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Treasury’s October 22, 2026 proposal would expand the U.S. Outbound Investment Security Program (OISP) to cover certain biotechnology investments involving covered foreign persons in countries of concern. It is a proposed rule, not an immediate blanket ban: Treasury must complete notice-and-comment rulemaking and publish final regulations with an effective date. Depending on the investor, foreign entity, technology and deal structure, a transaction could be prohibited, allowed only after a notification to Treasury, excepted or outside the rule.
The practical dividing line for health companies is transaction structure. Treasury officials told the Washington Post that billions of dollars in licensing deals are not swept into the proposal, while equity investments, joint ventures and some greenfield projects could be affected. The boundaries of partnerships and development collaborations remain unsettled.
What exactly did Treasury propose?
The Notice of Proposed Rulemaking (NPRM) would implement the Comprehensive Outbound Investment National Security Act (COINS Act) by adding biotechnology as a prohibited-technology sector under an expanded OISP. Treasury says the policy is intended to stop U.S. capital and expertise from helping adversaries develop technologies that could threaten national security.
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Treasury reports that, during roughly 21 months of operating the existing program, it received approximately 100 notifications involving semiconductor and artificial-intelligence industries and issued guidance responding to more than 50 frequently asked questions. Those figures describe the existing program, not an estimate of future biotech cases.
When would the biotech restrictions take effect?
They do not take effect when the NPRM is issued. The notice is pending Federal Register publication, after which Treasury will consider comments and issue a final rule. The stated deadline for written comments is December 7, 2026; the final rule’s publication date and effective date have not been set.
The proposal is not retroactive. Transactions governed by the existing Part 850 rules before the final regulations take effect remain subject to those rules for the relevant period. A new closing, amendment, restructuring or follow-on investment after the effective date could require a fresh analysis.
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Which biotechnology activities are in scope?
The NPRM uses a broad, technology-based definition rather than limiting coverage to a particular type of medicine or company.
Biological systems and medicines
Covered activities include biological systems used to modify, enhance, produce or control specified agents, energetic materials, novel functional materials, pharmaceutical compounds and delivery mechanisms. The list also includes cell and gene therapies, monoclonal antibodies and other recombinant proteins.
Research equipment and manufacturing
The proposal identifies biomanufacturing equipment and related software, biological sequencing, and flow cytometers or cell sorters designed for spectral analysis or equipped with 26 or more detectors or channels. It also covers liquid-chromatography mass spectrometry used for top-down proteomics, a method that analyzes intact proteins rather than only their component peptides.
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Software, data and automated discovery
Computational and bioinformatics tools are included, as are hardware, robotics, software and cloud-laboratory infrastructure used for automated scientific discovery or experimentation. That could bring some digital platforms and laboratory-automation projects into the same diligence process as conventional biotech investments.
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How does Treasury decide whether a transaction is prohibited or merely notifiable?
The proposal creates two principal tracks. A covered national-security transaction involving a prohibited technology would be unlawful; a transaction involving a notifiable technology could proceed if the U.S. person submits the required information to Treasury.
| Regulatory path | What it means | Deal examples that may require analysis |
|---|---|---|
| Prohibited | The covered transaction may not be completed. | Certain equity investments, joint ventures or greenfield projects tied to a listed biotechnology activity and a covered foreign person. |
| Notifiable | The transaction may remain permissible, but the U.S. person must provide information to Treasury under the final reporting procedure. | A covered investment in a biotechnology activity Treasury classifies as notifiable rather than prohibited. |
| Excepted or excluded | The transaction falls within an expressly listed exception or exclusion. | Certain underwriting, bank lending, payment processing, clearing, prime brokerage, global custody or publicly traded-securities activity. |
| Outside jurisdiction | The OISP does not apply on the facts presented. | A deal lacking the required U.S.-person, covered-foreign-person, country or technology connection. |
Classification depends on all four elements: the U.S. investor or controlled foreign entity, the foreign person and its affiliates, the technology, and the transaction’s structure. A company should not assume that a familiar label such as “strategic partnership” determines the result.
Are licensing deals banned under the proposal?
Not generally, based on Treasury’s public explanation reported by the Washington Post. A Treasury official said billions of dollars in licensing deals are not swept into the proposal. That statement does not settle every arrangement that includes a license, investment, shared development rights or manufacturing commitments.
Equity investments, joint ventures and some greenfield projects are the areas drawing the most attention. “Joint venture” is not yet defined clearly enough for companies to predict how every partnership will be treated, and the final rule could revise the definition, exemptions or treatment of development collaborations.
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Which countries and entities could be covered?
