Global Statistics

All countries
135,735,714
Confirmed
Updated on April 10, 2021 1:09 pm
All countries
109,163,969
Recovered
Updated on April 10, 2021 1:09 pm
All countries
2,934,078
Deaths
Updated on April 10, 2021 1:09 pm
Saturday, April 10, 2021

Global Statistics

All countries
135,735,714
Confirmed
Updated on April 10, 2021 1:09 pm
All countries
109,163,969
Recovered
Updated on April 10, 2021 1:09 pm
All countries
2,934,078
Deaths
Updated on April 10, 2021 1:09 pm
Molderizer and Safe Shield

Vaccine Production And State Intervention In The U.S. – Coronavirus (COVID-19)

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During the COVID-19 pandemic, governments across the globe have
become increasingly involved in the private sector.1
State-owned enterprises have long been common in Asia, but the
pandemic has increased their prominence in Europe. In Italy and
Norway, for instance, governments are taking equity stakes in the
airline industry to help distressed companies. Now, with vaccine
manufacturing ramping up, it makes sense that governments would
intervene in the life sciences and pharmaceutical sectors as well.
In our article published earlier this month on, we analyzed the
legal framework for state intervention in vaccine production in
Germany
. Since then, the German government has increased its support for local vaccine
production. But what is happening across the pond in the United
States?

Here, too, the federal government has intervened to ramp up the
vaccine supply. On March 2, 2021, President Biden announced an
historic partnership between Johnson & Johnson (J&J) and
Merck to increase production of J&J’s COVID-19 vaccine.
While this partnership between two pharmaceutical behemoths is
significant in its own right, it also made headlines for the role
government played in brokering the deal. The Biden administration
agreed to pay $268.8 million to upgrade two Merck production
facilities and is helping Merck procure necessary equipment. Of
course, this was not the first time during the Coronavirus crisis
that the federal government has intervened to shape the private
sector’s pandemic response.2] Nevertheless, it is
notable that President Biden is engaging the private sector at this
scale and so soon into his presidency. The Biden
administration’s early approach to state intervention during
the COVID-19 pandemic may portend even greater involvement down the
road, which would present both opportunities and risks for life
sciences companies doing business in the U.S.

The Statutory Framework

Over 90 percent of constitutions in the world contain emergency
clauses, but not the U.S. Constitution.3 Instead, the
federal government’s authority to intervene in a pandemic comes
from a patchwork of statutes and regulations. At the center of this
constellation is the Defense Production Act, 50 U.S.C. § 501
et seq. (DPA). The origins of the DPA trace back to the
War Powers Act of 1941 and 1942, passed during WW2 to give
President Roosevelt more control over the wartime economy. Congress
enacted the DPA in 1950 during the Korean War and has re-authorized
it ever since then-most recently in the John S. McCain National
Defense Authorization Act of 2019. In short, the modern DPA
authorizes the executive branch to mobilize private actors and
allocate resources during moments of national crisis. The president
can compel companies to prioritize orders from the government,
allocate materials/resources, offer loans or loan guarantees, make
purchase commitments, and authorize companies to work together.
Historically, the federal government has used the DPA to procure
defense contracts and respond to natural disasters. For more
information about the DPA, see MoFo’s articles providing a
summary of the Defense Production Act
and
three key takeaways about the DPA
.

 In addition to the DPA, the executive branch derives
authority to respond to public health emergencies from several
other sources. First, the National Emergencies Act, 50 U.S.C.
§ 1601 et seq., allows the president to declare
national emergencies, which essentially unlock statutory powers that the executive
branch cannot otherwise access. President Trump declared the
COVID-19 pandemic a national emergency on March 13, 2020. Second,
the Stafford Act, 42 U.S.C. § 5521 et seq., organizes
federal emergency assistance with respect to state and local
governments. Third, the Pandemic and All-Hazards Preparedness
Reauthorization Act of 2013, 42 U.S.C. ch. 6A § 201 et
seq.
, allows the Food & Drug Administration (FDA) to
prepare and stockpile medical countermeasures (drugs, vaccines, and
devices), and streamlines the FDA’s emergency responsiveness.
Fourth and most recently, the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”) gives the FDA a greater role
in drug/vaccine supply chains. This is not an exhaustive list of
emergency legislation. But when it comes to intervening in
private contracting to boost vaccine production, the DPA is the
most significant legislation.

