As large biopharma companies have increasingly turned to China for novel biotech innovation, political calls in the U.S. to block those deals have gotten louder.
By relying on China to fuel pipelines, U.S. pharmas are trading the future of American biotech for short-term profits, Olivia Kosloff, a senior fellow at American Economic Liberties Project, argued in a May 12 op-ed in Stat.
To counter this trend, Kosloff proposed adding biotechnology to the COINS Act, which restricts U.S. outbound investments in certain sensitive tech fields.
“There’s a need for some kind of legislative response because the market is not going to automatically fix this,” Kosloff said in an interview with Fierce.
The goal, Kosloff said, is to target cash paid for Chinese biotech assets and force American pharma companies to look more to the domestic sector. In recent years, biopharma acquirers have been able to find great deals in China, though prices have been climbing lately.
“In an ideal world, it would apply to a lot of the biggest deals that these companies are going after,” she said.
Kosloff’s recommendation has its supporters on Capitol Hill, at least among China hawks. In February, several Republican lawmakers, including Rep. Brian Mast, R-Fla., chair of the House Foreign Affairs Committee, sent a letter (PDF) to Treasury Secretary Scott Bessent, urging his department to, among other things, add biotechnology to the implementation of the COINS Act.
Then Rep. John Moolenaar, R-Mich., the chair of the House’s select committee on China, penned a separate letter to Bessent on May 21, requesting the same thing. Moolenaar had co-signed the earlier letter penned by Mast.
The COINS Act, or Comprehensive Outbound Investment National Security Act, became law only recently as part of the fiscal year 2026 national defense bill. It codifies and expands a U.S. Treasury screening system designed to prohibit—or require notification of—American investments in sensitive foreign sectors, including artificial intelligence, semiconductors and quantum information technologies, among others.
Under the Act’s current text, a sectoral expansion alone likely wouldn’t cover the growing number of pharma licensing deals involving Chinese innovation, according to Laurie Burlingame, a lawyer at Morse, Barnes-Brown & Pendleton, who specializes in life sciences transactions.
The types of investment explicitly covered by the Act mainly include equity backing, debt financing, and option and warrant structures. However, according to Burlingame, one Chinese deal structure that’s growing in popularity in biotech—known as “NewCo”—may be particularly vulnerable if the COINS Act expands to the sector. As it stands, joint ventures are a core category of covered outbound investment activity subject to regulations under the Act.
Under the NewCo model, venture capitalists form a new U.S. biotech based on assets licensed from China. Compared to a traditional licensing pact, this model is increasingly attractive for early-stage Chinese drug candidates because it grants the licensor an equity stake, allowing them to capture long-term upside as startups scale or get acquired.
The stake that Chinese companies take is usually less than 20%, Burlingame noted, which falls below the 50% trigger under the Treasury Department’s original U.S. outbound investment regulation. But the agency is currently in the process of updating the policy’s details as the Act mandates.
“I don’t think a pure license without there being an equity component or an option would necessarily be covered,” Burlingame said in an interview with Fierce. “But joint venture is really an interesting one.”
Though unlikely to become the prime targets in Burlingame’s view, other traditional deal types may not be immune. In both letters to Bessent, lawmakers called for targeting additional transaction types—even if they’re not currently specified by the COINS Act.
“I urge Treasury to give particular consideration to transactions involving the licensing of pharmaceutical IP, drug discovery platforms, clinical research and development capabilities, and biologics manufacturing and commercialization know-how,” Moolenaar concluded in his letter to Bessent.
China’s rising biotech sector has drawn a lot of interest from U.S. lawmakers, Kosloff said, adding that, “Whether or not that translates into action is always an open question.”
Changing the law to officially include biotech could be “a serious battle,” as large pharmas and biotechs would lobby against it, Burlingame said. But as the federal agency executing the COINS Act, the Treasury Department doesn’t need Congress to pass a new law to kill or restrict non-equity-based China biotech deals, she noted.
As a sweeping discretionary expansion clause, Section 809 of the Act gives the executive branch authority to pull new industries and other deal types into its purview without needing new legislation from Congress.
The potential inclusion of biotech in Treasury’s rules is not unimaginable, as the sector was one of the targets in President Donald Trump’s “America First Investment Policy.” In a memorandum unveiled last February, the President directed his government to devise “new or expanded restrictions” on U.S. outbound investments to China in certain strategic areas, including biotechnology.
“Given the commercial reality of how intertwined U.S. and Chinese biotech companies are today and the timeline for promulgation of the COINS Act regulations, the likelihood of the initial regulations imposing an outright ban on all licensing activities in this sector seems low,” Brian Curran, a partner at Hogan Lovells who focuses on national security and U.S. investment security policies, told Fierce.
As an alternative to an outright ban, the COINS Act—similar to the original outbound investment security policy—provides a framework for a notification pathway, under which a transaction of concern would need to be reported to regulators first.
Such a policy could lead to a longer due diligence process, potentially slowing down dealmaking and making it more costly for a U.S. company to license from China, Burlingame noted.
“It is also possible that there could be a chilling effect on biotechnology licensing, as U.S. companies may not want to have to undertake the government notification process,” she said.
The notification pathway could also create a potential stepping stone for the U.S. government to escalate the scrutiny to a full prohibition. Therefore, U.S. companies licensing Chinese assets would also need to consider how transactions may end up being unwound under that circumstance, Burlingame said.
The Treasury Department is required to issue final regulations implementing the COINS Act by March 13, 2027, or 450 days from the legislation’s enactment.
