Time to assess BIOSECURE risk: 1260H listings add urgency to pharmaceutical contracting decisions

The BIOSECURE Act: What it is and how it works

As background, there are two key policy concerns underlying the BIOSECURE Act. The first is a national security concern – specifically that the Chinese government can use biotechnology equipment and services produced by Chinese companies as a means of unlawfully acquiring U.S. citizens’ genomic data. The second relates to onshoring of drug and biotechnology manufacturing. According to FDA, by the end of 2025, approximately 53% of brand name drugs, and 69% of generic drugs, were manufactured outside the U.S. The following are the key mechanisms through which the authors of BIOSECURE attempted to address these policy concerns:

• BIOSECURE prohibitions: The BIOSECURE Act bars executive agencies of the U.S. Government (USG) from directly procuring or obtaining covered biotechnology equipment and services from biotechnology companies of concern (BCCs) or from companies (contractors or grantees) that use covered biotechnology equipment and/or services to fulfill their contracting and grant obligations to the USG. Key Federal procurement and granting agencies for drugs and biotechnology are the Departments of Veterans Affairs, Health and Human Services, and War. Importantly, Federal health programs that reimburse for drugs and biologics but do not involve government procurement (e.g., Medicare and Medicaid) are not covered under BIOSECURE.
• Biotechnology Companies of Concern (BCC): BIOSECURE authorizes the Office of Management and Budget (OMB) to consider, and list, companies as being BCCs if they meet a list of criteria set out in the Act (as detailed below), which focuses on national security risk associated with linkage to “foreign adversary” governments, such as China and Russia.
• Covered equipment and services: BIOSECURE defines “biotechnology equipment” and “biotechnology services” broadly. Although the former is limited to equipment designed for the research, development, production, or analysis of “biological materials,” the term biological materials is undefined. “Biotechnology services,” similarly, include “the research, development, production, analysis, detection, or provision of information, including [the] storage and transmission” of biological materials information. The Director of OMB can augment these definitions in the “interest of national security.”

Are 1260H entities biotechnology companies of concern?

The 2026 iteration of the 1260H list includes five companies operating in the biotechnology space. In addition to WuXi AppTec, the list includes BGI Group (and subsidiaries, including Complete Genomics, Forensic Genomics International, and others), MGI Tech Co., Ltd, Novogene Company Limited, and Origincell Technology Co., Ltd. Notably, 1260H listing does not automatically cause a company to be designated as a BCC, as an OMB determination and designation is still required. However, 1260H inclusion likely will significantly increase the likelihood that OMB will designate the company.

A company may qualify as a BCC if OMB, in conjunction with the Secretary of Defense and the heads of other relevant agencies, determines an entity:

• Is subject to administrative governance, structure, direction, control, or operates on behalf of the government of a foreign adversary;
• Is to any extent involved in the manufacturing, distribution, provision, or procurement of a biotechnology equipment or service; and,
• Poses a risk to national security based on a list of pre-defined criteria.

When a company is listed on the 1260H list, the process for classifying it as a BCC is streamlined: OMB needs only to determine that the company is involved in the biotechnology sector (i.e., the second prong). This streamlining accounts for the fact that 1260H companies have already effectively been found both to be an agent of a foreign adversary and to pose a risk to U.S. national security.

Thus, companies on the 1260H list, including the newly-listed biotechnology company Wuxi AppTec, are not automatically included as BCCs until OMB reaches its determination and adds it to the OMB list. Notably, companies on the 1260H list can request reconsideration and, if successful, be de-listed, which would place them back into the general category of companies for which OMB would need to conduct the full three-pronged analysis and determination.

Importantly, subsidiaries, parents, and successors of BCCs are not automatically designated as BCCs. Rather, BIOSECURE requires OMB to determine—through the process described above—that the subsidiary, parent, or successor qualifies as a BCC in its own right for it to be included on the final list of BCCs.

Both the Department of War (DoW) and OMB offer processes for companies to challenge their inclusion on the 1260H list and BCC list. Regarding the former, companies may submit a reconsideration request including: 1) the name and address of the company, 2) the name and address of an authorized representative, and 3) arguments and evidence as to why there is an insufficient basis to classify the entity as a Chinese military company. The BIOSECURE Act, in a similar vein, requires OMB to provide advanced notice to companies that will be classified as BCCs and affords those companies 90 days to submit information and arguments in opposition to their designation as such.

Key considerations in light of the new 1260H listing

Although the 1260H update by DoW does not itself cause the newly-added companies to constitute BCCs under BIOSECURE, it does provide insight into the companies that OMB likely will consider for designation on its list of BCCs. As noted, OMB will compile this list based on consultation with DoW, and the 1260H listings can be seen as a signal as to the department’s perspective on which Chinese biotechnology companies present national security risks. Companies that obtain biotechnology services or products from these 1260H-listed entities would be well-served to examine existing or anticipated arrangements with these entities to determine whether they are impactful to current or potential future grants or contracts with the Federal government.

Thus, the time is ripe to evaluate:

• the number, and size, of your company’s current and anticipated USG contracts and grants;
• whether your company has any existing or upcoming contracts with 1260H companies (and, potentially, entities associated with 1260H companies) to determine whether the contracts provide exit opportunities and a means to secure the intellectual property, technology, and alternative contractors necessary to comply with BIOSECURE; and,
• ultimately, to determine whether cutting ties with any BCC may be worthwhile to your business.

Throughout the assessment process, it is important to recognize that BIOSECURE does not impose a ban on partnerships with BCCs. Rather, it imposes restrictions on the ability of companies to obtain new government contracts and grants involving drugs and biotechnology. It is important to keep in mind that BIOSECURE applies only to covered biotechnology equipment and services that are necessary to the performance of a contract or grant with the USG. Thus, early stage clinical development services provided by a BCC might not have BIOSECURE implications for a company that sells finished commercial drug products under Federal contract, but it could well be prohibited in the context of a Federal grant.

We will continue to provide updates regarding BIOSECURE implementation. In the meantime, if you have any questions about compliance with the BIOSECURE Act, please contact any of the authors of this alert or the Hogan Lovells attorney with whom you regularly work.

Authored by Joy Sturm, Mike Druckman, Ed Fishman, Cybil Roehrenbeck, and Noah Fisher.