Advising your clients on Personal Protection Equipment and the Emergency Use Authorization

COVID-19 Presents New Opportunities and Challenges for Importers and Exporters of Personal Protective Equipment and Other Medical Devices By Ali Gallagher and Lindsey Roskopf, McGinnis Lochridge The year 2020 ushered in a global healthcare crisis due to the COVID-19 pandemic. To meet this challenge, new technologies in the form of proposed diagnostics and treatments are being aggressively pursued. The scarcity of personal protective equipment (“PPE”) and medical devices to address critical needs is challenging the normal regulatory pathways for product commercialization and the trade of products from country to country. This dynamic, of balancing critical needs with critical shortages, is causing immediate and substantive changes to the ways companies can manufacture and distribute products domestically and into foreign markets. Correspondingly, governments are equally impacted as they attempt to address domestic needs and maintain regulatory flexibility to both engage with new PPE manufacturers and prevent a virtual tsunami of substandard or counterfeited products making their way to health care providers and the general public. Health care providers have found themselves competing with the general public for the limited supplies of needed product. On a macro level in the U.S., the same dysfunction exists state against state; states versus the federal stockpile. None of this is expected to change any time soon. In the United States, one important response to PPE and medical devices shortages has been the release of Emergency Use Authorizations (“EUAs”) by the U.S. Food and Drug Administration (“FDA”), which suspend requirements, in some cases, of companies registering with the FDA or in obtaining premarket approval. Expedited regulatory review and importation of select healthcare devices, including ventilators, filtering face respirators (“FFRs”) and other PPE, and diagnostic tests is the new normal, but the regulations are ever evolving. Additionally, the Federal Emergency Management Agency (“FEMA”) has taken the unprecedented step of detaining exports of certain PPE items to help manage domestic shortages. What is a manufacturer, importer or distributor to do? This article discusses some of the opportunities and challenges for U.S. importers and exporters of medical devices and PPE during the COVID-19 pandemic.

