Chinese Health Innovation Now Advancing Your Science Act

118th CONGRESS — 2d Session

H.R. _____

To require reinvestment of revenue from Chinese-licensed pharmaceuticals into domestic biomedical research and development.

SECTION 1. SHORT TITLE.

This Act may be cited as the "Chinese Health Innovation Now Advancing Your Science Act" or "CHINA PAYS".

SEC. 2. FINDINGS.

Congress finds the following:

1. Chinese biopharma licensing deals reached $41.5 billion in 2024, with 28% of large pharmaceutical companies' in-licensed drugs originating from China.
2. Chinese biotechnology companies have developed 639 first-in-class drug candidates since 2022, a 360% increase from the prior period.
3. The People's Republic of China has designated biotechnology as a strategic national priority under "Made in China 2025" and subsequent industrial policies.
4. US pharmaceutical supply chains are increasingly dependent on Chinese active pharmaceutical ingredients and manufacturing capacity.
5. Maintaining robust domestic biomedical research and development capacity is critical to the national security and economic competitiveness of the United States.
6. The BIOSECURE Act established precedent for treating Chinese biotechnology companies as presenting national security concerns.

SEC. 3. DEFINITIONS.

In this Act:

(1) CHINESE-ORIGIN ENTITY.—The term "Chinese-origin entity" means any corporation, partnership, association, or other entity that—

• (A) is organized under the laws of the People's Republic of China, including the Hong Kong and Macau Special Administrative Regions;
• (B) has its principal place of business in the People's Republic of China;
• (C) is owned or controlled, directly or indirectly, by—
  • (i) the government of the People's Republic of China;
  • (ii) the Chinese Communist Party;
  • (iii) a citizen or permanent resident of the People's Republic of China; or
  • (iv) another Chinese-origin entity;
• (D) is listed on the Department of Defense's list under section 1260H of the National Defense Authorization Act for Fiscal Year 2021; or
• (E) is designated by the Secretary as a biotechnology company of concern under section 9.

(2) COVERED DRUG.—The term "covered drug" means any drug—

• (A) approved under section 505 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) or licensed under section 351 of the Public Health Service Act (42 U.S.C. 262); and
• (B) for which—
  • (i) the original intellectual property holder at the time of approval was a Chinese-origin entity;
  • (ii) a majority of preclinical development activities were conducted by a Chinese-origin entity; or
  • (iii) the drug was licensed or acquired from a Chinese-origin entity.

(3) QUALIFIED DOMESTIC BIO R&D EXPENDITURES.—The term "qualified domestic bio R&D expenditures" means amounts that—

• (A) meet the definition of qualified research expenses under section 41(b) of the Internal Revenue Code of 1986;
• (B) are paid or incurred for research activities substantially performed within the United States; and
• (C) are not paid to any Chinese-origin entity or any entity controlled by a foreign adversary as defined in 15 CFR 791.4.

(4) UNITED STATES GROSS REVENUE.—The term "United States gross revenue" means gross receipts from the sale of a covered drug in the United States, less—

• (A) returns and allowances;
• (B) rebates paid under the Medicaid Drug Rebate Program;
• (C) rebates paid under the Medicare Coverage Gap Discount Program; and
• (D) amounts paid under the Medicare Drug Price Negotiation Program.

SEC. 4. REINVESTMENT REQUIREMENT.

(a) In General.—Each manufacturer of a covered drug shall, for each taxable year—

1. make qualified domestic bio R&D expenditures equal to not less than 10 percent of United States gross revenue from all covered drugs; or
2. pay into the CHINA PAYS Fund an amount equal to the shortfall between 10 percent of such revenue and actual qualified expenditures.

(b) Combination.—A manufacturer may satisfy the requirement under subsection (a) through any combination of qualified expenditures and Fund payments.

(c) Carryforward.—Qualified domestic bio R&D expenditures in excess of the 10 percent requirement may be carried forward for up to 3 taxable years.

SEC. 5. AMERICAN BIOINNOVATION FUND.

(a) Establishment.—There is established in the Treasury a fund to be known as the "CHINA PAYS Fund".

(b) Deposits.—There shall be deposited into the Fund—

1. amounts paid by manufacturers under section 4(a)(2);
2. amounts collected under section 7; and
3. such other amounts as may be appropriated.

