On March 18, 2020, the President issued an Executive Order on Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of COVID-19 (the “EO”). The EO was issued pursuant to the Defense Production Act of 1950 (50 U.S.C. §4501 et seq.) (“DPA”), which allows the President to invoke special Federal Contracting powers to address shortages in medical resources needed to respond to the COVID-19 pandemic. The EO specifically mentions personal protective equipment and ventilators as necessary to curb the spread of COVID-19, but also delegates authority to the Secretary of Health and Human Services (“HHS”) to identify additional necessary health and medical resources such as drugs, medical devices, health supplies, and health services and equipment.
The DPA allows the executive branch to increase and allocate production of such critical supplies, as well as the provision of services, necessary for the “national defense,” which broadly encompasses public health emergencies. Accordingly, the President (or his Delegate) has the authority to require companies to prioritize the fulfillment and delivery of specific Government orders deemed to be “priority rated” orders over unrated Government orders and orders from commercial entities or state and local governments. It also allows for “allocation orders,” which are meant to control the distribution of supplies and services in the name of national defense. The EO is most likely to impact companies that hold contracts with HHS, the VA, and the Defense Health Agency.
For more information on the DPA and HHS implementing regulations, and for a better understanding of HHS’s priority rating and allocation system, take a look at our FAQs.
For more legal insights visit our Coronavirus (COVID-19) page.
*This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. Please contact your Sheppard Mullin attorney contact for additional information.*