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The PREP Act and COVID-19: Immunity for Private Businesses and Individuals

Written by: Steven R. Mercadante

4/7/2020

With increasing frequency, the private sector is helping to ease the burden felt by America’s health systems due to COVID-19.  In order to safeguard the interests of those asked to answer this call to service, the Secretary of Health and Human Services triggered the protections of the Public Readiness and Emergency Preparedness Act (the PREP Act).  On March 10, 2020, Secretary Azar issued a declaration providing liability immunity for activities related to medical countermeasures against COVID-19 effective as of February 4, 2020.[1]  Understanding the protection offered by this declaration is critical to ensure that you and your business avoid exposure to liability while offering products and services in response to COVID-19.

PREP Act Immunity

The intent of the PREP Act is to remove the risks that may otherwise discourage companies and individuals from contributing products and services during a health emergency. Specifically, the Act grants the Secretary of HHS the authority to issue a declaration limiting the liability of “Covered Persons” against claims of loss resulting from the manufacture, distribution, administration, or use of “Covered Countermeasures.”  These terms are defined in the section entitled Eligibility Requirements below.[2]

The immunity created by the Act limits all claims for any type of loss caused by, arising out of, relating to, or resulting from, the administration or use of a covered countermeasure, such as death, physical, mental or emotional injury, fear of such injury, or loss of or damage to property, including business interruption loss.[3]  The immunity applies only during the effective period of the Secretary’s declaration, which currently extends to October 1, 2024.  Additionally, the Secretary’s declaration precludes claims related to the manufacture, delivery, distribution dispensing, or management and operation of countermeasure programs at distribution and testing sites.[4]

While immunity for eligible individuals and entities is broad, the Act does not prevent liability for death or serious physical injury caused by willful misconduct.  However, there can be no willful misconduct found against a manufacturer or distributor if HHS refuses to take an enforcement action or terminates or settles an enforcement action without imposing a criminal, civil, or administrative penalty.  Additionally, program planners or licensed health professionals can avoid willful misconduct so long as they act in accordance with applicable directions, guidelines, or recommendations issued by the HHS.[5]  Claims in response to activities that fall outside the scope of the Secretary’s declaration or for losses unrelated to the manufacture, distribution, administration, or use of Covered Countermeasures are also ineligible for immunity.[6]  The Secretary’s declaration also limits immunity to Covered Countermeasures related to present or future federal contracts, grants, and other federal agreements.[7]

Eligibility Requirements

To be eligible for the protection against liability granted by the PREP Act, you or your business must be a Covered Person.  Covered Persons include manufacturers, distributors, program planners, administrators, and licensed health professionals authorized to prescribe, administer, or dispense Covered Countermeasures.  Covered Persons also include officials, agents, and employees of these entities.  The protected entities are further defined as follows:

  • “Manufacturers” include contractors and subcontractors of a manufacturer, as well as a supplier or licenser of any product, intellectual property, service, research tool, or component used in the design, development, clinical testing, investigation, or manufacturing of a Covered Countermeasure.
  • “Distributors” include a person or entity engaged in the distribution of drugs, biologics, or devices, such as manufacturers, re-packers, common carriers, brokers, warehouses, and retail pharmacies.
  • “Program Planners” include state or local governments, and persons employed by the state or local government.  Program Planners also include persons who supervise programs that administer, dispense, distribute, or provide Covered Countermeasures.

If you or your business qualify as a Covered Person, you must also engage in the design, development, testing, manufacturing, labeling, distribution, formulation, packaging, marketing, sale, purchase, donation, dispensing, licensing, or administration of Covered Countermeasures in order to be eligible for immunity from liability.  Pursuant to the Secretary’s declaration, Covered Countermeasures include drugs, biological products, diagnostics, personal respiratory protective devices, and any other drug or device used to treat, diagnose, cure, prevent, or mitigate COVID-19 or its transmission.  Devices used in the administration of any such product are included as well.[8]

  • “Drugs” include articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals, articles (other than food) intended to affect the structure or any function of the body of man or other animals, and articles intended for use as a component of any of the above.
  • “Biological product” include a virus, therapeutic serum, toxin or antitoxin, vaccine, blood component or derivative, allergenic product, protein, or analogous product applicable to the prevention, treatment, or cure of a disease or condition of human beings.
  • “Personal respiratory protective device” includes such protective equipment approved by the National Institute for Occupational Safety and Health used during the period beginning on January 27, 2020 and ending on October 1, 2024 in response to the public health emergency.

Furthermore, the PREP Act states that Covered Countermeasures must either be (1) manufactured, used, designed, developed, modified, licensed or procured to diagnose, mitigate, prevent, treat or cure a pandemic or epidemic, or to limit the harm of such pandemic or epidemic, or  (2) intended to enhance the use or effect of these drugs, biological products, or devices.  The FDA must also approve or clear Covered Countermeasures.  Alternatively, the FDA may make exceptions for products used for research and authorize otherwise unapproved products for emergency use.  Beginning in late February, the FDA issued emergency use authorizations for personal protective equipment, ventilators, and in-vitro diagnostics for the detection or diagnosis of COVID-19.[9]

Determining Your Liability

Determining the exposure to liability faced by you or your company first requires an analysis of the services you provide.

  • Are you a manufacturer, distributor, program planner, or licensed professional?
  • Are you or your business designing, developing, testing or distributing Covered Countermeasures, or overseeing the manufacturing or distribution of such products?

Secondly, you must analyze the type of claim brought against you or your business.

  • Is the claim against you or your business a result of activities such as manufacturing, designing, developing, testing, or distributing?
  • Are the activities you or your business engage in within the scope of the HHS declaration?

It is important to remember that the protection from liability granted under the PREP Act does not extend to all activities related to COVID-19.  Rather, the immunity granted by the Act protects only Covered Persons engaged in the design, development, testing, manufacturing, labeling, distribution, formulation, packaging, marketing, sale, purchase, donation, dispensing, licensing, and administration of Covered Countermeasures.  Additionally, amendments to the Secretary’s declaration may alter the applicability of the PREP Act’s immunity to you or your business.  As a result, a thorough analysis of the PREP Act, the definitions therein, and any updates to Secretary Azar’s declaration is recommended before providing products or services in response to the COVID-19 emergency.

 

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