The Public Readiness and Emergency Preparedness (PREP) Act: Liability Protection for Suppliers of COVID-19 Countermeasures

To help our clients navigate the coronavirus (COVID-19) crisis, Arnold & Porter has established a Coronavirus Task Force covering a wide range of issues and challenges. Subscribe to our "Coronavirus (COVID-19)" mailing list to receive our latest client Advisories and register for upcoming webinars.

Introduction

Given the ongoing public health crisis, companies working to provide products and services to support the US response to the COVID-19 pandemic should be aware of an important liability protection: the 2005 Public Readiness and Emergency Preparedness Act (PREP Act), codified at 42 USC §247d-6d. The PREP Act provides that in the event the Secretary of the Department of Health and Human Services (HHS) makes a determination that a threat to health constitutes, or in the future may constitute, a public health emergency, the Secretary may make a declaration with respect to the manufacture, testing, development, distribution, administration, or use of one or more "Covered Countermeasures." Pursuant to the PREP Act, such a declaration provides immunity from liability to certain entities and individuals for claims of loss arising out of the administration or use of such Covered Countermeasures.¹ As described in this Advisory, a PREP Act Declaration has been issued to provide liability immunity for activities related to medical countermeasures against COVID-19, effective as of February 4, 2020.²

What is the scope of PREP Act immunity?

The PREP Act provides immunity for claims of loss brought against any entity or individual covered by a PREP Act Declaration. Immunity under the PREP Act covers claims that have a "causal relationship" with the design, development, clinical testing or investigation, manufacture, labeling, distribution, formulation, packaging, marketing, promotion, sale, purchase, donation, dispensing, prescribing, administration, licensing, or use of the Covered Countermeasure.³ A "Covered Countermeasure" also includes certain drugs, biological product, or medical devices that may be designated by the Secretary.⁴ The losses covered include, but are not limited to, claims for:

• death;
• physical, mental, or emotional injury, illness, disability, or condition;
• fear of physical, mental, or emotional injury, illness, disability, or condition, including any need for medical monitoring; and
• loss of or damage to property, including business interruption loss.⁵

The PREP Act's liability immunity applies to "Covered Persons," which include manufacturers, distributors, program planners, qualified persons, along with their officials, agents, and employees, as well as the United States.⁶  The PREP Act further defines these terms as described below.⁷

• 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.
• A program planner means a state or local government, including an Indian tribe; a person employed by the state or local government; or other person who supervises or administers a program with respect to the administration, dispensing, distribution, provision, or use of a Covered Countermeasure, including a person who establishes requirements, provides policy guidance, or supplies technical or scientific advice or assistance or provides a facility to administer or use a Covered Countermeasure in accordance with the HHS Declaration. Under this definition, a private sector employer or community group or other "person" can be a program planner when it carries out the described activities.
• A qualified person means a licensed health professional or other individual authorized to prescribe, administer, or dispense Covered Countermeasures under the law of the state in which the Covered Countermeasure was prescribed, administered, or dispensed; or a person within a category of persons identified as qualified in the Declaration. Under this definition, the Secretary can describe in the Declaration other qualified persons, such as volunteers, who are Covered Persons.

Limitations on Immunity From Liability Under the PREP Act

Although PREP Act immunity protections are quite broad, they are not available for death or "serious physical injury" proximately caused by "willful misconduct."⁸ Under the PREP Act:

• A Serious Physical Injury is one that is life-threatening; results in permanent impairment of a body function or permanent damage to a body structure; or necessitates medical or surgical intervention to preclude permanent impairment of a body function or permanent damage to a body structure.⁹
• Willful Misconduct is defined as an act or omission that is taken: (1) intentionally to achieve a wrongful purpose; (2) knowingly without legal or factual justification; and (3) 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. In order to establish willful misconduct, a plaintiff has the burden of proving all three conditions by clear and convincing evidence. ¹⁰

Importantly, under the PREP Act "willful misconduct" cannot be found against a manufacturer or distributor for actions regulated under the Public Health Service Act or the Federal Food, Drug, and Cosmetic Act, if the Secretary or Attorney General does not initiate an enforcement action, or if an enforcement action is initiated and resolved without imposing a criminal, civil, or administrative penalty.¹¹ Moreover, a "program planner" or "qualified person" will not be found to have engaged in "willful misconduct" if they act in accordance with applicable directions issued by the Secretary regarding administration and use of a countermeasure, provided either the Secretary or a State or local health authority is notified about the serious injury or death from the Covered Countermeasure within seven days of its discovery. ¹²

PREP Act immunity is not available for claims based on activities that fall outside the scope of the applicable Declaration, or do not present a "causal relationship" with the "administration or use" of a Covered Countermeasure. ¹³ Indeed, a New York State Court has held that immunity is not available for claims where an individual was not administered a vaccine. In a 2014 case relating to the H1N1 influenza pandemic, a wrongful death action was brought on behalf of a decedent who had allegedly been brought the Defendant hospital for an unrelated surgery, contracted the H1N1 influenza, and was not provided the vaccine. In the early stages of the H1N1 crisis, the vaccine was in short supply. Responding to this shortage, various hospitals, including the Defendant Hospital, were instructed to follow guidelines, set by the Center for Disease Control and the New York State and City Departments of Health, as to which individuals would receive the vaccine. The Defendant hospital asserted that the New York State Courts lacked subject matter jurisdiction premised on the PREP Act. Focusing on the words of the statute itself, the Court denied the motion, finding that the act "consistently speaks of administering or using the countermeasure" and therefore the "the vaccine must be administered to or used by a patient." Casabianca v Mount Sinai Medical Center, 2014 WL 10413521, No. 112790/2010, (N.Y. Sup. Ct. Dec. 02, 2014).