The Biden Administration’s Response to COVID-19

On his very first day in office, President Biden passed
Executive Order 13987. E.O. 13987 established the position of
Coordinator of the COVID-19 Response (currently Jeffrey Zients) and
organized that office in the White House. Among other
responsibilities, President Biden charged the COVID-19 Response
Coordinator with coordinating the government’s efforts to
produce and distribute personal protective equipment, vaccines, and
tests, “including through the use of the Defense Production
Act[.]”[4] President Trump depended somewhat on the DPA for
his early COVID-19 response, but critics, including then-candidate
Biden, argued that he did not fully take advantage of the Act to manage the medical equipment supply
chain
. Thus, President Biden’s early focus on the DPA
signaled a shift from the prior administration.

The next day, on January 21, 2021, President Biden signed
Executive Order 14001, ordering the secretary of state, secretary
of defense, secretary of health and human services, secretary of
homeland security, and the heads of relevant agencies to review the
inventory of critical pandemic response supplies and fill any
shortfalls. In particular, section 2 of the E.O. directs executive
officers to “take appropriate action using all available legal
authorities, including the Defense Production Act, to fill those
shortfalls as soon as practicable by acquiring additional
stockpiles, improving distribution systems, building market
capacity, or expanding the industrial base.”5
Section 3 lays out steps to address the pricing of pandemic
supplies. Section 4 seeks to develop “a strategy to design,
build, and sustain a long-term capability in the United States to
manufacture supplies for future pandemics and biological
threats.” Section 5 provides that the federal government will
communicate with Tribal governments to ensure access to the
Strategic National Stockpile.

The Biden administration announced its first significant anti-COVID-19
measures
on February 5, 2021. Specifically, it announced plans
to sign DPA contracts with six diagnostic companies to make at-home
and point-of-care testing more widely available. It also announced
that it would use the DPA to give Pfizer priority access to certain
materials that are essential in vaccine manufacturing. At that
time, the FDA had only approved the Pfizer and Moderna vaccines,
while the J&J single-shot vaccine was still under review. The
White House expected J&J to get FDA approval, but under-produce in terms of quantity. Of course,
the Biden administration later addressed that shortfall when it
facilitated the J&J-Merck partnership.

Opportunities for Collaboration Among Private Actors

Given President Biden’s early reliance on the DPA within the
first 60 days of his presidency, it is likely that the federal
government will continue to intervene in private contracting. This
is exciting for life sciences companies because government purchase
orders and loan guarantees can provide businesses with reliable
revenue streams. Moreover, the DPA may create unique opportunities
for businesses to collaborate that might not otherwise be possible.
Most notably, Section 708 of the DPA provides for voluntary
agreements among private parties to meet national defense
requirements or needs. Section 708(j) creates a limited defense to
antitrust enforcement if anticompetitive behavior was done “in
the course of developing a voluntary agreement initiated by the
President or a plan of action adopted under any such agreement [or]
to carry out a voluntary agreement initiated by the President and
approved in accordance with this section[.]” In other words,
collaboration between competitors, such as J&J and Merck, does
not risk antitrust enforcement when it has the president’s seal
of approval. And while subsection (j) requires the president to
initiate voluntary agreements, there is little antitrust risk if
entities pitch these agreements to the White House. Thus, the DPA
may create new opportunities for businesses during COVID-19.

Yet would-be collaborators should still be wary of antitrust
risks. In April 2020, MoFo antitrust lawyers published an article highlighting several antitrust risks
specific to the COVID-19 pandemic. They warned that the Department
of Justice and Federal Trade Commission will still go after
anticompetitive behavior, especially behavior that seeks to take
advantage of the ongoing pandemic such as price gouging, price
fixing, and stockpiling/hoarding resources. The article also
highlighted possible consumer protection issues related to
COVID-19. For instance, consumer protection laws in many states
also proscribe price gouging. And although the DPA provides a limited defense
with respect to antitrust enforcement
, it is not clear that
subsection (j) applies to consumer protection laws as well.
Ultimately, businesses hoping to collaborate with pandemic
responsiveness/vaccine production should be cautious and seek
counsel.

