Biopharma industry at odds over impact of Treasury’s new China rule

Treasury’s newly proposed rule governing outbound investment to China has divided the biopharma industry, according to STAT News. At issue is an exemption written into the rule for a common type of biopharma licensing deal, with industry voices disagreeing sharply over what that exemption will mean in practice.

STAT News reports the proposal is meant to restrict US capital flowing into Chinese technology sectors deemed sensitive, including biotechnology, but the mechanics of how licensing arrangements are treated under the rule have become the focal point of debate. Companies that routinely license drug candidates or technology to or from Chinese partners are reportedly trying to determine whether their existing or planned deal structures will fall inside or outside the exemption’s boundaries.

The disagreement, per STAT News, splits along lines of how narrowly or broadly the exemption should be read, with some in the industry viewing it as sufficient protection for standard licensing transactions and others warning that ambiguity in the rule’s language could chill deal-making or require costly restructuring of agreements already underway.

The report notes that the rule’s final language and its treatment of licensing deals remain unsettled, leaving companies with China-facing drug discovery and development arrangements uncertain about compliance obligations going forward.

STAT News did not report a timeline for finalization of the rule.