Key Takeaways

• Effective March 17, 2020, manufacturers, distributors, and retailers helping to confront the COVID-19 pandemic will have broad immunity from civil liability provided under the Secretary of Health and Human Services’ invocation of the Public Readiness and Emergency Preparedness Act (PREPA)

• Significantly, the complete clinical picture regarding COVID-19 is not fully understood and novel countermeasures being used will likely cause unintended side effects, leading to claims for catastrophic injury and even wrongful death

Tesla engineers are building ventilators for COVID-19 patients out of car parts; automakers like GM are taking steps to increase production of essential medical equipment; and Johnson & Johnson is set to begin clinical trials for a COVID-19 virus. What has caused so many manufacturers to initiate these efforts in light of the potential liabilities—particularly for manufacturing a product outside of their usual product lines? PREPA may be the answer.

In an effort to encourage the design, development and use of products, including pharmaceuticals, biologics and medical devices to combat the COVID-19 pandemic, on March 17, 2020, the Secretary of Health and Human Services declared a public health emergency and invoked the Public Readiness and Emergency Preparedness Act (PREPA). Declaring a public health emergency under PREPA provides legal immunity for manufacturers, distributors, and retailers operating mainly in the in the pharmaceutical and medical device spaces. Notwithstanding the broad range of persons and activities covered by PREPA, there are strict categories as to what is protected.

What is PREPA?

PREPA, 42 U.S.C. § 247d-6d (2005), provides certain individuals and entities (“covered persons”) immunity from liability under federal or state law during a “public health emergency” as declared by the Secretary of Health and Human Services. Liability protections extend to any claim of loss caused by, arising out of, relating to, or resulting from the manufacture, distribution, administration, or use of medical countermeasures (“covered countermeasures”), except for claims involving “willful misconduct.”

Immunity attaches only if the covered countermeasure:

• Was administered for the category or categories of diseases, health conditions, or threats to health specified in the declaration;
• Was administered within the geographic area specified in the declaration; and
• Was administered during the effective period of the emergency declaration.

As a complement to the immunity protections, PREPA also provides for a no-fault compensation program. The Countermeasures Injury Compensation Program, which is administered by the Health Resources and Services Administration, provides benefits to individuals experiencing serious physical injuries or death directly caused by the use of covered countermeasures identified by the Secretary. Since enactment, PREPA declarations have included manufacturers and distributors of countermeasures, including drugs, vaccines, diagnostics, and devices for public health emergencies such as Ebola, Zika, influenza, and anthrax.

What is the COVID-19 declaration?

On March 17, 2020, the Secretary of Health and Human Services invoked PREPA to provide liability immunity for activities related to medical countermeasures against COVID-19 caused by SARS-CoV-2 (85 Fed. Reg. 15198-01). This declaration is retroactive to February 4, 2020 and extends liability through October 1, 2024, or the final day the emergency declaration is in effect. The declaration covers not only the COVID-19 virus but also viruses mutating from SARS-CoV-2. There is no geographic limit.

What activities are protected under the COVID-19 declaration?

The COVID-19 declaration extends liability protections for “recommended activities” related to medical countermeasures against COVID-19, which is defined as “the manufacture, testing, development, distribution, administration, and use of the covered countermeasures.”

What is a covered countermeasure under the COVID-19 declaration?

The COVID-19 declaration defines covered countermeasures as any antiviral, drug, biologic, diagnostic, device, or vaccine “used to treat, diagnose, cure, prevent, or mitigate COVID-19, or the transmission of SARS-CoV-2 or a virus mutating therefrom, or any device used in the administration of any such product, and all components and constituent materials of any such product.” Such covered countermeasures must be “qualified pandemic or epidemic products,” or “security countermeasures,” or “drugs, biological products, or devices authorized for investigational or emergency use.” “Qualified pandemic or epidemic products” is also broadly defined as “a product manufactured, used, designed, developed, modified, licensed or procured to diagnose, mitigate , prevent, treat or cure a pandemic or epidemic” or to “limit the harm such pandemic or epidemic might otherwise cause.”