(c) Use of Funds.—Amounts in the Fund shall be available without fiscal year limitation to—

1. provide grants for domestic biomedical research, with priority for—
   • (A) early-stage translational research;
   • (B) research addressing unmet medical needs;
   • (C) research in economically distressed areas;
2. support biotech workforce development, including—
   • (A) graduate fellowships;
   • (B) biomanufacturing training programs;
   • (C) programs to increase workforce diversity;
3. invest in domestic biomanufacturing infrastructure.

(d) Administration.—The Fund shall be administered jointly by the Secretary of Health and Human Services and the Secretary of Commerce.

(e) Cap on Administrative Expenses.—Not more than 5 percent of amounts in the Fund may be used for administrative expenses in any fiscal year.

SEC. 6. REPORTING REQUIREMENTS.

(a) Annual Reports.—Not later than 90 days after the end of each taxable year, each manufacturer of a covered drug shall submit a report containing—

1. identification of each covered drug;
2. United States gross revenue from each covered drug;
3. a detailed accounting of qualified domestic bio R&D expenditures;
4. payments made to the Fund; and
5. certification of accuracy under penalty of perjury.

(b) Penalties for False Reporting.—Any manufacturer that knowingly submits materially false information shall be subject to—

1. a civil penalty of not more than $10,000,000; and
2. debarment from Federal procurement contracts for up to 5 years.

SEC. 7. EXCISE TAX ON NONCOMPLIANCE.

(a) Imposition.—Subchapter E of chapter 32 of the Internal Revenue Code of 1986 is amended by adding:

SEC. 8. ANTI-EVASION.

(a) Restructuring.—Any entity restructured, reorganized, or formed with a principal purpose of avoiding the requirements of this Act shall be treated as a Chinese-origin entity.

(b) Factors.—Factors indicating such purpose include—

1. formation within 24 months of a licensing transaction;
2. domicile in a jurisdiction without substantial business operations;
3. governance arrangements preserving de facto Chinese control;
4. financing arrangements creating economic dependencies on Chinese entities.

SEC. 9. DESIGNATION AUTHORITY.

(a) Authority.—The Secretary, in consultation with the Secretary of Defense and the Director of National Intelligence, may designate additional entities as biotechnology companies of concern.

(b) Criteria.—Designations shall be based on—

1. ownership or control by the Chinese government or Communist Party;
2. access to sensitive US personal data;
3. contribution to Chinese military or intelligence capabilities; or
4. other national security concerns.

SEC. 10. REGULATIONS.

Not later than 18 months after enactment, the Secretary shall promulgate regulations to implement this Act, including—

1. criteria for identifying covered drugs;
2. standards for qualifying domestic R&D expenditures;
3. reporting procedures and forms;
4. audit procedures; and
5. Fund allocation criteria.

SEC. 11. EFFECTIVE DATE.

(a) In General.—Except as provided in subsection (b), this Act takes effect on January 1 of the second calendar year after enactment.

(b) Regulations.—Section 10 takes effect on the date of enactment.

(c) Transition.—For covered drugs approved before the effective date, the covered drug determination applies based on facts at the time of original approval.

Section-by-Section Analysis

Section 2 — Findings

Establishes congressional findings supporting the national security rationale. Explicitly references Chinese industrial policy and the BIOSECURE Act precedent.

Section 3 — Definitions

Chinese-origin entity: Uses a multi-factor definition drawing from CFIUS, BIOSECURE, and 1260H list. Includes designation authority for new entities.

Covered drug: Three-prong test covering IP origin, development location, and licensing relationships.

Qualified R&D: Builds on IRC Section 41 with explicit prohibition on payments to Chinese entities.

Section 4 — Reinvestment Requirement

The core mechanism: 10% of US revenue must go to domestic R&D or the Fund. Carryforward provision allows flexibility for companies with uneven revenue.

Section 5 — CHINA PAYS Fund

Permanent, mandatory funding vehicle administered by HHS and Commerce. Priority areas specified but flexible. 5% cap on administrative overhead.

Section 7 — Excise Tax

Enforcement mechanism modeled on IRA. Tax equals unfulfilled obligation— a 1:1 penalty that makes non-compliance economically irrational.

Section 8 — Anti-Evasion

Addresses "NewCo" structures where Chinese biotechs license to shell companies in Singapore or Ireland. Lists specific red flags for restructuring.