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What the NDAA Means for the Future of Biotech · Making Medicine

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  Speaker 1: At Making Medicine. We're reporting on the headlines, not making
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  Speaker 1: medical recommendations. For personal health questions, always consult a doctor.
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  Speaker 1: Nothing in this episode constitutes investment, financial, or legal advice,
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  Speaker 1: and please consult your own advisors before making decisions. Hello everyone,
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  Speaker 1: and welcome back to the Making Medicine podcast, where science,
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  Speaker 1: policy and innovation meet. As always, I'm your host John Stanford.
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  Speaker 1: Today we have some headlines to cover as year end
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  Speaker 1: healthcare legislation moves through Capitol Hill and the biotech industry
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  Speaker 1: finishes off what's been a wild year. Let's get into
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  Speaker 1: the show up. First, we're going to talk about the
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  Speaker 1: Annual Defense Bill, or NDAA as it's known inside the Beltway,
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  Speaker 1: and stay with me here. In name, this must pass
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  Speaker 1: legislation sets the plan for the Pentagon for the following year,
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  Speaker 1: in this case twenty twenty six. But in this environment,
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  Speaker 1: it's one of the few bills that action becomes law,
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  Speaker 1: or at least has for the last sixty so years,
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  Speaker 1: so it always gets loaded up with things beyond just
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  Speaker 1: more planes and warships. So, while we've talked about biotech
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  Speaker 1: in the context of the FDA, CMS ANDIH the health
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  Speaker 1: side of government, this year's Defense Bill is making it
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  Speaker 1: clear that Congress views biotechnology not just as a means
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  Speaker 1: to making patients healthier, but as a critical asset to
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  Speaker 1: national security. The core idea is simple, biotech is now
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  Speaker 1: a strategic capability. The same way we think about semiconductors
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  Speaker 1: and AI, we're now thinking about bio manufacturing, synthetic biology,
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  Speaker 1: and data as part of the US national security toolkit.
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  Speaker 1: So it only makes sense that this bill that takes
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  Speaker 1: care of our national security toolkit touches on a set
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  Speaker 1: of biomanufacturing and biotech issues.
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  Speaker 2: So let's talk about them. One of the first things
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  Speaker 2: that we'll come back to is building at home. The
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  Speaker 2: bill makes clear that there needs to be more domestic
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  Speaker 2: biomanufacturing capacity, more infrastructure, and more talent. We also need
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  Speaker 2: to secure the ecosystem through supply chains, our own biological
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  Speaker 2: data and defense labs. And it wouldn't be a bill
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  Speaker 2: in Washington without a conversation about China. And this puts
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  Speaker 2: guardrails on China and other quote countries of concern, who
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  Speaker 2: we buy from, who we partner with, and where are
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  Speaker 2: capital goes. Most of this shows up in four places
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  Speaker 2: in the Defense Bill. The first section the bio industrial
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  Speaker 2: based inside the Department of Defense. DoD actually does a
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  Speaker 2: great deal of investment in biotech startups, and that's going
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  Speaker 2: to continue under this bill. Later in the legislation, Title eight,
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  Speaker 2: there's a government wide prohibition on contracting with certain biotech companies.
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  Speaker 2: Much later in the bill, Title sixty six, biotech inside
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  Speaker 2: the Intelligence Community, and stay with me, in section eighty five,
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  Speaker 2: there's a new outbound investment region that could eventually tie
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  Speaker 2: into biotech, something that we've been talking about for a
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  Speaker 2: while of would we be limiting US dollars from going
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  Speaker 2: to China. Now, biotech's not explicitly named as we'll talk about,
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  Speaker 2: but it sets precedent, and so it's something we're watching.
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  Speaker 2: So let's start with that first title. That first section
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  Speaker 2: the bill will fund real world infrastructure DoD, which has
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  Speaker 2: also started to go by DOW. The Department of War
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  Speaker 2: will get broader authority to support design and construct, pilot
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  Speaker 2: and demonstration facilities so that bio industrial R and D
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  Speaker 2: can translate into actual manufacturing capacity for critical materials, fuels,
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  Speaker 2: and other biomanufactured products. I know this is really in
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  Speaker 2: the weeds, but these programs eventually become entire segments of industry.