Immunity is also not available for foreign claims where the US has no jurisdiction, although immunity may be available for administration or use of a Covered Countermeasure outside the United States if the claim is based on events that take place in US territory or there is another link to the US that makes it reasonable to apply US law to the claim.

The COVID-19 PREP Act Declaration

As noted, on March 10, 2020, the HHS Secretary issued a PREP Act Declaration for medical countermeasures against COVID-19¹⁴, that is effective as of February 4, 2020. The Declaration will be published in the Federal Register shortly.  In the Declaration, the HHS stated the determination that the spread of SARS-CoV-2 or a virus mutating therefrom and the resulting disease, COVID-19, constitutes a public health emergency for purposes of the Declaration under the PREP Act. Pursuant to the Declaration, the Covered Countermeasures are:

. . . .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.

In general, these are products that are approved, cleared, or licensed by FDA; authorized for investigational use, i.e. an Investigational New Drug (IND) or Investigational Device Exemption (IDE), by FDA, authorized under an EUA by FDA, or otherwise permitted to be held or used for emergency use in accordance with federal law. This may include an unapproved diagnostic, drug or device that is intended for emergency use and shipped and held by a government agency or someone working on that agency's behalf for use only when that use is authorized.

Liability immunity is afforded to Covered Persons only for "Recommended Activities" involving Covered Countermeasures that are related to:

• Present or future federal contracts, cooperative agreements, grants, other transactions, interagency agreements, memoranda of understanding, or other federal agreements; or
• 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.

The Declaration defines "Authority Having Jurisdiction" to mean 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. A "Declaration of Emergency" is defined as 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 Declaration in support of an Emergency Use Authorization under Section 564 of the Federal Food, Drug, and Cosmetic Act.

With respect to governmental program planners only, liability immunity is afforded only to the extent such program planners obtain Covered Countermeasures through voluntary means, such as (1) donation; (2) commercial sale; (3) deployment of Covered Countermeasures from federal stockpiles; or (4) deployment of donated, purchased, or otherwise voluntarily obtained Covered Countermeasures from state, local, or private stockpiles. 

Compensation for Injuries Under the PREP Act

The PREP Act provides for the establishment of the "Covered Countermeasure Process Fund" for purposes of providing compensation to eligible individuals for serious physical injury or death directly caused by the administration or use of a Covered Countermeasure.¹⁵ If funds are appropriated, compensation may be available to eligible requesters under the Countermeasures Injury Compensation Program (CICP).

An injured party may seek judicial intervention in the District Court for the District of Columbia for Serious Physical Injury proximately caused by willful misconduct.¹⁶ However, this remedy is limited to situations in which the injured party has either exhausted their remedies pursuant the Covered Countermeasure Process Fund, no funds have been appropriated to the compensation program, the Secretary does not make a final determination on the individual's request for compensation within 240 days, or the covered individual qualifies for compensation and elects not to accept compensation under the PREP Act.¹⁷Any award of damages will be reduced by the amount of collateral source benefits such as health insurance and workers' compensation. The court's award of noneconomic damages, such as losses for physical and emotional pain, loss of consortium, and any other nonpecuniary losses, are limited to only an amount directly proportional to the percentage of responsibility of a defendant for the harm to the plaintiff.¹⁸

To date, despite the Casabianca case noted above, the small amount of litigation under the PREP Act has resulted in support for the core immunity provisions. For example, in one case against a county health department in New York State, alleging absence of parental informed consent for an H1N1 vaccination, the appellate court dismissed the plaintiff's claims, finding that the federal PREP Act preempted the claims under state law and that the breadth of liability immunity provided under the PREP Act precluded the plaintiff's claims of negligence and battery. Parker v. St. Lawrence Cty. Pub. Health Dep't, 954 N.Y.S.2d 259, (App. Div. 3d. 2012). In another case, also relating to an H1N1 vaccination, the parties did not dispute that the manufacturer was protected by the PREP Act, nor did they allege that it engaged in willful misconduct. As a result, the federal Eastern District Court of Missouri dismissed the claim against the manufacturer. Finding that it had no jurisdiction over plaintiffs' remaining claims, the federal court remanded the case to state court for further consideration of the plaintiffs' claims. Kehler v. Hood, No. 4:11CV1416, 2012 WL 1945952, (E.D. Mo. May 30, 2012).