The Coronavirus Aid, Relief, and Economic Security (CARES) Act (or “the Act”) is an unprecedented $2 trillion economic stimulus package passed to help mitigate the economic and health consequences caused by the COVID-19 pandemic and to strengthen the U.S. health system going forward. The Act includes many provisions addressing specific needs that have come to light during the COVID-19 pandemic, but some of these provisions have important impacts on the drug and device industry well beyond the current pandemic. The CARES Act, unsurprisingly, also contains provisions unrelated to the COVID-19 pandemic but that have potentially significant impacts on life science and medical device companies.
This summary blog post outlines some of the key provisions in the CARES Act that may be of interest to Morrison & Foerster’s life science and medical device clients. In the coming months, Morrison & Foerster will track these issues and provide more comprehensive updates on the practical application and any intended (or unintended) consequences of these new legal requirements. For full coverage of the CARES Act, please visit our CARES Act resource center.
Provisions to meet the needs of COVID-19 and future pandemics
The CARES Act includes a number of provisions impacting different financial aspects of healthcare related to COVID-19. For example, it authorizes the allocation of $1.32 billion for fiscal year 2020 for the detection of the virus that causes COVID-19 (SARS-CoV-2) or the prevention, diagnosis, and treatment of COVID-19. (See Section 3211.) It also requires insurers to cover diagnostic tests and qualifying preventative services for COVID-19. (See Sections 3201–3203.) These changes should help increase the availability of and maintain a fair pricing scheme for such tests and services. But note that any healthcare or laboratory provider offering COVID-19 diagnostic tests is required to disclose the cash price of the test on the provider’s public website during the emergency period. (See Section 3202.)
The severe respiratory issues caused by COVID-19 in some patients has led to a shortage of ventilators. The CARES Act adds certain respiratory devices to the existing list of covered countermeasures for use during public health emergencies. As a result, manufacturers and distributors that meet the statutory requirements will not be liable for issues arising from the use of covered respiratory devices during a public health emergency. (See Section 3103.) This, in conjunction with the FDA EUA process for ventilators, is expected to help with this critical supply need during the pandemic. Please see our related blog post FDA Inspires Modifications And Quick Authorizations For Ventilators.
Another means for tackling the COVID-19 pandemic is through expedited review of both relevant abbreviated new drug applications (ANDAs) and supplements to NDAs/ANDAs, and expedited inspections or re-inspections of establishments, if such action could help prevent or mitigate a drug shortage. (See Section 3111.) Prior to the CARES Act, expedited reviews and inspections were optional, but the Act now requires the FDA to carry out such expedited procedures. This change applies not only to current shortages related to COVID-19, but to all potential drug shortages going forward.
A unique issue arising from the risk of infection during the COVID-19 pandemic is the widespread need for remote access to healthcare. The Public Health Services Act previously acknowledged the need for improved telephone-based healthcare (telehealth) systems. The CARES Act reauthorizes and extends telehealth network and telehealth resource center grant programs. (See Section 3212.) The Act also increases access to telehealth services by, for example, increasing private insurance and Medicare coverage during emergency periods. (See Sections 3701, 3703–3706.) However, it is important to note that the federal changes to telehealth regulatory requirements do not fully address the myriad of state law requirements addressing the practice of telemedicine and the licensing requirements needed to permit telemedicine practice. Thus, we are tracking each state’s emergency response and telemedicine regulatory changes.
Heightened reporting requirements for medical devices, drugs, and active pharmaceutical ingredients
Both medical device and drug manufacturers are now subject to immediate, new, or heightened reporting and risk management requirements. Importantly, these new requirements for the first time also apply to medical devices critical to human health going forward.
Manufacturers of life-saving drugs were already required to notify relevant authorities, including the FDA, of any discontinuation or interruption of the manufacture of a life-saving drug that is likely to lead to a meaningful disruption in the supply of that drug in the United States, and the reasons for such discontinuance or interruption. The CARES Act expands the reporting requirements to include “any such drug that is critical to the public health during a public health emergency” and the active pharmaceutical ingredient(s) of such life-saving drugs. (See Section 3112.)
Manufacturers of life-saving drugs, their active pharmaceutical ingredients, and any associated medical device included with a drug for its preparation or administration are also now required to develop a redundancy risk management plan identifying and evaluating risks to the supply of the drug for each establishment in which the drug or active pharmaceutical ingredient is manufactured. (See Section 3112.)
The CARES Act also imposes new reporting requirements regarding discontinuances or interruptions in the production of medical devices that are critical to public health during or in advance of a public health emergency. (See Section 3121.) Any discontinuances or interruptions must be reported 6 months in advance or as soon as practicable. In the immediate term, these requirements most obviously apply to ventilators (See Section 3103), but they will also apply to any medical devices critical to public health in future public health emergencies.
Regulatory changes to market entry for over-the-counter drugs, unrelated to COVID-19
The CARES Act implements a new administrative order process that replaces the existing over‑the-counter (OTC) drug monograph process. (See Sections 3851–3853.) The OTC reform legislation has been pending for some time and, as part of political negotiations, is now embedded and enacted through the CARES Act.
The marketability of category I–III drugs under the new system will depend on the current monograph status of the drug (proposed, tentative final monograph (TFM), or final) and the generally recognized as safe and effective (GRASE) category.
Category I ingredients in a final monograph or tentative final monograph (TFM) would generally be considered GRASE and eligible for continued OTC marketing under the new process. Category III ingredients subject to a TFM, and Category I ingredients subject to an advanced notice of proposed rulemaking (ANPRM), can continue to be marketed without an approved new drug application (NDA), unless otherwise directed by an Administrative Order. Category II and other OTC ingredients that were already determined as not GRASE must file NDAs and will be required to leave the market within 180 days unless approved.
Further, Category I and III ingredients can only be marketed in a dosage form that has been used to a material extent and for a material time prior to enactment of the CARES Act. Only a “minor change” (i.e., one that does not change the safety, effectiveness, or material absorption of, or exposure to, the ingredient) to a dosage form is allowed.
The new provisions convert existing final monographs and TFMs, and disallowed OTC ingredients, to final Administrative Orders. The FDA may now also make GRASE decisions for OTC drugs using the existing GRASE standard and issue Administrative Orders. The Act requires the FDA to develop further guidance on these processes.
Any OTC drug currently on the market that fails to meet the new requirements or is not subject to an FDA Administrative Order will be deemed a “new drug” subject to the FDA’s new drug approval process.
To promote innovation, the CARES Act provides for a new 18-month market exclusivity process for certain OTC drugs that contain an active ingredient not previously used or provides for a change in the conditions of use of a drug for which new human data studies were conducted. The Government Accountability Office (GAO) will evaluate the new process within four years, including, among other things, the impact on FDA resources, consumer access, OTC drug prices, and sunscreens.
Finally, to fund this new Administrative Order process, the CARES Act authorizes the FDA to collect user fees from the OTC drug industry, with payments starting in July of 2020. (See Sections 3861–3862.)