The COVID-19 Virus Presents Contracting Opportunities and Challenges to Life Science and Biotechnology Companies

COVID-19 Update

Date: March 13, 2020

The novel coronavirus, severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), which causes coronavirus disease 2019 (COVID-19), poses significant public health challenges to U.S. government officials. Among the steps being taken by the federal government is the support of development of a vaccine and other medical countermeasures to stop the spread of the virus and treat its effects. The federal government has a history of funding research and development conducted by private industry to respond to public health threats, including viruses such as Ebola, Zika and influenza. The Department of Health and Human Services (HHS) has moved quickly to expand its existing program to solicit proposals from private companies to fund research and development for vaccines and medical countermeasures to include new technologies to respond to the COVID-19 virus.

The federal government’s efforts to support the development of countermeasures to COVID-19 presents significant opportunities for life science and biotechnology companies possessing the technical skills and experience necessary to produce responsive technologies. Any company interested in pursuing such opportunities must understand the key government agencies seeking industry support and the mechanisms by which those agencies provide federal funding for countermeasure research and development. Critically, a potential contractor who will receive federal funding for research and development should focus on key issues that will impact the performance of any agreement to produce countermeasures, including vaccines and other therapeutics, to the COVID-19 virus. Understanding these issues and factoring them into the contractor’s approach to performance will help to ensure success.

Government Agencies Support Development of Vaccines and Countermeasures to Viruses and Diseases Through Federally Funded Agreements

Several federal agencies have led government efforts to develop vaccines and other therapeutics in order to counter the threat of viruses and diseases. The Biomedical Advanced Research and Development Authority (BARDA) is a component of the Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response. BARDA has partnered with private industry to create medical countermeasures to address threats including emerging infectious diseases such as Ebola, smallpox and pandemic influenza. The Defense Threat Reduction Agency (DTRA), a Department of Defense agency, similarly addresses evolving threats and has funded the development of vaccines to counter anthrax and Ebola. Much of BARDA’s and DTRA’s support for the development of these medical countermeasures comes through funding of developmental efforts by private industry, mainly through contract and grant awards.

BARDA currently is taking the lead in seeking private industry support for the development of a COVID-19 virus vaccine and has established a website to track agency efforts related to responding to the COVID-19 virus. On March 4, 2020, BARDA issued an amendment to a standing broad agency announcement (BAA), BAA-18-100-COL-0003, which allows BARDA to award a contract for research and development in expressed areas of interest. The BAA amendment provides funding to support development projects to diagnose, prevent or treat the COVID-19 virus, specifically projects such as diagnostic tests (assays), vaccines, therapeutics and immunomodulators. The BAA requires the offeror to submit information, including a white paper and quad chart, that outlines the proposed technology, its objectives and alignment with the BAA’s areas of interest, the maturity of the technology, proposed activities and timelines and anticipated costs for the project. BARDA reviews these submissions and selects those offerors whose technologies are deemed to have technical merit and relevance to BARDA’s objectives to submit a full proposal. BARDA similarly reviews the offeror’s proposal against several factors such as programmatic relevance, technical merit, the offeror’s capabilities and experience and the project’s cost or price. BARDA enters into negotiations with those offerors whose proposals are deemed acceptable for award of a contract, grant or cooperative agreement, or other transactions agreement.

BARDA also already has engaged two pharmaceutical companies through existing contracts to assist with the development of a COVID-19 vaccine. One company, which currently holds a multi-year, multi-million-dollar contract with BARDA for vaccine development and supply, will receive funding and additional support from BARDA to produce a coronavirus vaccine candidate utilizing previously developed work for a SARS vaccine. A second company previously had entered into an agreement with BARDA using the agency’s other transactions authority to develop vaccines and other therapeutics to treat influenza, and BARDA is expanding that collaboration through additional funding and resources to accelerate the company’s investigational novel coronavirus vaccine into clinical evaluation. In both cases, BARDA has been able to harness existing agreements with these companies to expedite development efforts to respond to the COVID-19 virus.

Issues Impacting Contractors Performing Vaccine and Medical Countermeasure Development Agreements

Companies interested in seeking and receiving government funding for development of vaccines and other therapeutics to respond to the COVID-19 virus should understand the responsibilities associated with contracting with the government and prepare for negotiating and performing any agreement. As with all government contracts and grants, the agreement largely dictates the terms by which the company must perform the underlying requirements. However, contractors do have some flexibility in negotiating certain terms and enjoy important benefits that come from government research and development funding.

