U.S. drugmakers are breaking up with their Chinese supply-chain partners

From big pharmaceutical companies such as AstraZeneca to small biotechnology firms like Amicus Therapeutics of New Jersey, which is looking for a non-Chinese company to supply raw materials for its rare-disease treatment, the companies say it is time to reduce China risk.

Industry officials say one consequence could be slower drug rollouts and higher costs in the U.S. because the shift takes time and money.

Mostly unbeknown to American patients, U.S. and European companies often depend on China for basic chemistry services and pharmaceutical ingredients—which is why U.S.-China disputes over trade and military issues in recent years have shaken the industry. Executives say the cost for top-notch Chinese work is typically lower than in the West.

Now, companies are “making choices based on lowering risks of relying on a single country or a couple of countries," said Kymera Therapeutics Chief Executive Nello Mainolfi. His Massachusetts-based company, which is developing cancer and immune-system drugs, relies on Chinese firms for manufacturing but has begun to do more of that work in Europe, India and the U.S.

One driver of the shift is the Biosecure Act, which passed the House in September with overwhelming bipartisan support. The legislation would bar companies that receive government funds or contracts from doing business with a list of Chinese companies of concern.

The biggest names on the list are WuXi AppTec and WuXi Biologics, two affiliated Chinese companies to which thousands of customers around the world have turned for research and manufacturing.

WuXi AppTec said in May that naming it in the bill is “a pre-emptive and unjustified designation without due process." Both it and WuXi Biologics said they don’t pose a security risk to the U.S. or any other country.

The prospects for the Biosecure Act in the Senate are uncertain this year, and the current version gives companies until 2032 to cut ties with the targeted Chinese companies. Still, the prospect of restrictions has had “a chilling effect on companies considering whether or not to engage with WuXi or other Chinese companies," said Steve Abrams, global co-head of the life sciences practice at Hogan Lovells, a law firm.

The changes don’t mean a full severing of industry ties between China and the West. U.S. and European drugmakers still see promise in selling their products in China, the second-largest drug market after the U.S. and a country with a rapidly aging population. Chinese biotech companies have signed billions of dollars in licensing deals that seek to bring medicines of Chinese origin to the world.

The greater impact is on drug supply chains.

One example of a U.S. company cutting China ties is San Francisco-based Vir Biotechnology, which develops antiviral and cancer treatments. It ended manufacturing at WuXi Biologics earlier this year and is working with U.S. manufacturing partners and focusing on in-house development and manufacturing, a spokeswoman said.

Other companies are looking for new sources of raw materials as a backstop. Big drugmakers such as AstraZeneca, meanwhile, are working to create separate supply chains for China and the West.

Amicus Therapeutics relies on WuXi Biologics in China to produce its treatment for Pompe disease, a rare disease affecting the heart and muscles, and its main supplier of some of the raw materials is also in China. While Amicus remains comfortable working with WuXi based on the latest iteration of the Biosecure Act, it is searching for a materials supplier outside of China, said Amicus CEO Bradley Campbell.

The Biosecure Act “forced us to take a hard look at where we get our materials and the kind of delicate nature right now of our relationship with China," Campbell said. WuXi itself is helping him diversify: It has built a plant in Ireland set to provide commercial medicines late next year.

Nearly 80% of U.S. biotechnology companies contract with at least one Chinese firm, according to a recent survey by the Biotechnology Innovation Organization, an industry group. Chinese companies have spent years honing their expertise and infrastructure with government help, winning respect from global executives.

The WuXi companies make the raw materials for cancer drugs Imbruvica and Jemperli, among other drugs, according to supply-chain analytics firm Qyobo. Among listed U.S. biotechs and pharmaceutical companies, 60 have flagged their work with at least one of the companies in filings, according to data platform AlphaSense.

Those relationships can’t be replicated overnight. Biotech companies searching for alternative lab space or manufacturing lines are often vying for the same contractors.

The result could be more expensive or slower drug development as companies shift dollars from trials or research into reshaping their manufacturing, said John Maraganore, a former CEO of Alnylam Pharmaceuticals who advises companies as a venture capitalist.

He said he wished U.S. legislation focused more on encouraging domestic manufacturing to avoid the costs and other challenges that would be brought on by the Biosecure Act. “All of us would have hoped that this would be achieved with more carrots and less sticks," Maraganore said.

For now, there are signs that the WuXi companies may be managing the headwinds. WuXi AppTec’s order backlogs climbed by one-quarter at the end of September compared with the end of last year, according to the company. Both it and WuXi Biologics said business remains robust despite the U.S. challenges.

Waltham, Mass.-based Invivyd, which used WuXi Biologics to research and produce its Covid-19 therapy Pemgarda, will finish its R&D and manufacturing with the firm in the coming months, said Chairman Marc Elia. He said Invivyd was identifying alternative sites and would move the work outside China.

Elia said Invivyd could pivot because its manufacturing is done in cycles. “All this stuff has to get sorted out, but that’s a very different statement than, ‘This will be impossible to sort out.’ It won’t be," he said.

For startups, losing a Chinese contractor over a geopolitical issue could threaten the entire business, so venture capitalists say they are advising portfolio firms to avoid that risk.

At Boston-based RA Capital Management, which invests in the health business, principal Tess Cameron said addressing supplier risk has become one of the top issues for due diligence when a young company seeks funding. “It’s kind of like: asset, deal terms, ownership structure, supply chain," she said.

Write to Jared S. Hopkins at jared.hopkins@wsj.com and Clarence Leong at clarence.leong@wsj.com