Even with these broad definitions, it is questionable whether a product originally designed for another use is still covered if the product is repurposed to serve as a covered countermeasure. This appears to be part of the hesitation by 3M, when it backed off of a promise to ramp up production of N95 respirators by repurposing respirators originally designed for the construction industry. In response to 3M’s concerns, Congress extended legal immunity to manufacturers of respirators on March 18, 2020, just one day after the COVID-19 Declaration. The Families First Coronavirus Response Act, H.R. 6201, expanded the definition of covered countermeasures to include “a personal respiratory protective device … approved by the National Institute for Occupational Safety and Health” to combat the COVID-19 pandemic.

Who are covered persons under the COVID-19 declaration?

Covered persons who are afforded immunity under the COVID-19 declaration are “manufacturers,” “distributors,” “program planners,” “qualified persons,” and their officials, agents, and employees, as those terms are defined by PREPA, and the United States. These terms are defined in PREPA and are broad in their reach. For example:

• A manufacturer includes “a 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 the parents, subsidiaries, affiliates, successors, and assigns of a manufacturer.”
• A distributor means “a person or entity engaged in the distribution of drugs, biologics, or devices, including but not limited to: Manufacturers; re-packers; common carriers; contract carriers; air carriers; own-label distributors; private-label distributors; jobbers; brokers; warehouses and wholesale drug warehouses; independent wholesale drug traders; and retail pharmacies.”

The COVID-19 declaration also covers state-licensed health professionals authorized to prescribe, administer, or dispense covered countermeasures, and their officials, agents, employees, contractors, and volunteers.

What legal immunity does PREPA provide?

PREPA provides immunity for any claim under federal or state law for damage “caused by, arising out of, relating to, or resulting from the administration to or the use by an individual of a Covered Countermeasure.” This includes claims for wrongful death, personal injury, emotional damage, medical monitoring, property damage, and business interruption loss.

PREPA creates a rebuttable presumption that immunity applies to covered persons engaged in recommended activities pertaining to covered countermeasures. PREPA states “[T]here shall be a rebuttable presumption that any administration or use, during the effective period of the emergency declaration … of a  Covered Countermeasure shall have been for the category or categories of diseases, health conditions, or threats to health with respect to which such declaration was issued.” Thus, the burden is on the plaintiff to show that immunity does not attach.

The COVID-19 declaration provides immunity to covered persons only for recommended activities involving  covered countermeasures that are related to: “(a) Present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, 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.” Thus, manufacturers and distributors need to assess immunity on a case-by-case basis.

PREPA does not extend immunity to covered persons engaged in “willful misconduct.” A plaintiff alleging willful misconduct must prove by clear and convincing evidence an “act or omission that is taken—(i) intentionally to achieve a wrongful purpose; (ii) knowingly without legal or factual justification; and (iii) in disregard of a known or obvious risk that is so great as to make it highly probable that the harm will outweigh the benefit.”

If suit alleging willful misconduct is initiated, it “shall be filed and maintained only in the United States District Court for the District of Columbia” and requires a verified complaint and an affidavit of a non-treating physician attesting to the causal relationship between the covered countermeasure and the alleged damages. If the complaint is not verified in accordance with the act, it is subject to dismissal and the statute of limitations is not tolled until the complaint is appropriately verified. In an effort to preclude joint and several liability, the act also provides that noneconomic damages may only be awarded in an amount directly proportional to the percentage of responsibility of a particular defendant.

What are the net benefits for manufacturers?

Despite the technical regulatory language in PREPA and the COVID-19 declaration, manufacturers, distributors, and retailers involved in combatting the COVID-19 pandemic have been granted broad protection from tort claims. This act creates challenges to bringing a claim by raising the standard of conduct required to prevail, invoking federal jurisdiction in a specific federal court and requiring that the complaint be verified and that a physician attest to the causal relation between the covered countermeasure and the alleged damages. This is particularly significant because the complete clinical picture regarding SARS-CoV-2 is not fully understood and novel countermeasures being used to save millions of people affected by the pandemic will likely cause unintended side effects. The plaintiffs’ bar historically exploits such situations by bringing lawsuits against manufacturers, by second-guessing their conduct, and arguing any aspect of the regulatory scheme open to interpretation. This not only consumes valuable time and billions of dollars, but often tragically results in slowing or stopping the development and marketing of life-saving treatments. Manufacturers should closely consider whether their activities related to medical countermeasures against COVID-19 will qualify for immunity under PREPA.

If you are not sure whether or not your company is immune, reach out to a lawyer for advice and contact your insurance carrier to assess these risks.