PREPA Extends Liability Immunity to Manufacturers of Component Parts and Suppliers of Raw Material Suppliers Used in COVID-19 Countermeasures
With the COVID-19 outbreak spreading across the globe, there is a shortage of critical medical supplies such as ventilators, test kits, and personal protective equipment (PPE). Component part manufacturers and raw material suppliers have scaled up production to help medical device and pharmaceutical manufacturers eliminate critical shortages. Components and raw materials are also being supplied to non-medical companies like General Motors, Tesla, and Dyson, who have repurposed their factories to make unfamiliar products like ventilators and face shields.
To head off the inevitable wave of products liability lawsuits, which would hinder efforts to effectively combat the COVID-19 pandemic, the Public Readiness and Emergency Preparedness Act (PREPA) extends liability immunity to component part manufacturers and raw material suppliers above and beyond any defenses available under state law, such as the bulk sales/sophisticated purchaser/component part doctrines.
We previously wrote about PREPA and the March 17, 2020 declaration by the Secretary of Health and Human Services providing liability immunity to “manufacturers” and “distributors” of “covered countermeasures.” PREPA includes component part manufacturers and raw material suppliers in the definition of “manufacturer.” 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.” Others in the supply chain, such as distributors and resellers, are immunized as well. A distributor includes “a person or entity engaged in the distribution of drugs, biologics, or devices, including but not limited to: Manufacturers; re-packers…brokers; warehouses and wholesale drug warehouses; independent wholesale drug traders; and retail pharmacies.” The COVID-19 declaration defines covered countermeasures as any antiviral, drug, biologic, diagnostic, device, or 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.”
Component part manufacturers and raw material suppliers may also be immunized if, inter alia, the final product is being provided pursuant to a federal contract or the federal government ordered the manufacturer to make a product, such as the aforementioned ventilators. This immunity arises under the Defense Production Act of 1950 (DPA), which was invoked by the Trump Administration on March 27, 2020, “to require General Motors Company to accept, perform, and prioritize [federal contracts for] ventilators.”
PREPA and DPA are among many actions taken to increase protections for component part manufacturers and raw material suppliers. If you are not sure whether or not your company is immune, please reach out to us for advice to assess these risks.