Federal Acquisition Regulation (FAR) to implement the Act’s provisions. The Act provides for a five-year winddown period after the FAR is updated for pre-existing dealings with BCOCs. The restrictions for 1260H entities would take effect 60 days after the FAR is updated and the restrictions for entities designated through the review process would take effect 180 days after the FAR implementation.
Practical Considerations
- Companies that contract with federal agencies or rely on federal funding should evaluate whether they source equipment or services from entities on the 1260H list and consider winddown options.
- Companies should also consider the likelihood that existing Chinese suppliers pose a high risk of designation as BCOCs and look for ways to mitigate supply chain risk.
- Supply chain due diligence going forward must confirm equipment and services are not indirectly provided by BCOCs and should review for red flags that a supplier poses heightened risk of designation, including foreign adversary government ownership or relationships.
- As part of government contracting or receiving federal funding, companies should be prepared for the possibility of mandatory clauses restricting use of biotechnology equipment or services from BCOCs.
Learn more about Fenwick’s trade and national security capabilities.