The Outlook for Late 2021 and Beyond

President Biden’s intervention to ramp up vaccine production
has been an unqualified success. Entering office, his goal was to
provide 100 million vaccinations within his first 100 days. After
reaching that target on day 59, President Biden announced a bold,
new goal:
200 million vaccinations within the first 100 days
. Given that
there are 260 million adults living in the U.S., that is good news;
experts predict that approximately
80 percent of the population, or 208 million, must be vaccinated to
achieve herd immunity
. Altogether, the Biden administration
hopes to make vaccines available to
every adult in the United States by May 1
.

Yet that will not mark the end of vaccine production in the
United States. First, as new variants of the coronavirus emerge
over the summer, vaccinated individuals may require
booster shots
to keep up their immunity. Fortunately,
Pfizer
and
Moderna
have already started preparing to bring
variant-specific third doses to clinical trial. Second, the FDA is
likely to approve COVID-19 vaccines for children at some point in
the future. To date, the FDA has only approved vaccines for adults.
Just last week, however, Pfizer announced a
clinical trial for its COVID-19 vaccine involving healthy
6-month-old to 11-year-old children
. With over 70 million
children living in the U.S., it is likely that demand for the
COVID-19 vaccines will remain high through the end of 2021. Third,
the U.S. will remain involved in vaccine production even after
reaching domestic herd immunity. Soon after entering office,
President Biden entered Covax, a
partnership with the World Health Organization to deliver COVID-19
vaccines to the developing world. Low- to middle-income countries
lag behind wealthy nations in terms of
vaccine procurement
, and current models estimate that there
will not be enough vaccines for the global population until
2023-24.

What exactly does all of this mean for life sciences companies
doing business in the United States? It means that, although there
appears to be a light at the end of the COVID-19 tunnel, the
pandemic will continue to unfold both domestically and abroad well
into the future. Correspondingly, private-public partnerships and
state interventions into vaccine production should persist into the
future as well. Businesses that are currently fighting COVID-19
should brace themselves to continue long-term. And businesses that
have not been involved with the pandemic response thus far may yet
find opportunities to contribute going forward.

Short-Term Authority and Long-Term Preparedness

Looking beyond COVID-19 vaccine production and rollout, the DPA
will also play a prominent role in general pandemic preparedness
going forward. Again, E.O. 14001 sought to increase vaccine
production capacity for future pandemics. On the surface, it may
seem odd that the president could wield emergency powers to achieve
long-term objectives. Yet the DPA actually contemplates such
prophylactic measures; in fact, preparedness is one of the primary
objectives of the policy.6 Of course, life sciences
companies may not be able to produce vaccines in anticipation the
next deadly virus outbreak, but they can begin to replenish the
national stockpile of personal protective equipment and medical
devices, such as ventilators. Already, President Biden has used
executive authority to bolster supply chains
for critical
pharmaceutical materials. Look out for similar measures in the
future.

Over one year into COVID-19, even with vaccines rolling out
across the country, there is still a long way to go in responding
to this pandemic and preparing for the next one. And while the
Biden administration is still in its infancy, it is already clear
that the White House will take a hands-on approach in public health
and emergency preparedness-before, during, and after crises.
Healthcare and life sciences companies should prepare for-and look
forward to-that new reality.

Zachary Fuchs, Litigation Associate, contributed to the
drafting of this article.

Footnotes

1
OECD Policy Responses to Coronavirus (COVID-19)The COVID-19 crisis
and state ownership in the economy: Issues and policy
considerations
. The Wall Street Journal:
Western Economies Embrace State Intervention, Emulating
Asia
.

2
Understanding Trump’s Invocation of the Defense Production Act
for Meat
.

3
Harvard Law Review: States of Emergencies Part I
. Oxford
Academic:
The architecture of emergency constitutions
.

4 Federal Register:
Organizing and Mobilizing the United States Government To Provide a
Unified and Effective Response To Combat COVID-19 and To Provide
United States Leadership on Global Health and
Security
.

5 Federal Register:
A Sustainable Public Health Supply Chain
.

6 The Stafford Act defines “emergency
preparedness” to include “[m]easures to be undertaken in
preparation for anticipated hazards[.]” 42 U.S.C. §
5195a(3)(A).

Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.

© Morrison & Foerster LLP. All rights reserved



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