[Music] the Biotech Industry began ringing alarms about anti-china biotech bills such as the biocure act in late January that's When leaders of the US House select committee on the Chinese Communist Party said that they were determined to rapidly Drive Chinese contract development and Manufacturing organizations out of the us since then the biocure has whisked through Washington mutating along the way and leaving clouds of misunder understanding and confusion in its wake last week the house rules committee hit the pause button on the biocure ACT excluding it from the defense authorization bill that is set to pass this year today on the biocentury this week podcast we are going to talk about what the delay means what will happen next and how it will affect life sciences companies welcome to a special edition of biocentury this week I'm Jeff cranmer one of the executive editors here at biocentury and joining me to talk about the biocure ACT are my colleagues Simon Fishburn editor and chief Steve Austin Washington editor and Josh Berlin head of corporate alliances and business development excellent thanks for joining guys Steve let's cut right to it Why the pause here so the house rules committee decided to exclude the biocure act from the National Defense authorization act the ndaa that reflected broader political and parliamentary Dynamics it wasn't because of a lack of support for bioc secure the house leadership wanted to minimize the chances that divisive measures would be added to the bill that would create problems for republicans in November they created a filter for what could be added and biocure didn't make it the pause has rubbed some of the sense of inevitability off the legislation but there's still very very strong support for it in both houses of Congress and in both parties it could pass the house as a standalone bill but there's no room on the Senate agenda for any Standalone legislation this means that it's most realistic chance for enactment is to be attached to a must-pass bill that's why its supporters were trying to get it under the NDA a a there are going to be other must pass bills considered um this year most likely in the lame duck session they're going to be spending bills possibly other legislation that it could be attached to one thing to think about there's two live versions now there's the house bill HR 8333 and a bill that's been endorsed by the Senate Homeland Security and government Affairs committee Senate Bill 3558 I've heard from congressional staff that there's an informal agreement between the house and the Senate to proceed with the house version HR 8333 so I think for purposes of talking about the bill today that's the one that we should talk about Steve it's clear that there's a lot of confusion over what the bill does and what it won't accomplish I know you've been speaking to a lot of lawyers about this and and some of your other contacts around Washington can you shed some light here so what the bill does it bars the federal government from procuring biotechnology equipment or services produced or provided by a so-called biotechnology company of concern or from entering into a contract that requires the use of biotechnology equipment or Services supplied by a biotechnology company of concern biotechnology companies of concern are defined in the bill as wooi aptech woi biologics MGI and its subsidiary complete genomics and bgi and companies that are iated with those companies there are also Provisions in the bill to add additional companies in the future lawyers who I've spoken with say that it's clear the wording does not apply to the biggest government drug programs Medicare and Medicaid those are reimbursement programs they're not Contracting programs I've also been told by Congressional staff that they've received advice from the GAO and from other federal agencies that supports that contention that says that the way the bill is is worded it wouldn't include Medicare and Medicaid that's important it probably applies to the veterans administration which purchases drugs under contracts to the defense department and the defense Department's Tri Care Program which is for active service members and their families the NIH for example um for NIH trials it seems to apply to finished products like a drug or a gene therapy some attorneys told me that this means it wouldn't affect contracts for services Upstream of final manufacturing like pre-clinical research clinical trials a wide variety of things that Chinese cdmos do for American companies and it wouldn't even necessarily affect drug product or medicines that are used in clinical trials if there's a separate manufacturing for the commercial for the final product some other lawyers though told me that that's probably too narrow an interpretation of it it may be interpreted more more broadly and then we won't really know until guidance is produced by the OM the Bill calls for the OM to produce guidance in consultation with HHS Department of Defense and other federal agencies so Steve you know you've written extensively about this and we will continue to cover it because we think it's so important and the themes of it run so deep in biotech I am sure that farmers and many sophisticated biotechs are what watching closely to see how the law actually ends up being written assuming it does and what's in and what's out that said there seems to be a footprint or an imprint that's even bigger than that that isn't even contingent upon whether the law is enacted or how it is and I think companies need to be making decisions right now that you know incorporate this as a risk you know we had talked previously you may want to talk a little bit more about back app plans for uh manufacturing what are the ways that companies and as a consequence like you know BCS and so on might be thinking about this even beyond the details of what actually ends up getting enacted well I think that it has shined a spotlight on us dependence and Global the global life sciences Industries Reliance on Chinese companies for a variety of services from manufacturing which is most obvious to a lot of the preclinical and Clinical Services that they get from Chinese companies I think it's going to lead every company every certainly every large company to look at their supply chains to consider whether there are ways that they can diversify away from Chinese companies or in addition to Chinese companies for those kinds of services I think there're also going to be companies that are going to look at the letter of