  • Intellectual Property. Agreements issued by government agencies for the development of vaccines and other therapeutics generally incorporate standard intellectual property clauses set forth in the Federal Acquisition Regulation (FAR) or agency FAR supplements. These clauses typically provide protections for a company’s pre-existing intellectual property used in performance of an agreement, and while they permit the company to retain ownership of intellectual property developed during the course of the agreement’s performance, the clauses provide broad license rights to the agency funding performance in the developed intellectual property. Apart from having a clear understanding of the applicable clauses governing intellectual property incorporated in any agreement, any company performing an agreement for the development of a vaccine or other therapeutic should ensure that it clearly declares any privately owned, previously developed intellectual property that will be used during performance to protect the company’s ownership interests. In addition, although agencies generally will not revise the terms of standard intellectual property clauses, contractors may be able to negotiate contract-specific terms governing the use and treatment of intellectual property. It therefore is important for the company entering into an agreement for the development of any vaccine or other therapeutic to develop an approach to protecting intellectual property that it develops during performance of an agreement beyond the agreement’s term.
  • Indemnification. As a general matter, the federal government does not indemnify a contractor against claims arising from performance of an agreement with the government. Limited exceptions (such as Public Law 85-804, which allows agencies to indemnify a contractor against unusually hazardous or nuclear risks) do exist, although their application is limited. The federal government has provided protections against liability for contractors that produce and administer biological countermeasures. The Public Readiness and Emergency Preparedness Act (PREP Act) was enacted in 2005, and in part provides immunity from liability for losses arising out of the administration or use of countermeasures to diseases, threats and conditions determined through an agency declaration to constitute a present or credible risk of a future public health emergency. The PREP Act requires the secretary of Health and Human Services to issue such a declaration, which identifies for each covered countermeasure the disease or health condition against which the countermeasure should be used, the effective immunity period, the entities for which immunity would apply, and the geographic area for which the immunity applies with respect to the administration or use of the covered countermeasure. In the past, the HHS secretary has issued declarations for vaccines for Ebola and Zika as well as countermeasures for anthrax, smallpox and pandemic influenza. Given the severity of the public health risks posed by the COVID-19 virus, there is a strong possibility that the agency will issue a similar declaration providing PREP Act coverage to companies developing vaccines and countermeasures to respond to the new coronavirus.
Conclusion

The rapid spread of COVID-19 is testing the U.S. government’s ability to provide adequate protections to citizens, and the federal government has acted swiftly to tap private industry to aid in the government’s response. Companies possessing the technical skills and experience necessary to develop effective countermeasures to the virus are a critical component of the government’s response. For those companies seeking to enter into an agreement with the federal government to provide research and development support, understanding the process by which the government solicits industry support and the terms of the agreements under which that support is provided remains of paramount importance. Developing an understanding of these issues will increase the likelihood of obtaining and successfully performing an agreement to develop countermeasures to the COVID-19 virus.

FOR MORE INFORMATION

Chip Purcell and Tom Mason have represented life sciences and pharmaceutical companies in the negotiation and performance of contracts and grants awarded by the federal government, including BARDA and DTRA, for the research and development, including medical countermeasures such as vaccines for the Ebola virus and anthrax.

For more information, please contact:

Tom Mason
202.263.4168
Thomas.Mason@ThompsonHine.com

Francis E. (Chip) Purcell, Jr.
202.263.4118
Chip.Purcell@ThompsonHine.com

Faith L. Charles
212.908.3905
Faith.Charles@ThompsonHine.com

Ray McCann
202.263.4152
Ray.McCann@ThompsonHine.com

Joseph R. Berger
202.263.4193
Joseph.Berger@ThompsonHine.com

Mona Adabi
202.263.4147
Mona.Adabi@ThompsonHine.com

ADDITIONAL RESOURCES

We have assembled a firmwide multidisciplinary task force to address clients’ business and legal concerns and needs related to the COVID-19 pandemic. Please see our COVID?19 Task Force web page for additional information and resources.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

© 2020 THOMPSON HINE LLP. ALL RIGHTS RESERVED.