Fixing the foundation vs. Building the wall
As Bessent works to finalize the rules, the biotech industry is locked in a fierce debate over whether choking off Chinese partnerships genuinely safeguards American competitiveness or simply deprives patients of next-generation therapies.
Kosloff described American biotech startup founders as worried because their assets directly compete with cheaper Chinese products that are increasingly equivalent in quality and data. They have watched investments and deals go overseas without many tools to make the process in the U.S. cheaper.
Posting on social media platform X on May 18, biotech entrepreneur John Maraganore, Ph.D., argued that the U.S. should look inward rather than cutting ties with China.
“For starters, we should stop and reverse the self-inflicted damage created by certain Administration policies, including reduced NIH funding, FDA instability, drug price controls, H1B visa restrictions, and an anti-Vax/anti-science agenda,” he wrote. “Then, we should find smart ways to increase our global competitiveness, including reducing barriers to efficient clinical evidence generation, creating incentives for U.S. clinical trials and manufacturing, and reforming PBMs/340B to ensure reward for the innovator, not the middleman.”
John Crowley, CEO of the industry trade group BIO, has adopted a similar tone.
“It would be a fool’s errand to try to stop what’s happening in China,” Crowley said, as quoted recently by Stat. “Let’s look in the mirror. How do we win in biotech? How do we outcompete China?”
Kosloff recognized that the Chinese biotech sector became successful because “they’re very good at this long-term planning to protect the industry and to help it grow, which has a lot of positive side effects of keeping scientists who are trained within China to stay within China and building up this ecosystem that is all pulling together in the same direction,” she told Fierce. “I think the U.S. ecosystem is not doing the same thing.”
Besides an expansion of the COINS Act, Kosloff in her Stat op-ed also recommended reforming the clinical trial ecosystem in the U.S. to make it less expensive, as well preferential investing in American assets. The latter could include a price premium that the U.S. government would be willing to pay for U.S.-originated biotech assets, she told Fierce, although she acknowledged that rising drug prices might make this policy difficult.
But unlike Maraganore, who wants to maintain the industry’s dealmaking ties to China, Kosloff argued that multiple approaches are needed to bolster U.S. biopharma, including a COINS Act crackdown.
“I think the regulatory cost should be lowered, but I do think the COINS Act is an important component,” Kosloff said. “They could be paired together legislatively to make this easier on pharmaceutical companies, but I don’t think one has to happen before the other.”
While several biotech insiders like Maraganore have argued that restricting Chinese assets would harm patients, Kosloff disagreed.
Calling it a “false dichotomy,” Kosloff pointed out that Chinese biotechs were not a major source of deals for U.S. pharma companies until the 2020s. Global buyers have increasingly turned to Chinese biotech assets in recent years because they can generate early clinical proof-of-concept faster at a fraction of Western development costs.
“More innovative centers can only be good for patients,” Kosloff said. “I think that keeping U.S. companies from sending all of their money overseas in a way that hurts American biotech is not positive for American innovation. But Chinese innovation should also continue.”
Even if U.S. firms are not allowed to license Chinese assets at an early stage, Chinese companies can still carry their assets through the FDA finish line by themselves and bring them to American patients, she suggested.
Yet if the COINS Act defines a cash in-licensing deal as investing in an adversary, then U.S. patients—or the U.S. government paying on their behalf—will be making an even larger contribution upon a drug’s commercialization. After all, a drug’s value typically multiplies as it advances toward the market.
Even if the door to U.S. commercialization remains open on paper, Morse’s lawyer, Burlingame, noted that the COINS Act framework would “make it much harder for them to come here” because Chinese biotechs wouldn’t be able to tap into U.S. investors’ pockets or be eligible for any local government incentives. American VCs, which dominate the global life sciences landscape, are currently key in fueling the rise of the NewCo model of building U.S. startups around Chinese biotech assets.
In his May 22 letter to Bessent, Moolenaar also raised alleged ethical concerns, such as a lack of informed consent, as part of his reasons to prohibit Chinese biotech assets. But Burlingame argued that scrutinizing clinical data is the FDA’s job.
Even if there are real concerns around ethically flawed trials, bioweapons or information security, as the lawmaker described, Burlingame suggested that restrictions could be adopted in “a less extreme manner” than outright prohibitions.
Rather than fears of bioweapons, support for a concerted effort to address China’s biotech growth originated more based on U.S. economic considerations. Kosloff and other biotech leaders have drawn a comparison of the situation to rare earth minerals, fearing that China’s ascent in early biotech innovation might one day allow the country to wrangle the whole ecosystem to its side and gain a leverage in geopolitical conflicts.
In a long analysis published May 23, venture capitalists Peter Kolchinsky and Tess Cameron from RA Capital Management argued that novel medicines are not a fair comparison to rare earth minerals. Rather than a physical supply chain, biotech innovation essentially relies on patents and know-how. Therefore, China’s leverage is “fundamentally weaker” in life sciences because patents, which are public, “can be waived in extreme cases, such as if China were to refuse to provide a vital antibiotic or a cure to cancer to the US,” they wrote.
Once the U.S. in-licenses a China-made molecule, “[t]he supply chain follows the licensee, not the discoverer,” they argued. “This is structurally different from rare earths, where the supply chain and the expense of building it is the moat.”
In a rebuttal, biotech founder Nicolas Tilmans argued in a series of X posts on May 24, “We cannot outsource earlier discovery/clinical steps and lead biotech long term.”
“If you keep outsourcing industrial discovery and early clinical work, can you keep the University innovation bedrock of American Biotech? If U.S. Universities can’t offer students a career path, who will identify the programs to in-license from China?”