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Four Things to Know About Trump’s Executive Order on Hoarding of PPE

In response to the spread of COVID-19, on March 23, 2020, President Trump signed Executive Order 13910 (Order) to prevent the hoarding of health and medical resources necessary to respond to the spread of COVID-19 within the United States. Through the Order, the President delegated his authority under the Defense Production Act of 1950, 50 U.S.C. § 4512 (Act) to the Secretary of Health and Human Services (HHS). The Order authorizes HHS to protect scarce and threatened health care and medical items by designating particular items as protected under the Act (Designated Items). Once an item is designated, the Act makes it a crime for any person to accumulate Designated Items: (i) in excess of the reasonable demands of business, personal, or home consumption; or (ii) for the purpose of resale at prices in excess of prevailing market prices. 

Here are four things to know in connection with the Order:

  1. What health care and personal protective equipment (PPE) items are covered by the Order?

HHS issued a Notice on March 25, 2020, identifying the following items as Designated Items, which are now protected under the Act:

  • N-95 Filtering Facepiece Respirators, including devices that are disposable half-facepiece non-powered air-purifying particulate respirators intended for use to cover the nose and mouth of the wearer to help reduce wearer exposure to pathogenic biological airborne particulates;
  • Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, P95, P99, or P100), including single-use, disposable half-mask respiratory protective devices that cover the user’s airway (nose and mouth) and offer protection from particulate materials at an N95 filtration efficiency level per 42 CFR 84.181;
  • Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges;
  • Powered Air Purifying Respirator (PAPR);
  • Portable Ventilators, including portable devices intended to mechanically control or assist patient breathing by delivering a predetermined percentage of oxygen in the breathing gas;
  • Drug product with active ingredient chloroquine phosphate or hydroxychloroquine HCl;
  • Sterilization services for any device as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act and sterilizers as defined in 21 CFR 880.6860, 880.6870, and 880.6880, including devices that already have Food & Drug Administration (FDA) marketing authorization and those that do not have FDA marketing authorization but are intended for the same uses;
  • Disinfecting devices intended to kill pathogens and other kinds of microorganisms by chemical means or physical means, including those defined in 21 CFR 876.1500, 880.6992, and 892.1570 and other sanitizing and disinfecting products suitable for use in a clinical setting;
  • Medical gowns or apparel (e.g., surgical gowns or isolation gowns);
  • PPE coveralls (e.g., Tyvek Suits);
  • PPE face masks, including any masks that cover the user’s nose and mouth and may or may not meet fluid barrier or filtration efficiency levels;
  • PPE surgical masks, including masks that cover the user’s nose and mouth and provide a physical barrier to fluids and particulate materials;
  • PPE face shields, including those defined at 21 CFR 878.4040 and those intended for the same purpose;
  • PPE gloves or surgical gloves, including those defined at 21 CFR 880.6250 (exam gloves) and 878.4460 (surgical gloves) and such gloves intended for the same purposes; and
  • Ventilators, anesthesia gas machines modified for use as ventilators, and positive pressure breathing devices modified for use as ventilators (collectively, "ventilators"), ventilator tubing connectors, and ventilator accessories as those terms are described in FDA’s March 2020 Enforcement Policy for Ventilators and Accessories and Other Respiratory Devices During the Coronavirus Disease 2019 (COVID-19) Public Health Emergency located here
  1. Has the Department of Justice (DOJ) provided guidance on interpretation and enforcement of the order?

In response to the Order, Attorney General William Barr issued a memo to direct the creation of a task force (Task Force) charged with addressing hoarding and price gouging associated with the COVID-19 pandemic. In the memo, Barr notes that:

  • The DOJ is receiving reports of “individuals using the crisis to hoard vital medical items and then make inappropriate, windfall profits at the expense of public safety and the health and welfare of our fellow citizens,” and the DOJ “will not tolerate bad actors who treat the crisis as an opportunity to get rich quick.”
  • “Scarce medical supplies need to be going to hospitals for immediate use in care, not to warehouses for later overcharging.”
  • The DOJ “will investigate and prosecute those who acquire vital medical supplies in excess of what they would reasonably use or for the purpose of charging exorbitant prices to the health care workers and hospitals who need them.”

