US BIOSECURE Act: Navigating challenges and opportunities

The US BIOSECURE Act, initially introduced in December 2023, aims to restrict US federal contracts with biotechnology firms linked to foreign adversaries, particularly China. Although the Act was omitted from the House Rules Committee's final list of amendments in June 2024, it has significantly impacted the biotech industry, especially contract development and manufacturing organizations (CDMOs).

David Shenberger, vice president of strategic partnerships at CAI, a biotech consultation firm, shared his insights on the Act's implications for CDMOs. “CDMOs are mostly in a 'wait-and-see' mode at this point,” he explained.

“They are working behind the scenes to understand the potential law's actual requirements and how it might affect the overall market. A significant educational effort is also underway with lawmakers to share what CDMOs are, how they operate, and the unique constraints they operate under.”

The BIOSECURE Act could disrupt supply chain versatility and redundancy, which are both critical for reliable operations. “Domestic CDMOs are evaluating alternate suppliers, sourcing strategies, and rethinking operations as to minimize the Act's impact and leverage an unforeseen opportunity to wring inefficiencies out of their operational workstreams,” Shenberger said.

Understanding the Act's limitations and its implications for CDMOs is crucial. He said that the Act could force CDMOs to spend more money finding alternate suppliers for key laboratory equipment.

Amid the uncertainties, he highlighted an industry-wide review of supply chains, data security, and partnering agreements. “You already see a wide range of actions occurring, including gap assessments, expansion of supplier networks, and evaluation of alternative equipment, APIs, and excipients.”

Despite the challenges that global companies will face, the Act also might bring opportunities for untapped and underserved communities.

“This act allows for the addition of previously unleveraged second- and third-level companies to provide network redundancy in the same way other industries have historically done,” Shenberger explained.

However, the reshoring process faces challenges. Automated manufacturing and process analytical technologies, many produced by sanctioned companies, are crucial. Meeting aggressive startup schedules and budgets will be difficult as new suppliers ramp up production, leading to higher prices and constrained supply.

Shenberger expects the market to split, with larger international CDMOs gaining scale while new, nimble manufacturers enter the market to produce niche products at competitive prices.

The key cost drivers that will affect CDMOs include the need for new equipment, expanded supply chains, higher-cost ingredients, and significant compliance work to ensure global supply-chain adherence to the new law.