US Treasury Proposes Rules for Pharma Licensing Deals with China

The US Treasury Department is working on a set of rules that would permit the majority of pharmaceutical licensing deals between American and Chinese companies, while placing restrictions on transactions related to pathogens or biotechnology that could be weaponized. This proposed framework aims to balance economic interests with national security concerns, allowing billions in pharmaceutical partnerships to continue.

This initiative comes at a time when the US government has been tightening regulations around sectors like semiconductors and artificial intelligence. However, the pharmaceutical sector appears to be receiving a different treatment, with the Treasury's draft rules indicating a willingness to maintain collaboration in this field. The announcement of these rules is anticipated to follow a meeting between President Trump and Chinese President Xi Jinping, highlighting the strategic timing of the proposal.

In 2025, Chinese biotech firms were involved in external licensing deals worth $115 billion, according to GlobalData. Nearly half of all inbound pharmaceutical licensing agreements that year included Chinese companies, indicating a robust trend that has continued into 2026. Major pharmaceutical companies such as Bristol Myers Squibb and Pfizer have engaged in significant collaborations with Chinese firms, with deals valued at billions of dollars.

The rationale behind maintaining these licensing agreements is primarily driven by the need for new drug pipelines as existing blockbuster drugs lose patent protection. Chinese biotech firms have emerged as valuable partners, providing innovative molecules and therapeutic platforms that can help sustain the growth of major pharmaceutical companies.

Regulatory Changes Impacting Biotech Partnerships

While the proposed rules would allow most transactions to proceed, they would still impose restrictions on those involving pathogens or biotechnology with potential military applications. This approach represents a notable shift from the more stringent regulations applied to other sectors, such as semiconductors and AI, under the Comprehensive Outbound Investment National Security Act, or COINS Act, which was enacted in December 2025.

A coalition of lawmakers and smaller pharmaceutical companies has expressed concerns that continued investment in Chinese biotech could undermine the US's competitive edge in drug development. They argue that significant financial commitments to Chinese partners divert resources and attention away from American startups. Additionally, critics have pointed out that regulatory oversight of Chinese companies remains limited, and intellectual property protections in China, although improved, still do not meet US standards.

Approved for Dissemination

The draft rules are not yet finalized and may undergo significant changes based on feedback from the White House. President Trump has previously indicated a willingness to leverage trade and investment policies in broader negotiations with China, which adds another layer of uncertainty to the situation. The delay in announcing the rules until after the Xi-Trump meeting underscores the delicate nature of these discussions.

For major pharmaceutical companies like Bristol Myers Squibb and Pfizer, the draft rules represent an optimal regulatory scenario, allowing them to continue their partnerships in a lucrative market. The substantial licensing activity recorded in 2025 reflects a strong commercial interest, but whether the US government will align its policies to support this ongoing collaboration remains an open question.