April 30, 2009

The recent outbreak of a new strain of H1N1 virus in North America and elsewhere has rekindled both concerns about pandemic and interest in combating it. That’s even more true now that WHO has declared that the world has entered Phase V (of 6 phases), just one shy of full-blown pandemic. Life sciences companies that make products potentially beneficial in public health emergencies should be aware of two federal statutes that provide a measure of protection from liability.

The Public Readiness and Emergency Preparedness (PREP) Act, Pub. L. No. 109-148, provided new authority under the Public Health Service Act to diminish exposure to liability related to the manufacture, testing, development, distribution, administration and use of countermeasures against chemical, biological, radiological or nuclear agents of terrorism, epidemics and pandemics. A countermeasure covered under a PREP Act declaration can be (1) a qualified pandemic or epidemic product, (2) a security countermeasure, or (3) a drug, biologic product or device authorized for emergency use under an emergency use in accordance with the Federal Food Drug and Cosmetic Act. In response to the current outbreak, FDA issued emergency use authorizations (EUAs) on April 27 to allow emergency use of 1) oseltamivir (Tamiflu) and zanamavir (Relenza), antiviral medications for treatment and prophylaxis of flu; 2) disposable N95 respirators for use by the general public, and 3) a diagnostic test for H1N1 virus.

The PREP Act creates immunity from tort liability (except for willful misconduct, and not from other forms of liability) for manufacturers, distributors, program planners and qualified persons arising from administration and use of covered countermeasures as specified in a Declaration issued by the Secretary of HHS. Protection is afforded only upon issuance of such a declaration, however. The PREP Act also establishes a mechanism to compensate those injured as a result of using covered countermeasures, although so far Congress has not provided funds for such recovery. Examples of products covered under the PREP Act are vaccines against anthrax and pandemic flu.

The Support of Antiterrorism by Fostering Effective Technologies (SAFETY) Act of 2002, enacted as part of the Homeland Security Act of 2002, PL 107-296, creates liability protections for providers of “Qualified Antiterrorism Technologies” (QATTs). The statute’s goal is to encourage the development and deployment of innovative antiterrorist products and services by creating a system of both risk management and litigation management. A QATT is “any qualifying product, equipment, service (including support services), devices, or technology (including information technology)” that the Secretary in the exercise of discretion and judgment determines to merit designation. An act of terrorism is defined to mean an act that (1) is unlawful, (2) causes harm to a person, property or entity in the U.S. or in the case of a domestic U.S. air carrier or U.S. flag vessel (or vessel based principally in the U.S. or on which U.S. income tax is paid and whose insurance coverage is subject to regulation in the U.S.) in or outside of the U.S., and (3) uses or attempts to use instrumentalities, weapons, or methods designed to cause mass destruction, injury or otherwise to citizens or institutions of the U.S.

For a designated QATT, and in the event of an act of terrorism, the seller’s liability for products or services is limited to that amount of insurance which DHS determines the seller must maintain. Subcontractors are covered. Designation can also be obtained for promising antiterrorism technologies that are undergoing testing and evaluation. The SAFETY Act creates other protection as well. Jurisdiction of claims is exclusively federal. Punitive damages are barred. Claims for emotional distress must be supported by evidence of physical injury. Absent an Act of Terrorism, however, as defined, the Act provides no protections against claims. A radiation threat identification system, designed to scan cargo and detect gamma, neutron, and x-radiation, is an example of a product awarded a QATT designation.

In addition to the benefits provided under the SAFETY Act’s designation provisions, a seller may also apply for and get further protection of its antiterrorism technology by getting it “certified.” Against claims arising from acts of terrorism, a certified QATT is entitled to the protections of the government contractor defense.

Given the ingenuity of the plaintiffs’ bar, companies should not assume that either of these statutes is a panacea. Both are too new to have achieved a track record permitting confident predictions about their effectiveness. PREP Act protections apply to covered countermeasures only, and HHS has not been liberal in applying the term. SAFETY Act protections require application for a designation or a certification or both, and acceptance of such applications is not guaranteed. Nevertheless, there enactments are helpful, and their provisions should be invoked aggressively.