The U.S. FDA has granted several emergency use authorizations (EUAs) to address the COVID-19 pandemic, a series of actions designed to lower regulatory hurdles. Despite these developments, the agency is keeping a close eye on issues, such as product claims, and both federal and state agencies are in a position to prosecute for hoarding and price gouging.
The FDA’s device center maintains a repository of EUAs issued for diagnostics, personal protective equipment (PPE) and other items, documents that have proven as iterative as the devices they regulate. The agency also has issued a series of policies and guidance for other devices needed to handle the symptoms associated with the SARS-CoV-2 virus, as well as instruments needed to provide telehealth services. However, much of the conversation surrounding the COVID-19 pandemic has revolved around the availability of PPE and associated bad-actor behaviors, such as hoarding and price gouging.
Regulatory attorney Jonathan Havens, of the Baltimore office of Saul Ewing Arnstein & Lehr LLP, told BioWorld that makers of items, such as respirator masks must still be cautious despite the more relaxed regulatory environment, including regarding product claims. Extraordinary price hikes have been more topical for pharmaceuticals in recent years, but Havens said these hikes are now relevant for makers of PPE as well.
Whether a distributor or another party would be subject to enforcement for such practices “very much depends on the facts and circumstances,” Havens said, adding that drastic increases in which the price is multiplied by triple or more over the prices charged prior to the COVID-19 outbreak “would be a cause for concern.”
The new normal is only a temporary normal
The FDA has refreshed its policy on several types of PPE, including an April 2 update to the policy for face masks and respirators, stating that among its adjustments is to allow the use of imported N95 masks and similar items. Havens said that while any such items that bear a CE mark are authorized for distribution without the normal FDA notification, manufacturers might want to avoid falling into the trap of thinking that this will become the new normal once the pandemic has passed.
There is still the possibility that some such items would be commandeered by state authorities who are attempting to deal with a massive outbreak, such as New York, another factor that could complicate the supply chain equation along with issues of distribution of items in federal stockpiles. “Some hospital systems are talking directly to importers and manufacturers,” Havens noted, rather than relying on state and federal governments. Manufacturers and their representatives must be careful about product claims, such as proposing that a non-N95 mask is functionally equivalent to an N95 when this has not been demonstrated. “You have more leeway than you would otherwise get as long as you’re not abusing it,” Havens explained.
Another angle in this scenario is the availability of so-called KN95 masks, which are made in China, where they are approved. Indeed, some have claimed they are equivalent to N95 masks. The CDC has listed these masks as acceptable alternatives; however, there are differences in specifications, such as pressure tolerance for both inhalation and exhalation.
Those who are manufacturing or distributing these masks need not worry, as long as their claims are in bounds. “If you’re not making any representations other than a picture showing it covers the nose and the mouth, you’re fine,” Havens said, although he predicted there will be a few lawsuits, assuming some of the performance specifications and other product features create their own hazard in the absence of due notice. One example of this is liquid permeability, he said.
Documentation is also crucial in this environment, given that both litigation and subsequent enforcement will force a company to prove its products were not violative of an EUA. Those documents can substantiate a manufacturer’s claim that a product complied with guidelines that were in force on the date of manufacture – an especially crucial piece of the compliance puzzle, given the rapidly iterating guidance environment. “An ounce of regulatory compliance would be worth a pound of cure on the litigation front,” Havens said.
States in the enforcement arena as well
Katrina Robson, a partner in the Washington office of O’Melveny & Myers LLP, said the risk for manufacturers, importers and distributors is not solely a matter of the U.S. federal government. Robson said there is a web of state agencies tasked with enforcing state law, adding that many of those laws would cover the same types of equipment that are cited in the Defense Production Act. State acts typically focused principally or entirely on price gouging, but Robson said confiscation can take place under state law in some jurisdictions.
Robson also noted that there is little in the way of case law or in U.S. enforcement history to address what might seem a case of hoarding triggered by a distributor that is making a good-faith effort to get product out despite what might seem a case of excess inventory.
Even cities have gotten into the action. For its part, New York has issued an emergency rule that says products needed to deal with the pandemic cannot be priced at more than 10% above normal list price, and Robson said state authorities have issued more hundreds, possibly thousands, of notifications of violation already. She said that more than 30 states have price-gouging statutes on the books, and some have passed legislation that provides private right of action as well.
The Defense Production Act provides for penalties of $10,000 and/or a year in prison for failure to comply with an order to deliver goods in a rated order, Robson said, but several states have similar enforcement authorities. “The bottom line right now is: Be careful how you choose to conduct business” in connection with pandemic-related scarcities, she said. Robson noted that the federal government has made it clear that this is a time for the nation to come together to thwart the pandemic, and that federal agencies, along with their state counterparts, are “quite willing to enforce the law to make sure that is what’s happening.”