However, Barr stated that the DOJ would not “take action against the manufacturers or suppliers who are working with the government and with health care providers in an effort to combat this crisis.” In a press release, the U.S. Attorney’s Office for the Eastern District of Michigan stated that the DOJ is not going after “businesses who are making smart storage decisions,” but “if you’re hoarding goods far above what you need, or if you’re trying to rip off the people of Michigan by profiting from the pandemic, we will be targeting you.”

  1. Are there any other instances of federal or state action?

On April 3, 2020, President Trump signed a memo (Trump Memo) giving the Federal Emergency Management Agency (FEMA) authority under the Act to allocate the use of the following Designated Items:

  • N-95 Filtering Facepiece Respirators, including devices that are disposable half-face-piece non-powered air-purifying particulate respirators intended for use to cover the nose and mouth of the wearer to help reduce wearer exposure to pathogenic biological airborne particulates;
  • Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, P95, P99, or P100), including single-use, disposable half-mask respiratory protective devices that cover the user’s airway (nose and mouth) and offer protection from particulate materials at an N95 filtration efficiency level per 42 CFR 84.181;
  • Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges;
  • PPE surgical masks, including masks that cover the user’s nose and mouth and provide a physical barrier to fluids and particulate materials; and
  • PPE gloves or surgical gloves, including those defined at 21 CFR 880.6250 (exam gloves) and 878.4460 (surgical gloves) and such gloves intended for the same purposes.

Aside from federal action, several states have taken matters into their own hands to prevent hoarding and to redeploy resources. New Jersey’s governor recently signed two executive orders requiring businesses and non-hospital health care providers to report how much PPE (and other equipment) they have on hand and authorizing the commandeering of PPE from those deemed to have an excessive supply. Similarly, the governor of New York signed an executive order requiring that medical equipment, including PPE and ventilators, held in inventory by any entity in the state, or otherwise located in the state, be reported to the Department of Health (DOH).  The executive order also gave DOH the authority to shift the reported medical equipment not currently in use to facilities in urgent need of such inventory.

In connection with the New Jersey executive order, PPE that has been confiscated will be reimbursed following the procedures established by the Disaster Control Act, N.J.S.A. App. A:9-51. Similarly, under the New York executive order, the state has committed to returning confiscated equipment or reimbursing facilities for the equipment in accordance with fair market value.

  1. Has there been any federal or state enforcement of the Order?

The DOJ has publicized an instance of enforcement where the Task Force seized a massive cache of hoarded PPE, including 192,000 N95 respirator masks, 598,000 medical grade gloves and 130,000 surgical masks, from an individual who was selling the supplies to doctors at a 700% markup. In its press release, the DOJ noted that HHS will pay the owner of the hoarded equipment pre-COVID-19 fair market value for the seized supplies. The defendant was charged with assault of a federal officer and making a false statement. However, at this time, it is unclear whether the defendant will face charges under the Act.

Under the Trump Memo, FEMA is actively engaged in redistributing certain Designated Items to states that are in greater need. There are reports that FEMA is requiring the largest distributors in the country to sell about half of their stock to certain counties that the federal government has prioritized based on the severity of the COVID-19 outbreak.

Conclusion

At this point in time, it appears that the Task Force is focused on individuals who are taking advantage of the COVID-19 crisis in order to make windfall profits by purposefully hoarding massive amounts of PPE. However, as discussed above, the federal government and individual states have demonstrated their intent and ability to confiscate medical equipment and redistribute such items to areas that are in greater need. Stakeholders in this space should take these factors into account when making strategic decisions regarding their supply chain to ensure that their actions do not run afoul of federal or state measures. This is a developing matter, and we will continue to monitor for any updates.

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Author

Theresa C. Carnegie is a Mintz attorney who advises health care clients on a wide array of transactional, regulatory, compliance, fraud and abuse matters, and health law issues. She counsels health plans, pharmacy benefit managers, pharmacies, device manufacturers, and distributors.