Importation of PPE and Medical Devices FDA recognizes that it is in the best interest of the U.S. to facilitate and expedite the importation of products into the U.S. market that address immediate, urgent public health needs. In order to do so, FDA has issued EUAs and new enforcement policies for various medical devices, which, depending on the product, waive certain existing regulatory requirements, such as reducing former standards for product testing, FDA clearance through the premarket approval process, FDA registration and listing, labeling, and post-market compliance. At the same time, there is a sense of urgency due to the need, and due to the opportunity to get in while the getting’s good. To assist importers and to minimize any entry delays, FDA has also published information for filing imports of PPE and medical devices, which sets forth guidance for reporting import data to U.S. Customs and Border Protection (“CBP”) and FDA and provides links to current FDA requirements for importation of these products under EUAs and new enforcement policies. Additionally, the FDA has set up hotlines for companies to call if products are detained by CBP. Due to the fluid situation, FDA policy for the importation of PPE and other medical devices is constantly evolving to meet the demand for these products and to deal with the very real issue of counterfeit products or products that lack traceability to show authenticity. Therefore, it is important that importers and distributors of these products closely monitor the status of EUAs and enforcement policy guidance documents to ensure their products comply with the current required testing standards. Most importantly, labeling is a regulator’s first line of defense in spotting inferior products. An importer will have to comply with associated recordkeeping and adverse event reporting requirements in the event FDA issues a product recall or suspension of product sales. Close monitoring of the regulatory landscape has become all the more important because, throughout the COVID-19 pandemic, FDA has changed importation requirements with little to no notice in order to respond in real time to shortages of critical products and to stymy the influx of counterfeit products. In particular, face masks, FFRs, and diagnostic tests have faced suspension or revocation of previous authorizations when it has been found that products do not meet FDA standards or the chain of suppliers cannot be discerned. The relaxed regulatory environment also presents opportunities for both inexperienced manufacturers and bad actors to enter the market. This means that, in addition to constantly changing regulations, importers also have to deal with fraud and mislabeling problems when imported products do not actually meet the qualifications claimed and labeled. These issues are not just a problem for contract liability, but also possibly tort liability, and potentially a separate set of FDA and CBP regulatory problems for submitting incorrect import documentation. Therefore, in order for importers to take advantage of new opportunities, while also managing potential liability, it important for importers to carefully vet new suppliers, ensure they have protective contractual terms in agreements with both their suppliers and customers, obtain sufficient product liability insurance coverage, and continue closely monitoring ongoing regulatory changes. Exports of PPE Limited by FEMA While FDA and other agencies are taking steps to facilitate the importation of PPE, FEMA is exercising its authority to limit the exportation of PPE. On April 10, 2020, FEMA issued a temporary final rule limiting certain types of PPE that can be exported from the United States, including N95 and other FFRs, elastomeric respirators and their filters or cartridges, and PPE surgical masks and gloves. This rule is currently in effect until August 10, 2020. Due to the scarcity of five specified categories of PPE, exports containing subject items, which are not otherwise subject to an exemption, will be temporarily detained by CBP and subject to review by FEMA. FEMA will review the export to determine whether to return the items for domestic use, issue a rated order for the items, or allow the export of part or all of the shipment. FEMA subsequently issued a notification of exemptions on April 21, 2020, which provides 10 exemptions to the April 10, 2020, rule and sets forth the process for making use of those exemptions. The exemptions cover, among other things, shipments to U.S. commonwealths and territories, certain humanitarian donations by non-profit or non-governmental organizations, and intracompany transfers by U.S. companies to company-owned or affiliated foreign facilities. As such, potential exporters of PPE must first determine whether the PPE is subject to FEMA review. If it is, the exporter will need to determine whether an exemption is available. To avoid delays, exporters must follow the appropriate procedures to use the exemption. Where PPE is subject to review and not eligible for an exemption, exporters should plan on serious delays in the near term. In 2011, the International Health Regulations Review Committee for the World Health Organization offered this statement: “The world is ill-prepared to respond to a severe influenza pandemic or to any similarly global, sustained and threatening public-health emergency.” Yet, the world is now facing this pandemic, and governments are attempting to respond. The lives of their citizens depend on their success. COVID-19 has created and unprecedented global demand for PPE and diagnostics to test and trace this novel virus with an aim to contain it. So far, the initial response country to country reveals equally unprecedented regulatory challenges while, at the same time, creating new opportunities for manufacturers, distributors, importers, and exporters to enter new markets. The rapidly evolving situation makes it all the more important that parties involved in the sale and distribution of PPE and critical needs medical devices take full advantage of regulations now inviting their participation to provide the products needed globally. Equally important is for them to closely monitor the changes so they can also avoid the potential liabilities, because, at some point, when governments catch-up, there will be ‘looking back’ to identify those who got it right and those who put greed over public safety.

About the Authors

Ali focuses her corporate practice on the commercialization of new companies’ products and services, and emerging technologies. Ali has decades of experience working with a wide variety of corporations, especially in the medical device field as key management, Chief Privacy Officer and in-house legal counsel. She has an extensive background in manufacturing, product labeling, FDA regulatory oversight and post-market compliance for both consumer goods and FDA medical devices. Ali has also managed angel/venture capital financing including preparing for an initial public offering, drafting convertible notes, simple agreements for equity and/or other seed-stage investments.

Lindsey advises clients on export controls, economic and trade sanctions, antiboycott laws, and customs and import laws. She has worked with clients in the oil and gas, hydrographic survey, medical device, chemicals, aerospace, defense, electronics, manufacturing, and not-for-profit sectors. Lindsey regularly assists clients with identifying export licensing requirements; developing export licensing strategies; reviewing technology transfer controls; determining the export jurisdiction and classification of equipment and technology; and responding to government inquiries. She has extensive experience in advising clients on compliance with U.S. sanctions, particularly with respect to Russia, Iran, Cuba, and Venezuela. Lindsey also has considerable experience in conducting internal investigations and making voluntary disclosures to the Commerce, State, and Treasury Departments.