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The PREP ACT: Critical Liability Immunity for Critical Products

July 28, 2020

As the coronavirus (COVID-19) pandemic resurges, PREP Act liability immunity continues to be critical for manufacturers and users of COVID-19 medical products.

At the start of the COVID-19 pandemic, the US Food and Drug Administration (FDA) rushed to issue multiple emergency use authorizations (EUAs) for a variety of drug and device products intended to diagnose, treat, or prevent COVID-19, including SARS-CoV-2 diagnostic tests, ventilators, face masks and other personal protective equipment, remote patient monitoring devices, and various drugs, such as remdesivir. As the pandemic wears on and case numbers rise, companies that are developing, manufacturing, distributing, and/or using such medical products will continue to face significant product liability risks from increased hospitalizations, deaths, and long-term adverse health effects. Additionally, FDA has withdrawn, modified, or limited EUAs for certain COVID-19 devices and drugs based on postmarket developments concerning their safety or effectiveness.

Given these developments, companies should continue to evaluate their potential product liability exposure and assess whether protection under the federal Public Readiness and Emergency Preparedness (PREP) Act may be available for the development and distribution of new and repurposed medical products for COVID-19 prevention and treatment, and if so, how to best position the company to document eligibility.

PREP Act Overview

The PREP Act provides immunity from personal injury, business disruption, or property damage claims (except willful misconduct) to individuals or organizations broadly involved in the development, testing, manufacture, distribution, or dispensing of drugs, biologics, and devices intended for use for COVID-19 or program planning around such products.

To be covered by PREP Act immunity, the COVID-19-related activities and products must meet the criteria set forth in the US Department of Health and Human Services (HHS) declaration of immunity from liability, published March 17, 2020 and amended on April 15 (the Declaration). HHS also later issued an advisory opinion on April 17, which was updated on May 19, to provide further clarity on the breadth of the Declaration (the Advisory Opinion).

Key Factors and Definitions

The Declaration describes several detailed criteria and definitions for liability immunity under the PREP Act; thus, it is important to assess applicability on a case-by-case basis. Key definitions from the Declaration include, for example, the following:

Covered Countermeasures. PREP Act liability immunity is tied to “covered countermeasures.”

  • Covered countermeasures are defined to include the following:
    • Any drug, biologic including vaccines, or medical device product or respiratory protective device used to treat, diagnose, cure, prevent, or mitigate COVID-19 or SARS-CoV-2 (or a virus mutating therefrom);
    • Any device used in the administration of any such product; and
    • All components and constituent materials of any such product.
  • Covered countermeasures may include certain products related to, or intended to support, COVID-19 prevention, treatment, or diagnosis, including, for example:
    • A product intended to diagnose, mitigate, prevent, or treat a serious or life-threatening disease or condition caused by a COVID-19 therapeutic; or
    • A product or technology intended to enhance the use or effect of another COVID-19 covered countermeasure (e.g., drug or vaccine adjuvant).
  • To qualify as a covered countermeasure, the drug, biologic, or device must be approved or cleared by FDA, or authorized for investigational or emergency use by FDA, for COVID-19-related purposes.
  • Respiratory protective devices must be approved by the National Institute for Occupational Safety and Health (NIOSH).

Covered Persons. PREP Act liability immunity is available to “covered persons,” defined to include the following:

  • “Manufacturers,” which is broadly defined to include any contractor or subcontractor of a manufacturer; a supplier or licenser of any product, intellectual property, service, research tool, or component or other article used in the design, development, clinical testing, investigation, or manufacturing of a covered countermeasure; and any or all of the parents, subsidiaries, affiliates, successors, and assigns of a manufacturer.
  • “Distributors,” which is defined to include any entity engaged in the distribution of covered countermeasures, such as manufacturers, repackers, common and contract carriers, own-label and private label distributors, jobbers, brokers, warehouses, wholesalers, and retail pharmacies.
  • “Program planners,” which can include state or local governments and private sector employers or groups that supervise or administer a program, establish standards, or provide policy guidance relating to a covered countermeasure.
  • “Qualified persons,” which includes persons authorized to prescribe, administer, or dispense covered countermeasures, such as physicians, nurses, pharmacists, technicians, and other healthcare providers.

Recommended Activities. PREP Act liability immunity is available to covered persons engaged in “recommended activities,” including the following:

  • The manufacture, testing, development, distribution, administration, and use of the covered countermeasures.
  • Administration of covered countermeasures includes not only physical administration of products and services, but also activities and decisions directly relating to public and private delivery, distribution and dispensing of the covered countermeasures, management and operation of covered countermeasures programs, or management and operation of locations for purpose of distributing and dispensing covered countermeasures.

Limitations

The Declaration also includes limitations on liability immunity. Most significantly, the Declaration states that liability immunity is only available for recommended activities involving covered countermeasures that are related to “(a) present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, or memoranda of understanding or other federal agreements; or (b) activities authorized in accordance with the public health and medical response of the Authority Having Jurisdiction to prescribe, administer, deliver, distribute, or dispense the Covered Countermeasures following a Declaration of an emergency.”

As a result, in order to qualify for PREP Act immunity, distribution of the countermeasures must be coordinated with federal, state, or local government. According to the HHS Advisory Opinion, covered activities “can be authorized through, among other things, guidance, requests for assistance, agreements, or other arrangements.” Documenting that authorization in writing is critical.

Issues That May Occur Under the PREP Act

  • Although PREP Act immunity is broad, it is not unlimited—injuries from willful misconduct are precluded and injuries for activities ancillary to covered countermeasures may not be covered. Additionally, the PREP Act does not protect against federal enforcement actions (e.g., FDA enforcement actions).
  • As noted above, FDA has withdrawn, modified, or limited EUAs for certain COVID-19-related medical products. If an EUA has been withdrawn, the product covered by the EUA no longer qualifies as a “covered countermeasure” and, therefore, activities related to the product will no longer be eligible for PREP Act immunity.
  • There may be geographical limitations to the immunity, which should be considered in connection with international operations and distribution.
  • Immunity is not determined until a claim is submitted to the HHS-administered Countermeasures Injury Compensation Program. Therefore, coverage is not knowable until a serious injury has occurred, making it difficult for companies to evaluate in advance liability exposure for the research and development, manufacture, and distribution of medical products and services.

How We Can Help

Morgan Lewis helps companies determine the scope of their eligibility, consider documentation that may assist is securing immunity, and draft and negotiate EUAs, government contracts, and other similar documents that are critical to coverage under the PREP Act. We also provide legal and regulatory strategy and counsel on product liability risks and ongoing HHS/FDA/CLIA and related regulatory and legal compliance obligations for COVID-19-related medical products, as well as draft and negotiate collaboration and other commercial agreements between companies partnering on COVID-19-related medical products.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. Find resources on how to cope with the post-pandemic reality on our NOW. NORMAL. NEXT. page and our COVID-19 page to help keep you on top of developments as they unfold. If you would like to receive a digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts, and download our COVID-19 Legal Issue Compendium.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Michele Buenafe
Kathy Sanzo
Stephen Ruscus

Philadelphia
John Lavelle