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July 13, 2020

Stroock Special Bulletin

By: Chris Griner, Shannon Reaves, Gregory Jaeger, Christopher R. Brewster, Erin Bruce Iacobucci

For the past several years, Congress and U.S. regulatory agencies have shown increasing interest in foreign supply chains that support U.S. government contractors and other critical industries.  Now, in a rare show of bipartisanship, on June 30, 2020, Senators Marco Rubio (R-Fla.) and Elizabeth Warren (D-Mass.) introduced the U.S. Pharmaceutical Supply Chain Review Act.  Despite the proposal’s obvious focus, U.S. companies in all industries important to national security should take note of the bill’s provisions.  If passed, the bill will require the Federal Trade Commission, working in cooperation with the Committee on Foreign Investment in the United States (CFIUS), to conduct a study on foreign investment in the U.S. pharmaceutical industry, including a review of transactions that have been approved by CFIUS. 

Within one year of enactment and annually thereafter, the bill would require the Federal Trade Commission and CFIUS to submit a report to appropriate congressional committees, the Secretary of Health and Human Services, and the Commissioner of Food and Drugs, that provides an assessment of (1) the supply chain of the U.S. pharmaceutical industry and the effect of concentration and reliance on foreign manufacturing within that industry; (2) the effect of foreign investment in the pharmaceutical industry on domestic capacity to produce drugs and active and inactive ingredients of drugs; and (3) the effect of foreign investment in technologies or other products for sequencing or storage of DNA in the United States, including the effect of such investment on U.S. capacity to sequence or store DNA.

Importantly, the reports required by the Act also must identify the number of CFIUS reviews and investigations in both the U.S. pharmaceutical as well as the DNA analysis industries that have been conducted in each of the previous 10 fiscal years.  The report(s) must include a short description of each such review or investigation, including whether the transaction was approved or prohibited.

The proposal is notable not only for the U.S. pharmaceutical industry, but also for other critical U.S. industries, because of its focus on foreign supply chains (especially those involving China), and its direction to review – retroactively – foreign acquisitions and investments that were cleared by CFIUS.[1]  One of the hallmarks of CFIUS review since its inception has been the finality accorded reviews.  Indeed, firms that bypass review of covered transactions do so at peril of a transaction being reviewed (and potentially unwound) in perpetuity.  Although the proposal would not unwind any transactions, it would subject them to renewed scrutiny.  If passed, the U.S. Pharmaceutical Supply Chain Review Act could prove to be a paradigm for congressional review of foreign investment in other industries.  U.S. companies that are in critical industries and dependent upon foreign supply chains would do well to follow the progress of the legislation.  Moreover, even if not enacted, the bill may serve to bring new congressional and regulatory attention to supply chains in critical industries, raising the potential of new statutory and regulatory obstacles for some foreign suppliers. 

For a copy of the legislation or to discuss the issue raised by the bill, please contact any member of the Stroock CFIUS, National Security, and Compliance Group.  ______________________________

For More Information:

Chris Griner

Shannon Reaves

Gregory Jaeger

Christopher R. Brewster

Erin Bruce Iacobucci

This Stroock publication offers general information and should not be taken or used as legal advice for specific situations, which depend on the evaluation of precise factual circumstances. Please note that Stroock does not undertake to update its publications after their publication date to reflect subsequent developments. This Stroock publication may contain attorney advertising. Prior results do not guarantee a similar outcome.


[1] In that regard, the Act is similar to President Trump’s April 4, 2020, Executive Order establishing the “Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector.”  As noted in our previous alert,, that EO grants the Committee the power to review existing FCC licenses “to identify any additional or new risks to national security or law enforcement interests of the United States,” thus creating regulatory risk for transactions that have already been completed.