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  Speaker 2: The bill also creates a home for biotech inside the Pentagon.
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  Speaker 2: There'll be a new Biotech Management Office and a senior
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  Speaker 2: Biotech Lead that's charged with developing and executing a department
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  Speaker 2: wide strategy that'll be updating acquisition policies, coordinating with industry
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  Speaker 2: and allies, and identifying workforce needs. It basically gives biotech
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  Speaker 2: a permanent address at DoD, So if you're in the
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  Speaker 2: startup egosystem, this is going to be somewhat in government
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  Speaker 2: that we need to add to the list of who
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  Speaker 2: we know. This section is also going to push commercialization
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  Speaker 2: and supply chain resilience. New programs are authorized to expand
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  Speaker 2: domestic biofactoring, hardened defense supply chains, and use bio based alternatives.
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  Speaker 2: It will also upgrade lab and digital infrastructure. Again, these
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  Speaker 2: are investments today that we will see for years to
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  Speaker 2: come down the road. It also makes biological data AI
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  Speaker 2: ready and secure. It requires the DoD to standardize that
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  Speaker 2: data so it can be used with AI and advance
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  Speaker 2: computational tools, while also planning for secure cloud storage, cybersecurity,
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  Speaker 2: and biosecurity protections. So not only is the goal of
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  Speaker 2: this to protect patient data further, but it's also to
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  Speaker 2: ready it for large language models and other AI tools.
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  Speaker 2: If Title one is about building America's biocapacity, the next
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  Speaker 2: set of provisions is about guarding it, mainly with an
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  Speaker 2: emphasis on China. No surprise there. So let's take a
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  Speaker 2: look at what the NDA is doing. Title eight and
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  Speaker 2: sixty six first cut off foreign biotechs of concern from
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  Speaker 2: federal money. This is basically the Biosecure Act that we've
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  Speaker 2: talked about before. The bill is going to implement an
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  Speaker 2: updated version of Biosecure. Federal agencies generally can't buy biotech
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  Speaker 2: equipment or services from designated quote biotechnology companies of concern.
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  Speaker 2: Federal grants and loans can't be used to buy from
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  Speaker 2: it either. Companies are identified as a company of concern
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  Speaker 2: either through placement on the DoD managed twelve sixty h
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  Speaker 2: list or through a new list that will be managed
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  Speaker 2: by the Director of O and B and updated annually.
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  Speaker 2: As we've seen the Trump administration, these lists, which have
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  Speaker 2: been wonky in the weeds for years can quickly become
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  Speaker 2: very relevant to how we do business. As we've discussed
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  Speaker 2: on a past episode, designated firms get a notice and
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  Speaker 2: will have a chance to respond to try to have
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  Speaker 2: this designation removed, but that's only on the OMB manage list.
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  Speaker 2: Companies on the twelve to sixty h list at DoD
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  Speaker 2: will not have an opportunity to address or reconcile that.
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  Speaker 2: This section also builds focus on biotech inside the intelligence community.
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  Speaker 2: It's tough to draw our world of biotech design to
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  Speaker 2: three letter agencies, but look no further than the last
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  Speaker 2: Mission Impossible movies. It's clear that this is something that
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  Speaker 2: the intelligence community is paying attention to. Key agencies like
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  Speaker 2: the ODNI, the CIA, the NSA, FBI, DIA, and even
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  Speaker 2: the secure elements of the Department of Energy will appoint
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  Speaker 2: senior biotech leads, and then the Director of National Intelligence
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  Speaker 2: that oversees all of this has to improve how we
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  Speaker 2: declassify and share intelligence on foreign biotech threats. The intelligence
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  Speaker 2: community is tasked with helping secure our data from exploitation,
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  Speaker 2: steering procurement of synthetic DNA and RNA towards trusted domestic providers,
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  Speaker 2: and closing intelligence gaps around how China invests and accesses
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  Speaker 2: US originated biotech. Put together, these provisions may clear the
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  Speaker 2: US is tightening national security around who we buy from,
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  Speaker 2: where biological data goes, and how deeply we're intertwined with
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  Speaker 2: China's biotech ecosystem. Finally, as I mentioned title eighty five,
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  Speaker 2: this last piece isn't written for biotech, so I should
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  Speaker 2: be really clear upfront. As of right now, biotech is
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  Speaker 2: not covered by what I'm about to say, but it
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  Speaker 2: should be in every investor and founder's radar because this
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  Speaker 2: year's Defense Bill will create a new outbound in investment regime.
