China Proposes to Tighten Biosecurity Law and its Potential Impact on Foreign Pharmaceutical and Biotech Companies Operating in China

On April 26, 2020, the Standing Committee of the National People's Congress, China’s top legislature, passed the second draft of the country’s Biosecurity Law (“Draft Biosecurity Law”)^[1].  Once promulgated, this will become the first unified legal framework for biological safety in China and, significantly, is also deemed “part of the national security.”  On May 21, 2020, the National People's Congress announced that the Biosecurity Law would likely be finalized within the year.^[2]

Background

Biological safety and biosecurity laws are not new in China.  In fact, China had already promulgated several separate regulations on biosecurity^[3] when China became a party to the Convention on Biological Diversity in 1993 and officially approved the Cartagena Protocol on Biosafety to the Convention on Biological Diversity in 2005.  However, because those regulations and rules were separate and distinct, there was a growing sentiment in China to propose one unified law to close perceived loopholes^[4], control the spread of infectious disease and to promote public health.

In addition, spurred by the COVID-19 pandemic, the Chinese government has put the enactment of the Draft Biosecurity Law on a fast track and now deems biosecurity as a part of China’s “national security.”

Overview

The Draft Biosecurity Law addresses biosecurity in eight broad categories:

1. prevent and control the outbreak of emergent epidemics,
2. research, develop, and use of biotechnologies;
3. manage laboratory biosafety;
4. manage the security of human genetic resources and biological resources;
5. prevent the invasion of non-native species and the preservation of biodiversity;
6. respond to microbial drug resistance;
7. prevent bioterrorist attacks and defend against the threat of biological weapons; and
8. other activities related to biological security.

Draft Biosecurity Law Concerning Foreign-Invested Entities and Overseas Entities

As noted above, the Draft Biosecurity Law is extensive and comprehensive.  Below are some provisions that may, directly or indirectly, impact foreign-invested entities (namely, pharmaceutical and biotech companies) operating in China and overseas biotech companies dealing with Chinese partners.

1. Biosecurity risk control scheme

Foreign entities that participate in or may be involved in transnational research, development and partnerships with Chinese entities should be aware that the Draft Biosecurity Law introduces additional review mechanisms involving numerous Chinese governmental entities. 

The Draft Biosecurity Law adds risk-control mechanisms that would involve not only China’s health and science governmental departments but also the country’s National Security Commission (NSC) and departments responsible for military affairs.  Specifically, the Draft Biosecurity Law requires the establishment of a “National Coordination Mechanism for Biosecurity” led by NSC and consists of China’s State Council's departments in charge of health, rural affairs, science and technology, and foreign affairs, and organizations responsible for military affairs.

The biosecurity mechanism includes, among others:

1. a biosecurity risk monitor and an early warning system;
2. regular biosecurity risk assessments;
3. an inter-department biosecurity information sharing system and a uniform system for publishing biosecurity information; and
4. a biosecurity incident investigation and tracing system.

Specifically, through the Draft Biosecurity Law, the Chinese government will provide a risk-based analysis for (i) animals and plants, (ii) animal and plant products, and (iii) any other high-risk biological factors that are entering China for the first time or are resuming entry after a temporary suspension.  In addition, foreign producers, processors, storage units and export businesses would also be subject to a registration and filing process.  The National Coordination Mechanism for Biosecurity will also draft and publish certain catalogues and lists related to biosecurity matters for border crossings in or out of China.  These catalogues and lists will be the basis on which China’s customs will regulate the biosecurity of border crossings.  In the event that an item is not listed in the catalogue as a permissible import, additional approval will be required.  Foreign entities that may be involved in or participate in transnational research, development and partnerships with Chinese entities should be aware of these proposed additional administrative hurdles in the Draft Biosecurity Law and the additional time required to complete them.

2. Human genetic resources and biological resources

Any foreign entity that works with human genetic resources in China should be aware that the Draft Biosecurity Law appears to reaffirm China’s existing requirements on human genetic resources and biological resources, which many in the international public health and medical community have deemed lengthy and cumbersome. 

Specifically, any entity (foreign or Chinese) must first obtain approval from the China’s Ministry of Science and Technology to:

1. collect China’s important gene families or human genetic resources from specified regions, or collect certain specified types and volumes of human genetic resources;
2. preserve China’s human genetic resources;
3. enter into international research collaboration using China’s human genetic resources;
4. export human genetic resource materials out of China.

In addition, the Draft Biosecurity Law appears to reaffirm that

1. foreign entities and individuals as well as the institutions formed or actually controlled by the foregoing (“Foreign Parties”) are prohibited from collecting and preserving China’s human genetic resources in China and from providing China’s human genetic resources outside of China;
2. provision of any information on China’s human genetic resources to Foreign Parties is subject to report to and prior security review by the Ministry of Science and Technology;
3. Foreign Parties must obtain approval from competent authorities for obtaining and utilizing China’s biological resources.

As a result, any multi-regional clinical studies would need to first undergo rigorous approval processes.  International clinical and research centers should be aware that, if this Draft Biosecurity Law is not amended to provide some flexibility, it may remain challenging to promptly transfer or share data in multi-regional studies.

3. Research, development, and use of biotechnologies

Foreign biotech companies should be mindful that the Draft Biosecurity Law classifies research and development of biotechnology activities under three categories – high risk, medium risk or low risk.  The draft law requires that high-risk and medium-risk biotechnology R&D could only be conducted by legal entities that are established in China and subject to regulatory approvals or filings.  Foreign-invested entities should be cautious as the majority of biotech R&D activities are classified under high and medium risk.

4. Laboratory biosafety

Any pathogenic microbe lab in China that has a foreign investor will be subject to a security review procedure under the Draft Biosecurity Law.  The introduction of this security review procedure is an illustration of how China now deems biosecurity a “national security.” 

Penalties

The Draft Biosecurity Law provides severe administrative penalties for violation.  For example, any party engaging in biotechnological research, development, or applications that is deemed to endanger China’s national security may, among other things, be subject to a fine of up to RMB 10 million (US$ 1,417,000).  If the illegal gain is more than RMB 1 million, the fine could be up to 10 times the illegal gain.  In addition, their legal representative and other persons in charge may be prohibited from engaging in the relevant businesses for 10 years.

Furthermore, violations of the Draft Biosecurity Law could also trigger administrative penalties under existing laws and criminal liabilities.

Conclusion

The exact timeline for the promulgation of this Draft Biosecurity Law remains unclear, as domestic Chinese companies, international pharmaceutical companies and biotechnology companies continue to carefully review and discuss its ramifications.  Companies, both inside and outside of China, operating in this sector should carefully assess their activities, products and intellectual property, to ensure compliance with the new law (if promulgated in this current form).  Moreover, with biosecurity now deemed an “important part of the national security” and the global race to develop a vaccine for COVID-19, it is especially critical for international pharmaceutical and biotech companies operating in China or dealing with Chinese partners to carefully follow any developments regarding this Draft Biosecurity Law.