(By Caixin journalist Chen Xi)
US lawmakers’ push to scrutinise biotechnology ties with China is unsettling expectations for Chinese innovative drug licensing and development deals overseas, threatening a fast-growing channel that has connected local drugmakers with global pharmaceutical companies.
The proposed legislation comes as Chinese biotech companies have become increasingly important sources of drug candidates for multinational companies. Licensing deals have given Chinese developers access to capital, overseas clinical expertise and commercial partners, while helping global drugmakers replenish pipelines. If enacted, the measure could slow or complicate cross-border transactions involving intellectual property, drug development platforms and biologics know-how.
On 2 June, John Moolenaar, chairman of the House Select Committee on the Strategic Competition Between the United States and China, and US Representative Debbie Dingell introduced the Biotech Investment National Security Act, or BINSA, which they said is intended to prevent the offshoring of “American investment, expertise, and technology” to China, according to a statement from the two lawmakers.
The bill would amend the Comprehensive Outbound Investment National Security Act of 2025, known as the COINS Act, to add biotechnology — specifically pharmaceutical and biological product development — to sectors subject to US outbound investment screening.
It would require a Treasury Department review of US pharmaceutical licensing agreements, joint ventures and equity investments involving Chinese covered foreign persons, including deals centered on technology and intellectual property.
The bill directs the Treasury to issue implementing regulations within one year, in consultation with the Health and Human Services Department, the Defense Department and the director of national intelligence. It also requires the defence secretary to report within 60 days on whether US capital flows into Chinese biotechnology pose risks to national security or military readiness. The measure excludes agricultural biotechnology, industrial fermentation and basic academic research.
Before introducing BINSA, Moolenaar made similar demands in a 21 May letter to Treasury Secretary Scott Bessent, calling for restrictions on China-US innovative drug transactions, US companies’ use of Chinese research and development (R&D) services and suppliers.
Moolenaar has publicly laid out several arguments for bringing biotechnology under the COINS framework. He said that “48% of US pharmaceutical licensing-in deals come from China”, accused Chinese clinical trials of violating ethical norms and argued that the Food and Drug Administration can’t conduct adequate on-site inspections.
The effort follows the passage late last year of the Biosecure Act as part of the fiscal 2026 National Defense Authorization Act. That measure targeted parts of China’s biopharmaceutical industry in the name of national security and domestic industrial protection.
As China’s innovative drug sector has grown, overseas buyers have identified more valuable R&D pipelines, fuelling a surge in deal activity.
The total disclosed value of Chinese innovative drug outbound licensing deals exceeded US$60 billion in the first quarter of 2026, nearly half the full-year 2025 total of US$135.66 billion across 157 transactions, according to China’s National Medical Products Administration.
As China has become more integrated into the global innovative drug ecosystem, protectionist voices in the US biotechnology sector have increasingly cited national security and domestic industrial policy concerns.
Liu Yiming, partner in charge of Cooley LLP’s Shanghai office, told Caixin that current US outbound-investment security rules remain focused on semiconductors, quantum technologies and artificial intelligence. Biotechnology hasn’t been formally included in restricted sectors.
“But the political and legislative signals around including biotechnology in the COINS framework and strengthening review of licensing, joint ventures and equity investments have indeed been heating up recently,” Liu said.
From late May to early June, innovative drug stocks fell steadily. Some analysts said expectations of tighter regulation around business development deals were one source of pressure. In May, the Hang Seng Hong Kong Biotech Index fell 8.85%, with an 8.53% drop after 12 May.
As Chinese innovative drug companies pursue more overseas partnerships, Moolenaar’s warnings about a biotechnology “China threat” have brought recent transactions into the spotlight.
Moolenaar said such deals show US companies are no longer limited to simple licensing arrangements, but are moving toward full co-development, transferring drug development platforms and biologics manufacturing technologies to Chinese entities.
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A deal between Jiangsu Hengrui Pharmaceuticals Co. Ltd. and Bristol Myers Squibb Co. was among the first to draw scrutiny.
On 12 May, Hengrui and the US drugmaker announced a global strategic cooperation and licensing agreement valued at about US$15.2 billion to jointly advance 13 early-stage programmes in oncology, hematology and immunology. The announcement said Hengrui “has the option to co-develop certain programs and the opportunity to conduct certain commercialisation activities jointly with BMS globally”.
Hengrui said the companies expected the deal to close in the third quarter of 2026, pending US antitrust approval and satisfaction of other customary conditions.
Days after the announcement, Moolenaar singled out the Hengrui-Bristol Myers deal in his 21 May letter to Bessent. Moolenaar urged the Treasury to add biotechnology as a “prohibited technology” under the COINS Act.
He said the request was in response to a “dangerous surge of American capital and knowledge into China’s biotechnology sector, including Bristol Myers Squibb’s recently announced US$15 billion deal with China’s Hengrui Pharma that also transfers intellectual property to China”.
Moolenaar said the US is engaged in “a fierce biotechnology competition” with China and urged the Treasury to screen transactions involving the licensing of pharmaceutical intellectual property, drug discovery platforms, clinical R&D capabilities, and biologics manufacturing and commercialisation know-how.
The two companies haven’t disclosed further progress. One industry participant told Caixin they are watching closely to see whether the deal closes.
Industry participants interviewed by Caixin called on policymakers in China and the US to build regulatory frameworks for cross-border deals that reflect the innovative drug industry’s distinctive ecosystem and business logic.
They urged regulators to study the industry’s development needs, trends and global environment, objectively assess risks and policy effects, recognise the special role of innovation in patient health, and respect the scientific laws that govern drug development.
Peng Wei, co-founder of innovative drug company Crimson Gateway, told Caixin that innovative drug R&D can’t be done behind closed doors.
“Normal cross-border cooperation can’t be blocked,” Peng said. “Forcibly blocking it could have a negative impact on the entire ecosystem.”
Chen Ziyi, head of Asia healthcare research at Goldman Sachs, said the next key moment for the globalisation of China’s innovative drug industry could come from 2027 to 2029, when a batch of Chinese drugmakers are expected to release large overseas Phase III trial results and move toward commercialisation.
That could again draw broader overseas attention to and recognition of Chinese innovative drug assets, Chen said.
Cui Xiaotian contributed to this article.
This article was first published by Caixin Global as “In Depth: U.S.’ Biotech Scrutiny Tests China’s Drugmakers Abroad”. Caixin Global is one of the most respected sources for macroeconomic, financial and business news and information about China.