The current framework identifies China, Hong Kong and Macau. The COINS Act’s broader country-of-concern list described in the NPRM also includes Cuba, Iran, North Korea, Russia and Venezuela under Nicolás Maduro. Coverage turns on the final country list and on whether the counterparty is a “covered foreign person,” which can include a listed entity, an affiliate or a person controlled by one.
The proposal applies to U.S. persons and certain controlled foreign entities. A non-U.S.-headquartered pharmaceutical company may not face identical U.S. restrictions when it partners with a Chinese biotech company, an asymmetry analysts cited in the Washington Post. U.S. control, financing, management rights and subsidiary status can still create obligations even when the operating company is incorporated elsewhere.
What exceptions and exclusions should deal teams check?
The NPRM proposes exclusions for several ordinary financial-market functions, including certain underwriting services, bank lending, payment processing or clearing, prime brokerage, global custody and publicly traded securities. It also proposes de minimis treatment, although the precise threshold and conditions must be confirmed in the final text.
These provisions are not a blanket safe harbor for a biotech deal. For example, a bank’s lending role may be excluded while an affiliated fund’s equity investment is covered. The final rule will determine how exceptions interact with indirect ownership, bundled services and transactions involving multiple investors.
Why could the proposal matter to patients and biotech companies?
U.S. drugmakers and investors often use cross-border capital, research collaborations, manufacturing capacity and licensing to move candidates from discovery to clinical development. Restrictions could reduce access to Chinese research programs, specialized equipment or production capacity, delay development work, or make a transaction too costly to structure.
Industry groups warned that broad limits could block companies from promising science. John F. Crowley of the Biotechnology Innovation Organization said, “We cannot restrict our way to success.” Robby Zirkelbach of the Pharmaceutical Research and Manufacturers of America said the restrictions risk blocking access to promising science. Harvard physician and drug-policy researcher Thomas Hwang described the proposal as less severe than some industry fears but broader in structure than expected.
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The national-security rationale points in the opposite direction: Treasury argues that U.S. money, data and know-how should not accelerate sensitive capabilities in countries of concern. The eventual effect on treatment availability cannot yet be quantified; no independent estimate establishes how many biotech transactions or how many dollars would ultimately be prohibited.
What should a biotech company or investor do before the final rule?
Companies can prepare without assuming that the proposal is already law.
- Inventory exposure. List investments, licenses, joint development agreements, manufacturing projects, acquisitions and planned facilities involving China, Hong Kong, Macau or another country on the proposed list.
- Map the technology. Describe the biology, therapeutic modality, equipment, sequencing, proteomics, software, robotics or cloud-laboratory capability involved, using the NPRM’s technical categories rather than a broad “biotech” label.
- Identify the parties. Trace ownership and control through subsidiaries, affiliates and beneficial owners to determine whether a counterparty could be a covered foreign person or a controlled foreign entity.
- Separate transaction components. Analyze equity, debt, licensing, governance rights, research services, facility construction and manufacturing commitments independently; a single contract may contain more than one regulatory trigger.
- Document diligence. Keep a record of the reasonable and diligent inquiry used to reach the classification, including questions sent to counterparties and the answers received.
- Review the proposal. Submit comments by December 7, 2026 on definitions, notification content, exemptions, penalties, enforcement and any national-interest exemption that should be available.
- Obtain qualified advice. Before closing a new transaction, have counsel experienced in outbound-investment and national-security rules review the facts against the NPRM and the latest Treasury guidance.
What should readers watch next?
The key developments are Federal Register publication, Treasury’s response to comments, any revision to the definitions of pharmaceutical compounds and joint ventures, the proposed Biotechnology Companies of Concern list, and final procedures for notification, exemptions and enforcement. Until a final rule and effective date are published, transaction status remains fact-specific and provisional.
Frequently Asked Questions
Is this proposal the same as an export-control rule?
No. It regulates certain outbound investments and related transactions by U.S. persons and covered entities, rather than licensing every shipment of a product or transfer of software. A deal can therefore require separate analysis under export controls, sanctions and the OISP.
Can a company sign a new deal before the final rule is issued?
The NPRM itself is not an operative blanket prohibition, but other laws and the existing OISP may already apply. Parties should also consider whether a signing, closing or amendment after the final effective date would create a new covered transaction.
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No automatic conclusion follows from nationality alone. The analysis depends on the final country and entity lists, ownership or control, affiliates and the specific biotechnology activity involved.
What information might Treasury require for a notification?
The NPRM’s final reporting fields are not yet settled. Deal teams should be prepared to identify the parties, ownership, technology, transaction value and structure, and to explain the diligence supporting their classification.
Could a U.S. investor be exposed through an overseas fund?
Potentially. The proposal reaches U.S. persons and certain controlled foreign entities, so the fund’s governance, control and investment discretion matter. An offshore place of incorporation alone does not resolve the question.
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