The Department of Justice (DOJ) has finalized new regulations that will impact data transfers involving U.S. sensitive personal data and government-related data. The US data localization law, taking effect on April 8, 2025, imposes restrictions on transactions with specific foreign countries labeled as “Countries of Concern.” These include China, Cuba, Iran, North Korea, Russia, and Venezuela.
For life science companies, this new rule is particularly relevant. Data such as biometric identifiers, genomic data, and personal health records are classified as sensitive, meaning their transfer to foreign entities could now be prohibited or restricted. These companies must take immediate steps to understand how these regulations apply to them, review their data-sharing agreements, and establish compliance strategies to avoid legal consequences.
Scope of the New Data Localization Law
The primary goal of this regulation is to prevent unauthorized access to bulk and U.S. government-related data by foreign adversaries. It applies broadly to transactions involving these data types and includes strict prohibitions on data brokerage transactions with countries of concern.
Under the new rule, certain transactions that involve bulk sensitive data or human biospecimens will be banned if they give a country of concern direct access to the data. In cases where these transactions are not outright prohibited, they may still be restricted, requiring companies to comply with cybersecurity measures outlined by the Cybersecurity and Infrastructure Security Agency (CISA).
Additionally, companies that engage in these restricted transactions must develop and implement risk-based compliance programs modeled on Office of Foreign Assets Control (OFAC) guidelines. These programs will become mandatory starting October 6, 2025.
Impact on Life Science Companies
The life sciences sector heavily relies on cross-border data transfers for research, clinical trials, and regulatory approvals. The new US Data Localization Law creates several challenges for these companies, as their data often falls under the category of sensitive personal data.
One of the biggest concerns is the restriction on international research collaborations. Many biotech and pharmaceutical firms share genomic and health-related data with international partners for drug development and disease research. Under the new rule, such transfers will now require strict security controls or may even be completely prohibited if the recipient is based in a country of concern.
Another key impact is on vendor, employment, and investment agreements. Life science companies that have foreign vendors, employees, or investors who have access to bulk sensitive personal data must ensure that these agreements comply with the new law. Contracts will need to include explicit prohibitions on onward data transfers to restricted entities.
Exceptions for Life Science Companies
Despite these strict regulations, the law does provide two key exemptions for life science companies to ensure continued progress in pharmaceutical research and medical innovation.
The first exemption allows life science companies to transfer U.S.-generated data to a country of concern if it is reasonably necessary for a regulatory marketing submission there. This means companies seeking drug, biologic, or medical device approvals in foreign markets can still share data required for regulatory processes.
The second exception covers the sending of clinical data that is “normally incident” to medical care, monitoring product safety, or evaluating performance in the real world. This includes post-marketing surveillance data used for pharmacovigilance and long-term safety studies of approved treatments. However, to qualify for this exemption, the data must be de-identified or pseudonymized according to FDA regulations.
Compliance Measures for Life Science Companies
To avoid violations and penalties, life science companies need to act swiftly to align their data management practices with the new law.
One of the first steps is conducting a comprehensive review of all data transactions involving foreign entities. Companies must determine whether any of their current data-sharing agreements involve Countries of Concern and assess whether these transactions are now restricted or prohibited under the new rule.
Another critical requirement is enhancing data security protocols. Companies that engage in restricted transactions must implement CISA-approved security measures to prevent unauthorized access to sensitive data. This includes encrypting data, limiting access to authorized personnel, and monitoring data flows.
Developing a risk-based compliance program is also essential. The new rule mandates that life science firms create compliance frameworks modeled after OFAC guidelines. This includes setting up internal review procedures, employee training programs, and continuous auditing processes to ensure compliance.
Finally, companies should engage with U.S. regulators such as the FDA, DOJ, and CISA to seek clarifications on the rule’s application to their industry. Proactive engagement with regulatory bodies will help companies navigate uncertainties and avoid potential enforcement actions.
Challenges Facing the Industry
While the exemptions provide some relief, the new law presents significant operational challenges for life science firms.
One major challenge is the delay in international clinical trials. The restrictions on data sharing may slow down approvals for new drugs and medical devices, making it harder for companies to enter foreign markets.
Another difficulty is the increased cost of compliance. Implementing stronger cybersecurity protocols, conducting risk assessments, and training employees will add significant operational expenses. Small and mid-sized biotech firms may struggle with these financial burdens, unlike larger pharmaceutical corporations with dedicated compliance teams.
The rule also limits global collaboration in research and development. Many biotech companies rely on international partnerships for innovation. With new restrictions, companies may need to seek alternative research partners in countries that are not on the restricted list.
There is also uncertainty regarding enforcement. With the law still evolving, some aspects remain open to interpretation, making it difficult for companies to fully predict how regulators will enforce the new requirements. This could lead to legal disputes or unexpected penalties for companies that misinterpret the rule’s provisions.
Preparing for the 2025 Deadline
Life science companies should begin preparations immediately to meet the April 8, 2025 deadline.
The priority should be identifying high-risk data transactions and determining whether they fall under the new restrictions. Companies should then renegotiate contracts with foreign partners to ensure compliance with data localization requirements.
Strengthening internal security measures is also critical. This includes implementing access controls, data encryption, and continuous monitoring systems to prevent unauthorized data transfers.
Training employees on compliance best practices is another important step. Many data breaches occur due to human error, so educating staff on the new restrictions and cybersecurity protocols is essential.
Finally, seeking legal guidance from experts in data privacy and regulatory compliance will help companies navigate complex areas of the law and avoid costly mistakes.
Conclusion
The upcoming US Data Localization Law, taking effect on April 8, 2025, presents significant legal and compliance challenges for life science companies. Navigating these new regulations requires expert legal guidance to protect your business from penalties, disruptions, and unforeseen risks.
Stevens Law Group specializes in data privacy, regulatory compliance, and international data transfer laws. Our team is ready to help your company:
- Assess your data transactions to determine compliance risks.
- Develop and implement risk-based compliance programs tailored to the new law.
- Renegotiate vendor, employment, and investor agreements to meet regulatory standards.
- Engage with U.S. regulatory bodies to ensure full alignment with legal requirements.
- Strengthen data security measures to avoid potential enforcement actions.
Don’t wait until it’s too late. Schedule a consultation with Stevens Law Group today to ensure your life science business is fully prepared for the new data restrictions.
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