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  Speaker 2: Here's what it does. First, it creates a formal screen
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  Speaker 2: on US money going out, not just foreign money coming in.
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  Speaker 2: The NBA incorporates the Comprehensive Outbound Investment National Security Act
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  Speaker 2: or COINS Act, which sets up a system to limit
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  Speaker 2: US investments into quote countries of concern when those deals
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  Speaker 2: touch sensitive technology sectors that could meaningfully boost foreign military capabilities. Second,
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  Speaker 2: it focuses on a handful of high risk tech sectors.
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  Speaker 2: For now, the initial covered sectors are industries including semiconductors,
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  Speaker 2: AI systems, quantum high performance computing, and hypersonics. For certain
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  Speaker 2: deals in those areas, US investors will have to notify
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  Speaker 2: the government, and in some cases those transactions can be
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  Speaker 2: prohibited outright with enforcement and penalties built in the bill
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  Speaker 2: leaves the door wide open for biotech to be added.
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  Speaker 2: Here's the ketch for life sciences. The law lets the
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  Speaker 2: administration add new sectors as covered national security sectors over time.
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  Speaker 2: Given everything else in the NBA that we just talked
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  Speaker 2: about relevant to China, biological data and biotech is a
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  Speaker 2: strategic capability, it's not hard to imagine biotech or specific
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  Speaker 2: sub fields being pulled into this regime down the road.
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  Speaker 2: So even though biotech isn't formally in the outbound investment
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  Speaker 2: crosshairs yet, this is the policy architecture that could one
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  Speaker 2: day govern cross border biotech partnerships, joint ventures, and capital flows.
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  Speaker 2: We're not telling investors and the broader ecosystem to hit
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  Speaker 2: the panic button yet, but believe this is an area
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  Speaker 2: we're going to have to pay attention to moving forward.
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  Speaker 2: Some listeners may be familiar with Siphius, which is a
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  Speaker 2: current and long standing operation at the Department of Treasury
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  Speaker 2: that limits the ability for foreign actors to invest in
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  Speaker 2: the US for strategic purposes. Some are calling the Coins
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  Speaker 2: Act and other ideas like it, the concept of a
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  Speaker 2: reverse Siphius that our capital is an asset as well,
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  Speaker 2: and that the government wants to have a say in
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  Speaker 2: where it can go in these countries of concern. That
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  Speaker 2: was a lot. So as a biotech investor or as
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  Speaker 2: a leader of a company, how can you be keeping
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  Speaker 2: the straight with all the other things on your plate
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  Speaker 2: and wrap up? The NBA is going to be both
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  Speaker 2: an opportunity as well as a potential constraint on our industry.
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  Speaker 2: As an opportunity, doors are opened at the Department of Defense,
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  Speaker 2: the largest agency in the federal government and probably the
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  Speaker 2: most critical, So it is clear that biotech strategy is
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  Speaker 2: going to be important there. That's going to open the
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  Speaker 2: door for funding partnerships, contracts, especially if you're building domestic,
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  Speaker 2: secure bio based capabilities. Add in the intelligence community and
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  Speaker 2: those additional resources, it could be that the DoD and
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  Speaker 2: the intelligent community becomes another catalyst for innovation around biotech,
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  Speaker 2: particularly for advanced technologogies. But it also can be viewed
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  Speaker 2: as a constraint. It's clear that the bill sets up
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  Speaker 2: against our adversary in China. It's a time where China,
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  Speaker 2: as we have talked about on a number of episodes,
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  Speaker 2: is moving forward in the innovative biotech community, there's going
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  Speaker 2: to be more scrutiny over who your suppliers are, where
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  Speaker 2: your data lives, and who your investors are, both here
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  Speaker 2: and abroad. The bill is setting the tone for years
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  Speaker 2: to come where we are going to be thinking about
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  Speaker 2: the US biotech system not just as something meaningful for
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  Speaker 2: patients that has been transforming lives around the world, but
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  Speaker 2: it's clear that it's going to become a part of
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  Speaker 2: our national security apparatus. We should all consider ourselves warned.
