What Steps US Regulators Are Taking to Promote Domestic Investment

Earlier this year, a report from Pharmaceutical Executive detailed the ways in which China is becoming an essential R&D partner for pharma and biotech companies. According to the report, $43 billion in licensing agreements with Chinese companies was announced in just the first five months of 2026.

Also this year, a bipartisan effort launched in Congress to pass a bill that would add biotech the Treasury’s outbound investment screening list. As part of this initiative, the Treasury would decide if agreements and investments with foreign companies, entities, or governments could pose a national security risk.

Pharmaceutical Executive spoke with John Standford, executive director of Incubate, about the rise of China as an R&D partner and the US government’s responses. According to him, years of investment in biotech innovation is starting to pay off for the country, and the US’ response is going to require a larger effort to solve our own issues first.

Pharmaceutical Executive: What steps are US regulators taking to promote domestic investment?
John Stanford: Last year's National Defense Authorization Act, or NDAA, marked an important moment: biotech is now formally part of the national security conversation. Among the steps being taken is the creation of biotech offices across the defense ecosystem, including the three-letter agencies and the Department of Defense. The NDAA also included a version of the BIOSECURE Act, which begins to address the onshoring of the pharmaceutical supply chain, though more work needs to be done there. The key questions are whether the right incentives are actually in place, and whether moving too quickly risks undermining our capacity for innovation. This is where the 1260H list becomes relevant. If a company appears on that Pentagon list, US entities cannot work with them, and we need to be thinking carefully about whether we have sufficient domestic capacity to fill that gap.

The biggest development, and I'll admit I buried the lead, is the BIOSECURE-related conversation around the COINS Act. The COINS Act was included in the defense bill and proposes to restrict outbound investment. For context, CFIUS has existed for 50 or 60 years and limits the ability of foreign investors to invest in US technology, and that has worked well. We don't want adversarial nations subsidizing sensitive technology development in the United States. The COINS Act is the mirror image of that: restricting US investors from investing in companies outside the US. It was initially applied to quantum, hypersonic, and AI technologies, with an explicit eye toward China—the concern being that the natural drive of US investors to maximize returns shouldn't override national security in those areas.

Biotech was notably not included. But the active debate right now is whether Treasury (which does have the authority) should add biotech to this list, and whether we should restrict the ability of US entities (pharmaceutical companies, investors, and biotechs) to license, invest in, or partner with Chinese companies. That question frankly merits more time and discussion than it's getting. There are clear cases where restrictions make sense. No one wants US investors subsidizing the development of biological weapons. But we also have to be realistic: some of the licensing deals making headlines are simply the acquisition of good molecules that make scientific and commercial sense to advance in the United States.

This is a nuanced and genuinely contested conversation, one where even our own membership holds very differing views. But anyone serious about this issue agrees it's not a simple or blanket solution. There are real questions about how you would even operationalize something like this. We expect the Treasury Department to propose a framework soon, but capital flows far more freely across borders than arms controls or technology export restrictions. If US capital is restricted from exposure to China, European capital, Japanese capital, and others will fill that void. Flipping the switch off risks ceding US leadership and cutting American investors and companies out of the conversation entirely.

We cannot deny that China has become genuinely good at biotech innovation. Some of these proposals feel like an attempt to return to a world that no longer exists. China is going to be a player in this industry whether we invest there or not.