Latest: The Treasury Department issued a notice of proposed rulemaking on Thursday to update the Outbound Investment Security Program under the Comprehensive Outbound Investment Security Act, passed as part of the Fiscal Year 2026 National Defense Authorization Act. The act codifies the government’s approach to regulating certain outbound investments by United States persons and builds on the existing program. Under the structure Treasury described, United States persons must notify the department of certain transactions involving covered foreign persons engaged in notifiable technologies, and are prohibited from certain other transactions involving covered foreign persons engaged in prohibited technologies. The requirements apply to a United States person including its controlled foreign entities, and the proposal covers excepted transactions, the information a notification must contain, the knowledge standard and the reasonable and diligent inquiry expected before a transaction, and the conduct that would count as a violation and the penalties that follow.
The statute lists five technology sectors: semiconductor technologies and microelectronics, artificial intelligence systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. Treasury said the Secretary has added biotechnology to the proposed regulations, using the act’s authority to add technologies that enable the military, intelligence, surveillance or cyber-enabled capabilities of a country of concern, after consultation with the appropriate congressional committees. Biotechnology also appears in the proposal’s technical specifications list, alongside semiconductor technology and microelectronics, quantum information technologies, super intelligence systems, hypersonic systems and high-performance computing and supercomputing. Secretary Scott Bessent said the proposed regulations would strengthen the existing program to prevent adversaries from using United States investment to develop critical technologies, and Assistant Secretary for Investment Security Christopher Pilkerton said the proposal is designed to address risks from foreign adversaries benefiting from United States investment in key technology sectors. The press release names no country. Written comments are due by the deadline in the official proposal at regulations.gov, and final implementing regulations at a later date will set an effective date.
For the pharmaceutical industry, the sector question is settled and the transaction question is not. Biotechnology is in the proposed regime, which confirms the direction Endpoints News reported the industry was bracing for. What the press release does not do is define which biotechnology transactions fall on the notification side and which on the prohibition side: that line sits in the proposal’s technical specifications, and whether licensing structures, as distinct from equity investment, are caught will be read from that text, not from Thursday’s announcement.
The pharmaceutical industry is bracing for a more stringent assessment of its China deals from the Treasury Department, despite months of work to escape a harsh outcome, Endpoints News reported on October 21, with the draft outbound investment rules expected on Thursday, October 22. The report is single-sourced and its full text is gated, and the rules had not been published when this edition closed, so the industry posture is carried here as Endpoints reported it and graded accordingly. What is documented is the machinery the rules would plug into, and it has already been switched on.
On October 7, Treasury announced its first civil penalty under the Outbound Investment Security Program, a $200,000 fine on Amidi LLC for failing to notify the department of an investment by its Chinese subsidiary of approximately $92,478 in a private Chinese company developing artificial intelligence, robotics and embodied intelligence. The penalty, imposed in July, was more than twice the value of the underlying investment, and Treasury said it found the transaction through its own compliance monitoring. The current program, in effect since January 2, 2025, prohibits or requires notification of US investments connected to China in semiconductors, quantum computing and artificial intelligence, and it holds US parents responsible for the transactions of the foreign entities they control.
The expansion is statutory. The Comprehensive Outbound Investment National Security Act of 2025, passed on December 18, 2025, widens the program’s jurisdiction, and it takes effect only when Treasury completes implementing regulations, which are due no later than 450 days after passage, by March 13, 2027. It is those implementing rules whose draft the industry is waiting on, and the open question for pharma is how far into biotechnology and licensing structures, as distinct from equity investment, the notification net is cast. China’s own draft rules on biotech platform transfers, covered on this site on October 20, approach the same traffic from the other direction.
The exposure is not hypothetical. This week’s edition alone has carried Roche’s ADC collaboration with Hansoh, structured at more than $15.5 billion with Greater China rights retained by the Chinese partner, and Lilly’s $1.1 billion delivery platform deal with Hong Kong-listed METiS TechBio. Neither is an equity investment of the kind the current program targets, which is precisely why the drafting matters: a regime drawn around investment alone leaves the licensing model intact, while one drawn around technology transfer pulls the industry’s fastest-growing deal channel into a notification, or prohibition, framework. The draft, when it appears, is the document to read.