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  Speaker 2: For investors, it means that you might see new programs
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  Speaker 2: and incentives that make bio industrial and defense relevant biotech
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  Speaker 2: more attractive, but you're going to need to track blacklists,
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  Speaker 2: procurement restrictions, and potentially outbound investment rules that can shape
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  Speaker 2: cross border deal making. The challenge and the opportunity is
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  Speaker 2: figuring out how to harness all this new attention investment
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  Speaker 2: in ways that can accelerate the development of safe, effective
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  Speaker 2: new treatments without over correcting on security in ways that
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  Speaker 2: choke off innovation. We'll keep tracking the Defense Bill as
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  Speaker 2: it moves from text to law to implementation. In the meantime,
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  Speaker 2: if you have questions about anything we've covered, because it
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  Speaker 2: was a lot let us know in the comments or
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  Speaker 2: reach out to incubate directly. We will continue to be
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  Speaker 2: advocating that we have a strong global biotech community that
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  Speaker 2: can work take advantage of these opportunities and not put
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  Speaker 2: barriers in place of developing new medicines. Our second item
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  Speaker 2: today stays right in the same place in Congress with
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  Speaker 2: a new bipartisan bill that sits right at the intersection
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  Speaker 2: of biotech and national security. It's the Independence Investment Fund.
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  Speaker 2: ACKed on December third, Representatives Chrissy Hulan, a Democrat from Pennsylvania,
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  Speaker 2: and Pete Sessions, a Republican from Texas, introduce legislation that
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  Speaker 2: would create a government backed, privately run investment fund housed
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  Speaker 2: at the Treasury Department. The focus will be US based
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  Speaker 2: companies working on critical and emerging biotechnologies. You heard that right.
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  Speaker 2: This is a bill that would create a fund, a
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  Speaker 2: government fund not quite the size of sovereign wealth funds,
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  Speaker 2: but it would be a government fund that is investing
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  Speaker 2: in critical emerging biotech. The idea is to attack the
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  Speaker 2: classic value of death between research and commercialization. The fund
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  Speaker 2: would make strategic seed and mid stage equity investments of
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  Speaker 2: roughly one to ten million dollars per deal to help
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  Speaker 2: d risk promising technologies so private capital is more willing
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  Speaker 2: to pile in. The bill would appropriate just shy of
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  Speaker 2: a billion dollars to get the fund off the ground,
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  Speaker 2: with an explicit goal of bridging the financing gap for
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  Speaker 2: high impact technologies, crowding in private investment, and countering adversarial
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  Speaker 2: foreign capital that might otherwise scoop up or steer US innovations.
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  Speaker 2: This isn't coming out of nowhere. The National Security Commission
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  Speaker 2: on Emerging Biotechnology, someone Incubate has worked closely with, called
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  Speaker 2: for exactly this kind of fund in their April twenty
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  Speaker 2: twenty five report as a key area for government action.
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  Speaker 2: Look no further than the announcement around the bill's introduction,
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  Speaker 2: not just from Representative Sessions, but also reps Kana and
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  Speaker 2: Bise called out national security in why they supported this bill.
