Why the US BIOSECURE Act Could Give A Boost to Indian Contract Manufacturers

The U.S. BIOSECURE Act aims to restrict American companies and federal agencies from contracting with several foreign biotechnology companies from China.
The House of Representatives passed the bill with bipartisan support (306–81) in September. If it passes the Senate too, the law will impact the pharma and life sciences industry.
The Act may raise U.S. biologics manufacturing costs by limiting access to cheaper Chinese CDMOs, potentially boosting contract manufacturing in low-cost countries like India.

November 16, 2024 | Pharma and Life Sciences

On September 9, the U.S. House of Representatives passed H.R. 8333, known as the BIOSECURE Act. The bill addresses the concern that some foreign biotechnology companies could use genetic data for surveillance or espionage.

If signed into law, the BIOSECURE Act would prohibit entities that receive U.S. federal funding from doing business with foreign biotechnology companies affiliated with China’s People’s Liberation Army, including the five companies named in the bill (WuXi AppTec, BGI, MGI, Complete Genomics and WuXi Biologics).

Sourcing Challenges for U.S. Pharma

Wuxi Biologics, Wuxi AppTec, and WuXi STA account for about one-third of the top 10 global CDMO revenues in 2023, confirming their industry dominance.

While existing contracts may be honoured for up to eight years, the long-term implications are profound.

With nearly 120 U.S. biopharmaceutical drugs currently developed in partnership with Chinese contract development and manufacturing organizations (CDMOs), this shift is expected to disrupt the industry, leading to higher drug prices and extended development cycles

Market Disruption:

Potential delays, shortages, and increased costs in biotechnology due to restrictions on Chinese firms

Partnership Reassessment:

U.S. biotech companies may need to terminate contracts with affected Chinese companies, impacting supply chains and R&D.

Retaliation Risks:

Possible responses from the Chinese government, including export controls targeting U.S. firms in the biotech sector.

According to Evaluate Pharma report, Wuxi AppTec and Wuxi Biologics play an integral role in major pharmaceutical supply chains such as Eli Lilly’s tirzepatide (Mounjaro and Zepbound) and Pfizer’s Paxlovid along with AbbVie, Merck and other major pharma companies.

Pharma clients have limited options for CDMOs offering specialized modalities, such as gene-modified cell therapy, genome editing, and plasma-derived therapy. They may face challenges, as suppliers can demand premium pricing and more favorable terms.

However, for monoclonal antibodies, peptides, recombinant proteins, and small molecules, clients have a broader selection of CDMOs, allowing them to choose based on capacity and expertise.

U.S. BIOSECURE Act to Boost Indian Pharma Sector

The Act's emphasis on reducing reliance on China presents significant opportunities for Indian CDMOs. These organizations, already benefiting from cost advantages and government incentives like the production-linked incentive (PLI) scheme, are expected to see a surge in demand from U.S. pharmaceutical companies seeking alternative partners. Companies have reported increased business inquiries, with more than 60% of listed pharmaceutical firms experiencing a rise in interest.

The US BIOSECURE Act has created a favourable environment for Indian pharma companies like Syngene and Piramal, which are well-positioned to compete with Chinese companies.

While customers are exploring Indian capabilities by probing, testing, searching and trying to gauge the preparation to bridge the gap that can balance their supply chain, the impact on financials may take time due to the long cycles in the pharma and biotech industries.

Early signs are positive, but significant financial gains from these opportunities are expected to emerge over the next 12-24 months as pilot projects and inquiries convert into tangible deals.

Read Ahead

According to the American Society of Health-System Pharmacists, the number of active drug shortages in the U.S. stood at 300 in the second quarter of 2024.

Also Read: How to Manage Drug Shortage Challenge as Delta Spreads

The BIOSECURE Act is likely to exacerbate these shortages if the legislation is passed. Whether or not the BIOSECURE Act passes, it is expected to reshape the global biopharma landscape.

Other CDMOs, particularly from Japan and South Korea along with India, stand to benefit from this shift, though the drug development process could become more expensive and complex as a result.

Author: Manasi Baswe