the law and say look we can still use Chinese companies for certain activities that aren't specifically restricted by this law it also may be that some companies look at it and say kind of shrug their shoulders and say you know what the markets that would be precluded the government agencies that would be precluded from buying our products uh are not really that important to us it's more important to us to have manufacturing or Services performed by companies that are considered biotechnology companies of concern it may also be that some companies will believe that in the end if their product is manufactured by a biotechnology company of concern that the Veterans Administration the defense department perhaps other federal agencies will grant them waivers there are Provisions in the law for companies to get waivers up to 18 months because companies May believe that um the federal government's not going to want to deny you know veterans or service members or others access to drugs because they've been manufactured by a biotechnology company of concern it also may be that some of the Chinese companies find ways to spin out parts of their activities into separate companies that are not covered by the biocure act and to continue to provide services that way so there's a lot of a lot of uncertainty about what the response would be but I think what you're getting at is you know big picture it's clear that there's geopolitical tensions between the United States and China that there's no sign of those easing and the foreseeable future and companies are going to be looking for ways to reduce their their Reliance on Chinese companies all right thanks for that Steve we're going to take a quick break and then we'll be back to get Josh's thoughts on biocure this September in Nashville bioentry launches Grand rounds a new interdisciplinary R&D Forum at the interface of industry and Academia join bioentry and a rich roster of innovators and key thought leaders to identify Leading Edge discoveries and discuss urgent challenges that must be solved to translate these Innovations into product development and Medical Practice meet academic innovators physician scientists early stage investors and biofarma R&D leaders for two days of networking partnering and debate register at biosentry grandr rounds.com [Music] all right Grand round it's our newest conference Nashville in September really looking forward to that I know Simone's been working hard to bring a tippy top group of academics innovators investors to the event and Josh I do want to get your thoughts on biocure but first I know you also are working hard on the grand rounds conference uh anything you want to let us know yeah thanks Jeff Grand round September 9th to 11th in Nashville we're getting a lot of inquiries and excitement about it it's going to focus on the interface between Academia and Industry looking at opportunities for translation as well as bottlenecks and uh just because everyone's been so busy and on the road the last month or so we are running a special post bio post ASCO rate for folks to register if you register by close of business Friday June 21st so please check out bioentry Grand rounds.com or drop Simone Jeff or me a note we'd be happy to tell you more and hope to hope to see you in Nashville so Josh I know you have been out and about and talking with some stakeholders about their response to the biocure ACT and its various situations what are you hearing yeah thanks Simone I mean I think this topic is really top of mind and the subject of a lot of hallway conversations at events and other places that biotech leaders and investors gather even if it's not on the agenda itself and my take from what I'm hearing from folks is that this is a tremendous wakeup call to biotech CEOs and particularly to boards and investors and many of those boards and investors right now are pressuring their biotech CEOs about what their plan B is for wooi and even broader what's their plan B for geopolitics and I think that's because you know irrespective of how the biocure ACT gets the final language that Steve was talking about earlier which is important but even more than that I think folks are starting to wake up to the fact that the US China relationship is where it's at and you know if anything is unlikely to get better anytime soon probably more likely to get worse and that's creating a a lot of hard um lessons I think that are being learned now by the industry I think in some respects different topic but it's similar to the Silicon Valley Bank crisis which was also a tremendous wakeup call to the industry even though in the end you know biotechs and VCS did not lose the cash in their bank accounts but all of them now have learned lessons and they've changed how they think about Banking and I think wooi and Chinese cdmos is similar you know small biotechs use wooi because it's faster it's cheaper it's higher quality than anyone else and VCS have been telling their biotechs to use wooi and other china service providers much like they told their biotechs to use svb and now everyone is sort of scrambling for a plan B and the answers are not so easy there's not a lot of excess capacity right now in the global cdmo business particularly for emerging products like cell and gene therapy and I think a lot of VCS are coming to the conclusion that this might raise the cost for smaller biotechs their portfolio companies at a time when they're already facing inflationary pressures on everything from you know lab space to equipment to salaries and clinical trials um you know we just well one one thing I wanted just to raise is that you know we do continue to see a fair man a deal making though right with China biotech so this week was it last week who even remembers but day one pharmaceutical for example licensed an ADC from China biotech called mare I think there have been some other deals this is a trend that we've seen and I think um you know Steve may want away in on this as well China and China Sciences impact and Innovation continues to contribute to the ecosystem and sort of the decoupling from China will hurt drug development basically if some of the top science that's being done doesn't become accessible I don't know Steve if you want to weigh in on that or how you're thinking about it sure well you know what I've written and what I think is true is that the biocure act and all of the things that are being considered now are not going to stop Global Life Sciences companies from accessing innovation in China they're