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04.29.2020 | Legal Advisory

Practical Guidance for Medical Manufacturers, Health Care Providers, and Real Estate Owners Assisting With the Emergency Response to COVID-19

Over the last few weeks, many private sector entities have jumped into the marketplace to assist with the COVID-19 emergency response. Some manufacturers have pivoted from their normal activities to begin making a new product (such as non-surgical masks and ventilators), while others have begun developing diagnostics and vaccines. Still others, including some real estate owners, have considered donating their facilities to use as official testing locations to assist municipalities with the coordinated COVID response. In deciding whether to move forward, these entities have considered what, if any, liability they might face if something goes wrong.

On April 14, 2020, the U.S. Department of Health and Human Services (HHS) Office of General Counsel attempted to answer that question by issuing an advisory opinion (the “Advisory Opinion”) setting forth its current views on the scope of immunity under the so-called Public Readiness and Emergency Preparedness Act (“PREP Act”). The PREP Act authorizes the Secretary of HHS to issue a declaration that immunizes certain “Covered Persons” for claims arising out of the administration or use of “Covered Countermeasures” used to treat certain diseases that pose a credible health risk. HHS issued such a Declaration for COVID-19 on March 10, 2020. Our legal advisory discussing HHS’s Declaration can be found here.

Following the March 10 Declaration, HHS received a flood of inquiries regarding the extent to which particular products might be covered and under what circumstances. The Advisory Opinion attempts to answer some of those questions. While the Advisory Opinion by HHS does not have the force of law, it serves as useful guidance for medical device manufacturers and distributors who are developing countermeasures to treat or diagnose COVID-19.

The Advisory Opinion provides guidance on: (1) the scope of PREP Act immunity; (2) what qualifies as a Covered Countermeasure; (3) who is considered a Covered Person; (4) the need to take reasonable precautions; and (5) available compensation for injuries.

Scope of PREP Act Immunity

The Advisory Opinion indicates that Covered Persons and entities that comply with the declaration and “reasonably believe” their conduct was covered at the time it occurred will not lose PREP Act immunity. This applies even if the medical product at issue is ultimately found not to be a Covered Countermeasure or if the person at issue is not a Covered Person. If the requirements of the PREP Act and the declaration are met, “immunity covers claims for loss sounding in tort or contract, as well as claims for loss relating to compliance with local, state, or federal laws, or other legal requirements.”

PREP Act immunity is not absolute, however. HHS has now provided examples of situations in which immunity will not apply: (1) to federal enforcement actions – whether civil, criminal, or administrative; (2) to suits for claims under federal law for equitable relief; and (3) to claims that are not related to property damage or personal injury.

Covered Countermeasures

Under HHS’s March 10th Declaration, Covered Countermeasures are defined as any: “antiviral, any other drug, any biologic, any diagnostic, any other device or any vaccine, used to treat, diagnose, cure, prevent, or mitigate COVID-19 … or any device used in the administration of any such product, and all components and constituent materials of any such product.” The CARES Act amended the PREP Act to add respirators to the list of Covered Countermeasures so long as they are approved by the National Institute for Occupational Safety and Health (“NIOSH”) and are subject to an Emergency Use Authorization (“EUA”).

Covered Countermeasures also include a “qualified pandemic or epidemic product.” To fall within the definition of “qualified pandemic or epidemic product,” a product must:

1. Be used for COVID-19; and

2. Must be

• Approved, licensed, or cleared by FDA;
• Authorized under an EUA;
• Described in an Emergency Use Instruction (“EUI”); or
• Used under either an Investigational New Drug (“IND”) application or an Investigational Device Exemption.

The Advisory Opinion notes that the number of products approved, cleared, or used to treat COVID-19 are too numerous to list, but links to an appendix of Covered Countermeasures subject to an EUA. HHS is regularly updating the appendix, but the Advisory Opinion notes that there may be a lag between issuance of an EUA and the product’s appearance on the list. Accordingly, the absence of a particular product from the appendix does not necessarily mean it is not a Covered Countermeasure subject to an EUA.

Covered Person

The Act provides immunity to Covered Persons for certain activities involving a Covered Countermeasure. The definition of Covered Persons reaches manufacturers, distributors, program planners, and other qualified persons, as defined by the Act. In its guidance, HHS sought to clarify the meanings of “Program Planner” and “Qualified Person.” Under the Act, Program Planners include state and local governments, or other persons that supervise or administer a program concerning the use or distribution of a Covered Countermeasure. Program Planners might also include those who donate their facility to use in connection with the distribution or administration of a Covered Countermeasure.

The Advisory Opinion notes that in certain circumstances, private sector employers or community groups can also be considered Program Planners. Additionally, Qualified Persons can include certain licensed health care providers and individuals identified by the Secretary in the Declaration or authorized by an Authority Having Jurisdiction to administer, deliver, or use certain Covered Countermeasures. In other words, an Authority Having Jurisdiction (such as a public agency or its city, state, or local delegate) has broad powers to extend immunity to other persons or entities as part of the public health emergency response.

HHS emphasized that while it is one such Authority Having Jurisdiction, it is not the only Authority Having Jurisdiction. Therefore, other public authorities such as federal, state, city, or local agencies that have legal responsibility to coordinate and respond to the COVID-19 pandemic can extend PREP Act immunity by authorizing a person or entity to “prescribe, administer, deliver, distribute, or dispense the Covered Countermeasures.” Again, the Agency reiterated that an entity will not lose immunity, even if that entity is not a Covered Person, if the entity reasonably believes that it was a Covered Person.  

Reasonable Precautions

PREP Act immunity is broad – generally, “a Covered Person is immune from liability for all claims for loss except for willful misconduct that proximately caused death or serious injury.” Suits alleging exception to PREP Act immunity must be brought before a three-judge panel in the U.S. District Court for the District of Columbia. On top of the already high bar for a finding of willful misconduct, HHS noted two situations in which the willful misconduct exception does not apply.

1. The acts or omissions of a Manufacturer or Distributor will not constitute willful misconduct if neither the HHS Secretary nor the Attorney General has initiated an enforcement action, or an enforcement action has been resolved without a covered remedy.
2. Where program planners or qualified persons act in a way that is consistent with HHS’s directions, guidelines, and recommendations and proper notice requirements are met, acts or omissions will not constitute willful misconduct.

Nonetheless, HHS strongly encourages Covered Persons to document all reasonable precautions taken to safely use or distribute the Covered Countermeasures. Accordingly, those considering entering the marketplace or donating a facility to use in connection with the administration or use of a Covered Countermeasure would be wise to include in their contracts and/or otherwise document the steps they have taken to ensure they fit the definition of Covered Persons under the Act (either by delegation as such by an Authority Having Jurisdiction or otherwise) and that the product in question satisfies the definition of a Covered Countermeasure.

Compensation for Injuries

The PREP Act provides “a no-fault, speedy compensation system” for those who have been seriously injured or died as a direct result of a Covered Countermeasure through the Countermeasures Injury Compensation Program (CICP). CICP will pay for reasonable and necessary medical benefits, as well as lost wages to eligible recipients. However, HHS emphasized that the CICP is “a prayer of last resort” and that benefits are reduced by amounts paid out by the likes of health insurance and workers’ compensation. Claims such as emotional injury, fear of injury, and business losses will are not compensable.

We are monitoring the evolving situation and will keep you updated on future developments. 

This advisory was prepared by Nutter’s Product Liability and Litigation Practice groups. For more information, please contact David Ferrera, Sarah Kelly or your Nutter attorney at 617.439.2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.