The recently enacted Public Readiness and Emergency Preparedness Act1 ("PREP Act") provides immunity from tort liability claims (except for willful misconduct) to individuals and organizations involved in the manufacture, distribution, or dispensing of certain medical countermeasures against specified diseases. This immunity is broad and applies to any federal or state law claim for loss that has a causal relationship with the administration to, or use by, an individual of a Covered Countermeasure [defined below]. A "loss" includes death, personal injury, emotional injury, property damage, business interruption and fear of personal injury. The immunity to liability applies without regard to the date of the occurrence, presentation or discovery of the loss.
The purpose of the PREP Act is to encourage innovation and risk taking in order to solve problems arising in situations of great stress and peril, such as the current COVID-19 pandemic. The PREP Act's purpose is to avoid stasis, and its motto is: Audaces fortuna iuvat. This memorandum presents a brief description of the main provisions of the PREP Act as applied to COVID-19. Each individual case should be analyzed on its own facts to ensure that the PREP Act applies and is protective of the case and related activities.
Activation of the PREP Act for a specified disease requires a declaration by the Secretary of the United States Department of Health and Human Services ("HHS") after a determination that a disease constitutes a public health emergency. The Secretary has made such a determination with respect to COVID-19. Attached is the declaration (the "Declaration") of the Secretary of HHS, Alex M. Azar, issued on March 10, 2020, effective February 4, 2020, pursuant to section 319F-3 of the Public Health Service Act (42 U.S.C. 247d-6d), to provide liability immunity through October 1, 2024 for activities related to medical countermeasures against COVID-19 caused by SARS- CoV-2 or a virus mutating therefrom.
"Covered Persons" are those persons who are afforded liability immunity under the PREP Act and the Declaration (Section V). Covered Persons include, among others, the United States, and "manufacturers," "distributors," "program planners," "qualified persons," and their officials, agents, and employees, as those terms are defined in the PREP Act. The definitions are broad: "Manufacturers" include a contractor or subcontractor of a manufacturer, and 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" includes persons or entities 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; and "qualified person[s]" includes licensed health care professionals and other individuals authorized to prescribe, administer or dispense Covered Countermeasures under the law of the state in which the Covered Countermeasure was prescribed, administered or dispensed.
In addition, pursuant to the Declaration, the following additional persons are "qualified persons:"
(a) Any person authorized in accordance with the public health and medical emergency response of the Authority Having Jurisdiction, as described in Section VII below, to prescribe, administer, deliver, distribute or dispense the Covered Countermeasures, and their officials, agents, employees, contractors and volunteers, following a Declaration of an emergency;
(b) any person authorized to prescribe, administer, or dispense the Covered Countermeasures or who is otherwise authorized to perform an activity under an Emergency Use Authorization in accordance with Section 564 of the FD&C Act; and
(c) any person authorized to prescribe, administer, or dispense Covered Countermeasures in accordance with Section 564A of the FD&C Act.
The terms "Authority Having Jurisdiction" and "Declaration of Emergency" have the following meanings (see Section VII of the Declaration):
i. The Authority Having Jurisdiction means the public agency or its delegate that has legal responsibility and authority for responding to an incident, based on political or geographical (e.g., city, county, tribal, state, or federal boundary lines) or functional (e.g., law enforcement, public health) range or sphere of authority.
ii. A Declaration of Emergency means any Declaration by any authorized local, regional, state, or federal official of an emergency specific to events that indicate an immediate need to administer and use the Covered Countermeasures, with the exception of a federal Declaration in support of an Emergency Use Authorization under Section 564 of the FD&C Act unless such Declaration specifies otherwise.
The Declaration provides liability immunity for any "Recommended Activity". The Declaration (Section II) states that liability immunity, as prescribed in the PREP Act and under the conditions stated in the Declaration, is in effect for the Recommended Activities described in Section III. Section III states that "Recommended Activities" are: the manufacture, testing, development, distribution, administration, and use of Covered Countermeasures.
Section VI of the Declaration defines "Covered Countermeasures" 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 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.
The Declaration does state certain limitations to its protections.
As noted in the Declaration (Section VI): Covered Countermeasures must be "qualified pandemic or epidemic products," or "security countermeasures," or drugs, biological products, or devices authorized for investigational or emergency use, as those terms are defined in the PREP Act, the FD&C Act, and the Public Health Service Act.
In addition, as stated in Section VII of the Declaration: "[L]iability immunity is afforded 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.
No filing or registration is needed to obtain the immunity provided for under the PREP Act. The Declaration itself specifies the conditions under which the Declaration will provide immunity, such as the effective dates and geographic area for which immunity will be available. Immunity is not available for claims that fall outside these conditions. Immunity is not available for claims of loss unrelated to the design, development, testing, manufacture, labeling, distribution, formulation, labeling, packaging, marketing, promotion, sale, purchase, donation, dispensing, prescribing, administration, licensing or use of a countermeasure recommended in the Declaration.
We note that immunity from liability is not available for foreign claims where the U.S. has no jurisdiction. Immunity may be available for administration or use of a countermeasure outside the United States if the claim were based on events that take place in U.S. territory or if there were another link to the U.S. that would make it reasonable to apply U.S. law to the claim.
Our attorneys continue to monitor the impact of coronavirus on the markets, and we have developed a dedicated COVID-19 Resource Library to provide insights on regulations and/or changes to the law. Please contact your Pryor Cashman attorney for specific advice or counsel.
1 Enacted on December 30, 2005, as Pubic Law 109-148, Division C, Section 2, amending the Public Health Service (PHS) Act, by adding Section 319F-3 (liability immunity) and Section 319F-4 (compensation program); codified at 42 U.S.C. 247d-6d and 42 U.S.C. 247d-6e, respectively.
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