The US BIOSECURE Act, first mentioned in December 2023, proposes to prohibit federal contracting with biotechnology providers connected to foreign adversaries. This bill has high bipartisan support and received extensive attention since its introduction. The industry trade association Biotechnology Innovation Organization (BIO) reported that 79% of its member respondents have products or contracts supported by Chinese CDMOs/CROs (contract development and manufacturing organizations/contract research organizations, collectively CxOs) and changing vendors could take up to eight years!

While this Act’s passage before the 2024 US presidential election is unlikely, the advanced planning and the long cycles of the biopharma industry demand that the biopharmas, their service providers and their investors consider the consequences of this significant regulatory action.

L.E.K. Consulting’s proprietary global survey conducted in June 2024 shows that 90% of industry respondents are familiar with this topic. Of those who can speak knowledgeably:

  • Confidence in working with Chinese companies has dropped by 30%-50% for US-based life sciences companies, with the CDMOs being the expected worst hit. Those outside of the US are also concerned, though much less so.
  • Twenty-six percent of life sciences companies are looking to shift away from their current Chinese suppliers, though only 2% have taken actual unwinding steps. Somewhat surprisingly, 11% of life sciences companies report no impact on their decisions. This likely reflects the yet still uncertain nature of the Act.
  • That said, companies are already taking some precautionary actions: 68% of life sciences companies are adjusting their activities, including increasing legal and compliance requirements, planning to diversify suppliers and adding background checks for existing partners.
  • China’s market continues to be attractive, and the majority of biopharmas wish to consider commercialization. Collaboration with Chinese service providers in clinical research, development and manufacturing is also not completely off the table, with approximately 30% of respondents considering these partnerships as likely in the next three years.

The Act, regardless of passage, is likely to reshape how the global biopharma industry operates. The most successful CxOs derive a large portion of their business from the US; WuxiApptec, a Chinese CDMO named in the Act, for example, derives 65% of its 2023 revenues from the US. CDMOs from Japan, Korea and other markets are poised to pick up the slack given up by the Chinese CDMOs. Adding cost and complexity to the already challenging process of bringing a drug to market seems inevitable.

Next-step considerations for the industry include:

  • Biopharmas: Do you need to change your services/supply chain? Can you still continue to commercialize in the “risky” markets, Chinese or otherwise? What are the increased costs and lost opportunities from any quick decisions you make?
  • Contract services: How should you position yourself? Are there areas of opportunity to explore?
  • Investors: Where are the sweet spots in this period of uncertainty? How do you help your portfolio companies? 

To see the full survey results and analysis, please download the report here.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2024 L.E.K. Consulting LLC

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