certainly not going to stop them from accessing the the market Market in China and probably they're not even going to stop them from Manufacturing in China remember you know the United States isn't the only Market in the world it's possible that drugs could be manufactured in China and sold in other countries without having anything to do with the biocure act so I think that the the goals of some of the supporters of the legislation are not aligned with what the legislation or what any legislation is likely to do many of the supporters of the legislation really do want you use the word decoupling do want to see a decoupling of the US and the Chinese Life Sciences Industries I don't think that that's going to happen I don't think that it's desirable from the standpoint of view of innovation or certainly not from the standpoint of of companies and patients in both countries so there's going to be disruption and I think a lot of it is going to be along the lines of what Josh was saying it's going to increase the cost of drug development it's going to disadvantage smaller biotech companies the big companies look they're going to buy up Whatever Manufacturing capacity and capabilities that exist out there now big companies are going to lock them up as quickly as they can and it's going to take time for an ecosystem to evolve to be able to again to serve the smaller companies if the smaller companies are dissuaded from using Chinese cdmos the problem in terms of public policy is that it's very difficult to convince people especially politicians to consider that something didn't happen that could have happened if legislation had been different so the biofarm industry through the survey that we did and through other mechanisms made it loud and clear to Congress that if there's an Abrupt halt to access to Chinese manufacturing then there would be drug shortages and they would be felt acutely Congress the drafters of HR 8333 responded to that they put an 8-year grandfathering clause in for existing contracts and extensions of existing contracts so you won't see those kind of abrupt things the other things the other disturbances to The Innovation ecosystem are things where that that won't happen or they could have happened or will be more expensive and because they're more expensive they won't happen I should say also that supporters of this legislation including bio are hoping to use it as leverage to get Congress to invest massive amounts and what they're calling a chips for biotech act some kind of legislation that would create incentives and put investment in expanding us capabilities and capacity to make up for the Gap that would be created and that would increase the resilience of the US biofarma ecosystem it remains to be seen one whether they will be successful in convincing Congress to do that it's going to be an uphill battle because it's likely to be perceived as something that's helping the biofarm industry which is really not an industry that has a great deal of sympathy among the American people or or Congress and it's also not that easy to do it's proving to be extraordinarily difficult to do it in semiconductors but it's probably doable it's not as clear at all how you would create the whole kind of infrastructure that would be needed to make up for the capabilities that Chinese companies are providing in contract research development Manufacturing clinical resarch and so on yeah it would certainly take years Steve I'm curious uh which lawmakers are pushing for this biotech chips act are there champions of it in particular you know it's it's still in its formative stages there there are people who you can imagine would be interested in it I know that people in Industry have been up on the hill talking to leadership of all the relevant committees about it nobody's gone public and said that they would support this I think that tells do something and we'll discuss that more in length I'm sure on future podcasts but good luck uh try do something that looks like you're giving handouts to the industry that's goingon to be a difficult battle to fight yeah especially in an election year Well it's not going to happen this year there's no there's no scenario under which it would happen this year that's it's a long-term thing people are up there kind of socializing the idea on the hill with the idea that it might be something for next year there there um advisory groups that are advising Congress on the bioeconomy they're going to be coming out reports later in the year and you know they'll recommend it it's going to be something this is going to be a long-term process which again doesn't align very well with enactment of something like the biosecure ACT which is not going to be long term it's gonna it's going to go into effect relatively rapidly yeah Steve you know I think that makes a lot of sense I'd say the other part that I've been hearing in in a lot of conversations is you have a lot of geopolitical headwinds but some also seeing this as geopolitical Tailwinds and potentially opportunities for new regions and new companies to emerge as players in the global ecosystem so sure a lot of folks have been seeing what's been happening in Singapore you know I think folks I talked to in India Japan Australia the Middle East other regions are seeing this perhaps Korea yeah good point Korea seeing this as perhaps an opportunity if in fact uh the US China continue to disengage in the Biotech Industry you know are there opportunities for new players to be both service providers cdmos for instance but also maybe emerging areas of innovation for Western biofarma to Source from and I think it's the story is rapidly changing and is going to continue to evolve not just through this year but in future years as well as all this plays out Josh Steve Simone thank you for joining and we'll be back on Monday with our usual program discussing our latest biotech takeaways in the meantime don't miss the latest episode of our sister podcast the bioentry show Steve sat down with Rick brigh the former head of Barta during the covid-19 pandemic they take a close and critical look at the AV flu outbreak the barriers and opportunities to ensuring the US is prepared not going so well so far thank you all for tuning in Kendall Square Orchestra provides the music for bioentry this week the group connects Science and Technology professionals and other members of the Greater Boston Community to collaborate innovate and Inspire through music while supporting causes related to health care and education