In the last month, governments at the local, county, and state levels across the United States have raced to prepare and implement various measures to try to help counter the spread of COVID-19 virus in the US through limiting interactions.
Over the last week, these efforts have continued to escalate as the Governors of California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Idaho, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Vermont, Virginia, Washington, West Virginia, and Wisconsin issued executive orders requiring certain non-essential businesses to close. Further, many states, such as California and Illinois, have taken the more serious step of ordering and enforcing “shelter in place” for its residents.
This article summarizes the application of the aforementioned executive orders to life sciences companies and provides operational and strategic actions to consider in order to continue doing business in this new environment.
What it Means for the Life Science Industry
Each of the executive orders were made pursuant to state disaster and emergency laws, which empower the Governors to temporarily impose or change laws to cope with a crisis. As the state of the pandemic, including new cases and particularly new cases that occur from community spread, is evaluated throughout the coming days, we expect that the orders will be continuously reviewed and updated accordingly.
Each of the orders specify certain, essential businesses that may remain open during the crisis and allow employees to work on site. The definition of “essential” is broad for each state. The orders require other non-essential businesses to close, providing affected businesses with a very limited amount of time to do so.
Most of the orders issued to date deem life science companies as “essential businesses” and may continue to operate in the new environment. Many of the orders also deem “essential” manufacturing and/or distributors of medical products, or are businesses involved in the supply chain for the manufacture or supply of medical products.
Some of the orders—including Connecticut, Illinois, and Massachusetts—are in effect until specified dates, while other orders are open-ended.
Many of the orders draw upon, or directly incorporate, the guidance issued by the federal Cybersecurity & Infrastructure Security Agency (“CISA”) on March 19, 2020 (the “CISA Guidance”). The CISA Guidance identifies the critical infrastructure sectors and the essential workers needed to maintain the services and functions the public depend on daily, and that need to be able to operate resiliently during the COVID-19 pandemic response. A copy of the CISA Guidance is available here.
With respect to life sciences, the CISA Guidance includes Healthcare and Chemical industries.
- Healthcare includes manufacturers, technicians, logistics and warehouse operators, and distributors of medical equipment, personal protective equipment (PPE), medical gases, pharmaceuticals (including materials used in radioactive drugs), blood and blood products, vaccines, testing materials, laboratory supplies, cleaning, sanitizing, disinfecting or sterilization supplies, and tissue and paper towel products.
- Chemical includes workers supporting the chemical and industrial gas supply chains, including workers at chemical manufacturing plants, workers in laboratories, workers at distribution facilities, workers who transport basic raw chemical materials to the producers of industrial and consumer goods, including hand sanitizers, food and food additives, pharmaceuticals, textiles, and paper products. In the final section of this article, we summarize each of the orders and how they apply to life science industries.
At the end of this article is a link to a summary of each of the orders and how they apply to life science industries.
Operational and Strategic Actions for Life Science Companies to Consider
Research and Development Activities
- Consider whether R&D activities, including pre-clinical research involving animals and clinical trials, may be limited or suspended for the duration of the applicable order.
- Companies with clinical trials affected by COVID-19 should follow the FDA's guidance (available here) and ensure that labs with animal research have a support plan.
- Companies should identify critical support functions that require on-site support and those activities that can be limited to work from home.
Pipeline Product Decisions
- Companies must be prepared to make tactical decisions regarding products that are awaiting action from FDA and those that have anticipated late 2020 launch.
- Companies should focus on creating flexible, cost sensitive, and lean launch plans. For some this may mean constructing a plan A, B, C, and D.
- Restrictions on mobility and social interaction will require adapting product launch plans to remove in person gatherings. We anticipate key traditional areas of “in person” engagement including: scientific meetings and congresses, peer-to-peer interactions in hospitals and offices, Research and Development Days, discussions with payors, and other activities that have traditionally provided a basis for scientific discussions, will be impacted.
Supply Chain Interruptions
- Companies must quickly identify anticipated shortages and bottlenecks in the supply chain and work collaboratively with suppliers and, where applicable, the relevant government entities to attempt to resolve the impediment
- Companies should also strategize about alternative suppliers and sources, keeping in mind any obligation to report shortages to the FDA and providing critical medical device shortage information to the FDA.
- Companies may need to consider collaborations with competitors and other manufacturers outside of the life sciences industry, subject to ensuring applicable regulatory requirements are met, as interim measures to limit supply chain disruptions.
Current Commercialization Activities and Compliance
- The need to limit physical social interaction will increase the utilization of digital mediums for activities that traditionally took place in person. Deployment of new digital content for websites, medical education campaigns, and email content are on the rise.
- Virtual advisory boards, sales representative training, product launch meetings, annual and other cycle meetings, and the like will become the new normal for the foreseeable future. As part of the increased use of digital tools and technology, and the deployment of these tools and technology in innovative ways, companies must remember to continue to adhere to regulatory requirements and industry codes regarding transparency and disclosure laws, good promotional practices, good communication practices, and relevant fraud and abuse laws, including, but not limited to, the anti-kickback statute and false claims act.
Assess New Opportunities
- Some manufacturers and suppliers of medical products may be able to consider changing their focus to provide product to support COVID-19 and other new market demands.
- Research for a COVID-19 vaccine is well underway, and companies are reviewing products that were approved in other indications to determine if the product may be useful in the fight against COVID-19.
- As evidenced by the government orders issued thus far, we anticipate that most jurisdictions will allow life sciences industry manufacturing to continue throughout the duration of the COVID-19 state orders.
- A company's ability to provide supply in response to federal demand for certain products identified as essential may be an insightful strategy.
FDA Inspections and Quality Management Risk Mitigation
- In response to the COVID-19 mitigation efforts, the FDA has postponed foreign inspections until the end of April and temporarily postponed all domestic routine surveillance facility inspections.
- Manufacturers continue to bear the burden to ensure regulatory compliance, including adhering to quality management and quality systems requirements. Products must be produced in FDA-compliant facilities and must meet applicable specifications and other requirements per the applicable marketing authorization.
- It is critical that companies continue to monitor their pharmacovigilance systems, including adverse events and product complaints, to identify any trending new events, which may signal potential supply chain quality issues.
- Companies should identify supply chain risk mitigation tools, including review of your insurance policies and supply chain business partner contracts. Know the protections provided for in your supply and customer agreements and scope of indemnity and warranties.
Baker McKenzie continues to track the execution of state specific executive orders. We have developed a COVID-19 legal resource center to address the complex issues being raised, which we are updating constantly. Our Coronavirus Resource Center is available here and also includes a COVID-19 risk checklist which was specifically designed to address legal issues for the healthcare and life sciences sectors.
Click the button below to read a Summary of COVID-19 State Executive Orders.