US Treasury Department drafts rules to keep most pharma licensing deals with China alive

While Washington has spent the past two years building ever-higher walls around semiconductors and AI, it’s quietly sketching a door in the fence for pharmaceuticals. The US Treasury Department is drafting sector-specific rules that would permit the vast majority of licensing deals between American and Chinese pharma and biotech companies, restricting only transactions tied to pathogens or biotechnology with weapons potential.

The timing is deliberate. The announcement is expected to follow a meeting between President Trump and Chinese President Xi Jinping.

The billion-dollar backdrop

Chinese biotech firms were involved in $115 billion worth of external licensing deals in 2025, according to GlobalData. Nearly half of all inbound pharma licensing deals that year involved Chinese companies.

The trend has only accelerated into 2026. Bristol Myers Squibb struck a collaboration with Jiangsu Hengrui Pharma valued at up to $15.2 billion. Pfizer signed a deal with Innovent Biologics worth up to $10.5 billion to develop 12 oncology treatments.

Big Pharma has a straightforward argument for why these deals need to keep happening: patent cliffs. As blockbuster drugs lose exclusivity, companies need fresh pipelines, and Chinese biotech firms have become prolific sources of novel molecules and therapeutic platforms.

Where the line gets drawn

The proposed rules would create a carve-out, not a free-for-all. Transactions involving pathogens or biotechnology that could be weaponized would remain off-limits. Everything else, think cancer drugs, metabolic disease treatments, and standard therapeutic licensing, would generally proceed.

This approach marks a notable departure from how Washington has handled other sectors. The Comprehensive Outbound Investment National Security Act, or COINS Act, passed in December 2025, expanded investment screening to cover semiconductors, AI, and quantum computing. Biotech was conspicuously absent from that legislation. Treasury’s draft rules effectively fill that gap, but with a lighter touch than many hawks in Congress wanted.

The opposition

A coalition of lawmakers and smaller pharmaceutical companies argues that pouring investment into Chinese biotech undermines America’s competitive position in drug development. When a company like Pfizer writes a $10.5 billion check to a Chinese partner, that’s capital and strategic attention that isn’t flowing to a startup in Boston or San Diego.

Critics also point out that regulatory oversight of Chinese companies remains limited, and that intellectual property protections in China, while improved, still lag behind US standards.

What comes next

The rules aren’t final. Treasury’s draft could change substantially depending on input from the White House, and President Trump has shown a willingness to use trade and investment policy as leverage in broader negotiations with Beijing. The postponement of any formal announcement until after the Xi-Trump meeting underscores this point.

For Bristol Myers Squibb, Pfizer, and other major pharma companies with active Chinese partnerships, the draft rules represent a best-case regulatory scenario. The $115 billion in licensing activity from 2025 proves the commercial appetite is enormous. Whether Washington’s appetite for allowing it to continue matches that scale is the question that remains genuinely unresolved.

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