Pharma & Life Sciences

Biden to Invoke Defense Production Act Strategically in Pandemic

Feb. 19, 2021, 10:30 AM

The Biden Administration will take a broader look at the Defense Production Act to plug holes in the medical supply chain in anticipation of future disasters and Covid-like pandemics, going further than the Trump administration.

So far, the Korean War-era law has been used as a vehicle for government contracting, but supply consultants said the federal government hasn’t really looked at how it could be better used to shore up the pharmaceutical supply, ensure a steady production of critical items like masks and gowns, or provide loans to manufacturers.

Health workers still don’t have access to adequate personal protective equipment, although the situation has vastly improved since the beginning of the pandemic. However, the problems within the medical supply chain are more deeply entrenched and not just a result of this virus, and consultants and government officials say fixing them ahead of future disasters will require governmental backing.

“We’re not really seeing the DPA being leveraged the way we thought the DPA was going to be leveraged,” said Soumi Saha, vice president of advocacy for Premier Inc. Historically, the government has used it to take over manufacturing, including how much to make and when to make a particular product.

Now, manufacturers and consultants say the administration should look at using the DPA for every aspect of the supply chain and include the private sector in the complicated decision-making process around that.

Use of the law isn’t “always about compelling more production and supply,” especially when the challenges are with bottlenecks in distribution and allocation, said Abby Pratt, vice president of global strategy and analysis at medical device trade group AdvaMed.

Confusion With Recent Use

The Biden administration announced plans to use the DPA on Feb. 5 to boost supplies needed to make Pfizer’s Covid-19 vaccines, glove investments, and production of virus tests.

“There have been a handful of projects awarded and there are a great deal many more under review,” a Biden administration official said in an interview, and added that there will “absolutely” be more DPA awards.

The first investments under the DPA were in “the places that need immediate attention” and that the administration could move on quickly, the official said.

These recent announcements, while promising, have been confusing, Saha said. For example, the Biden administration said it planned to invest in surgical glove manufacturing when the true market constraints are in exam gloves, she said, but they also planned to invest in the raw material for exam gloves, nitrile butadiene rubber.

The investment will be in nitrile butyl rubber exam gloves, not surgical gloves, the administration official said.

The Biden administration was also unclear if its planned investment in Covid-19 tests were for point-of-care tests, at-home tests, or both, Saha said. The pending awards will be for point-of-care tests and the contracts are contingent on the manufacturers receiving emergency use authorizations from the Food and Drug Administration, the administration official said.

This kind of confusion doesn’t help the market refocus on areas of need, Saha said. Being specific about how long contracts will last and where the supplies would go would help the private sector better understand what products need more attention and what areas need increased shipments.

Strategic Use

Manufacturers said that any use of the law needs to be thoughtful. DPA priority authority must be used strategically and in partnership with manufacturers to help avoid unintended consequences, like disadvantaging other manufacturers who need the same supplies, said Ali Aafedt, director of trade facilitation policy at the National Association of Manufacturers.

“It’s important for us to be thoughtful and make sure that we approach it in a way that doesn’t just make a significant public investment in a short-term solution that doesn’t have a long-term viability,” the administration official said.

The federal government needs to invest in the component parts to make some of these critical items, not just the end product, said Kim Glas, president and CEO of the National Council of Textile Organizations. For example, N95 masks need elastics, certain disposable PPE items use meltblown material, and some antimicrobial specialty fabrics are used in surgical settings, she said.

Meltblown fabric is used as the middle filtration layer in N95 respirators and is what protects the wearer from external germs. The Department of Health and Human Services and the Defense Department invested a total of $16 million in Lydall Inc. and Hollingsworth & Vose Co. to increase domestic production of meltblown material.

The Biden administration is “looking across the entire spectrum of Covid response—therapeutics, vaccine, testing, durable medical equipment and PPE, and the entire supply chain. Everything from the sand for the glass for the vials, the stoppers,” etc., the administration official said.

Untapped Authority

The law also has other authorities that the Trump administration used sparingly in the medical field and the Biden administration hasn’t appeared to use at all.

Title III of the DPA—which allows the federal government to provide loans to manufacturers, helpful for organizations that need to raise capital—has been an “untapped area” for how it could help bring production of textiles back to the U.S., Glas said.

The intent is to use $10 billion set aside for the DPA in the American Rescue Plan through Title III toward “investments in manufacturing capacity. It’s one thing to go to the front of the line, it’s another thing to actually make more of the stuff we don’t have enough of,” the administration official said.

The Trump administration also used Section 708 of the DPA—which allows businesses to coordinate and shields them from antitrust violations while doing so—when it came to the supply of personal protective equipment. However, the Biden administration hasn’t held any meetings with the organizations participating in the Section 708 agreements since the inauguration, Saha said.

Neither administration has used the DPA on the drug market, Saha said. The raw materials for making drugs are dependent on Asia, and while the U.S. was lucky to not see greater issues with pharmaceutical shortages during the pandemic, the DPA can be leveraged now to help avoid future drug shortages, she said.

To contact the reporter on this story: Shira Stein in Washington at sstein@bloomberglaw.com

To contact the editors responsible for this story: Karl Hardy at khardy@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com

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