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  Speaker 2: So it's clear linking back to the Defense Bill that
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  Speaker 2: national security and biotech are clearly intertwined in Congress. Last,
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  Speaker 2: but certainly not least, is the ongoing debate around healthcare
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  Speaker 2: and a possible vote in the Senate. The Senate is
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  Speaker 2: scheduled to vote today on two competing healthcare proposals, one
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  Speaker 2: from Republicans, one from Democrats, with major implications for coverage
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  Speaker 2: and premiums. Let's step back for a second, as folks recall,
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  Speaker 2: the government shutdown was largely tied to the expiring Affordable
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  Speaker 2: Care Act subsidies that went into place during COVID They
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  Speaker 2: made it substantially more affordable, and we've already seen proposed
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  Speaker 2: plans for twenty twenty six having double or triple the premiums,
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  Speaker 2: and so Americans are beginning to reconcile this idea that
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  Speaker 2: the cost of health care is going up? But what
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  Speaker 2: is Congress going to do about it? Is the number
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  Speaker 2: one topic in Washington. On one side, Republicans, led by
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  Speaker 2: Senators Bill Cassidy and Mike Crapo, are proposing to replace
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  Speaker 2: the soon expiring COVID ERA subsidies with direct deposits of
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  Speaker 2: one thousand dollars to fifteen hundred dollars into health savings
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  Speaker 2: accounts for eligible individuals under seven hundred percent of the
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  Speaker 2: federal poverty line. For reference, the federal poverty line is
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  Speaker 2: roughly twenty thousand dollars, so this would be eligible for
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  Speaker 2: people up to about one hundred and forty thousand dollars
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  Speaker 2: of annual income. Democrats are instead pushing for a three
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  Speaker 2: year extension of the expiring ACA subsidy, arguing that the
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  Speaker 2: Republicans HSA plans and payments fall far short of covering
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  Speaker 2: the deductibles, which could leave Americans exposed to high out
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  Speaker 2: of pocket costs and coverage gaps. Both proposals are unlikely
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  Speaker 2: to secure the sixty votes needed to pass the Senate,
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  Speaker 2: so uncertainty remains. If neither plan gains traction, many of
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  Speaker 2: the twenty four million Americans who rely on ACA premium
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  Speaker 2: subsidies could face steep premium hikes, possibly triggering a major
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  Speaker 2: coverage disruption at the start of twenty twenty six. One
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  Speaker 2: of the reasons new medicines aren't celebrated as we think
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  Speaker 2: they should be is because access and affordability discussions in
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  Speaker 2: this country have been off the rails for years. Healthcare
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  Speaker 2: coverage and healthcare payments continue to upset people on both
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  Speaker 2: sides of the aisle because they simply can't figure out
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  Speaker 2: that even with insurance, they can't access the medicines, treatments,
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  Speaker 2: or doctors without copays. Co insurance taking dollars out of
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  Speaker 2: their pockets with the expiration of these subsidies for them,
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  Speaker 2: those accessing Affordable Care Act plans, as conversation is only
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  Speaker 2: going to get worse. So it's critically important that on
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  Speaker 2: both sides of the aisle, policymakers find a path forward
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  Speaker 2: that allow Americans to have confident that when they get
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  Speaker 2: sick and their doctor prescribes them a medication or requires
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  Speaker 2: a surgery, that they have access in an affordable way
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  Speaker 2: to the health care they need. The bad policies that
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  Speaker 2: we see that go after the ecosystem that derives so
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  Speaker 2: much innovation for patients tend to be tied back to
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  Speaker 2: the frustration Americans have that they can't afford their health care.
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  Speaker 2: That's why it's critically important that Congress and the President
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  Speaker 2: get this conversation right. I know it seems strange to
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  Speaker 2: draw connections to what seems to be ongoing battles against
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  Speaker 2: biotech with health coverage, but they're one and the same.
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  Speaker 2: Americans continue to remain frustrated with what they can access
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  Speaker 2: for health care in this country, and that prevents them
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  Speaker 2: from celebrating and being excited about the incredible science and
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  Speaker 2: innovation that's making medicines. So we'll be standing alongside a
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  Speaker 2: number of healthcare stakeholders and hoping to see this path forward,
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  Speaker 2: find compromising common ground so that we can focus on
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  Speaker 2: important policies that will allow us to keep pace with
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  Speaker 2: innovation around the globe. That's all for this week's episode
• 18:18
  Speaker 2: of the Making Medicine Podcast. Have a thought or question
• 18:21
  Speaker 2: about today's topics, drop a comment and we'll feature it
• 18:24
  Speaker 2: in next week's episode. Don't forget to subscribe on YouTube
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  Speaker 2: links in the description. Thanks for listening, and as always,
• 18:33
  Speaker 2: keep innovating