Congress has prioritized the government’s response to the COVID-19 pandemic, passing three sweeping legislative packages that provide a historic amount of funding to hospitals, businesses, and individuals affected by the virus. On March 6, President Trump signed H.R. 6074, the Coronavirus Preparedness and Response Supplemental Appropriations Act (PL: 116-123), Congress’s first legislative action on COVID-19, into law. The bill authorized $8.3 billion in emergency funding to boost vaccine development, research, and equipment, as well as funding to state and local health departments to combat the spread of the virus. The measure also included $2 billion for the Biomedical Advanced Research and Development Authority (BARDA) to support advanced research and development of vaccines, therapeutics, and diagnostics, prioritizing platform-based technologies with U.S.-based manufacturing capabilities; $826 million for the National Institutes of Health to support basic research of vaccines, therapeutics, and diagnostics; and $300 million in contingency funding to support procurement of such therapeutics and vaccines.
On March 18, President Trump signed H.R. 6201, the Families First Coronavirus Response Act (PL: 116-127), Congress’ second round of supplemental funding to fight the COVID-19 outbreak, into law. Under the bill, insurers would be required to cover COVID-19 testing and related procedures without cost-sharing or prior authorization requirements. Additionally, private sector employers with between 50 and 500 workers and government employers would have to provide as many as 12 weeks of job-protected leave under the Family and Medical Leave Act (FMLA). The bill also requires private sector employers with between 50 and 500 workers and all government entities to provide employees who are unable to work or telework with immediate paid sick leave. To cover employers’ paid sick leave and family leave expenses enacted under the bill, the legislation provides refundable tax credits to companies. Wages paid under the bill would not be subject to the employer payroll tax or railroad retirement tax, and credits would be increased to cover employers’ 1.45 percent Medicare tax.
On March 27, President Trump signed H.R. 748, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (PL: 116-136), into law. The $2 trillion package provides financial support to individuals and businesses affected by the virus, hospitals and healthcare workers, and local communities, and provides funding to develop vaccines and treatments. The bill provided $27 billion for BARDA to advance the development, manufacturing, production, and purchase of vaccines and therapeutics for COVID-19. To aid the medical response, the bill includes $100 billion in grants to hospitals and other providers to combat COVID-19 and make up for lost dollars due to delays of elective surgeries and other procedures due to the pandemic. Providers would also receive a 20 percent increase in Medicare reimbursement for treating patients with COVID-19. Additionally, under the legislation, individuals who earn under a certain threshold would receive $1,200, and couples would receive $2,400 in the form of a direct payment from the government.
Provisions to Support Businesses Impacted by COVID-19
Of particular note to medical product manufacturers, the CARES Act, along with Congress’s first two COVID-19 legislative packages, include a number of financial, labor, and tax provisions aimed at helping businesses manage revenue and operations shortfalls due the pandemic.
Large Businesses: The CARES Act package included $504 billion in loans to help airlines and other struggling businesses due to COVID-19. This included $50 billion in direct loans, comprising $25 billion to passenger airlines, $4 billion to cargo air carriers, and $17 billion to businesses critical to maintaining national security. The remaining $454 billion could be invested in Federal Reserve facilities to provide liquidity to banks for lending to states, municipalities, and businesses. The Federal Reserve can leverage these funds to provide 10 times that amount in liquidity. The statutory language states businesses must be based or incorporated in the U.S. or under U.S. law, maintain significant operations in the U.S., and have a majority of their employees based in the U.S. to be eligible for the loans.
Loans for Mid-Sized Businesses: The CARES Act directs the Treasury Department to create a program that would provide low-interest loans for eligible businesses and non-profits between 500 and 10,000 employees. To receive the loans, eligible businesses must provide a good-faith certification that their company intends to maintain at least 90 percent of their current workforce, are incorporated in the U.S. with significant operations in the U.S., will not pay dividends or engage in stock buy-backs, will not outsource or offshore jobs during the loan period or two years after, respect existing collective bargaining agreements, and remain neutral regarding current or future union organizing activity. These loans would require no repayment for at least six months and would be capped at 2 percent interest per annum.
Small Businesses: The Coronavirus Preparedness and Response Supplemental Appropriations Act created a $1 billion program to assist small businesses to be administered under the Small Business Administration (SBA). The legislation directed the SBA to offer low-interest federal disaster loans for small businesses suffering substantial damages from the COVID-19 pandemic. Such loans offer up to $2 million in assistance and may be used to pay fixed debts, payroll, accounts payable, utilities, and other bills that can’t be paid because of the virus. The interest rate of the loans is 3.75 percent for small businesses and 2.75 percent for non-profits. Terms of the loans are determined on a case-by-case basis, based on each borrower’s ability to repay.
The CARES Act provided $350 billion to the SBA to create the Paycheck Protection Program, which will provide small businesses and other entities with zero-fee loans of up to $10 million to cover payroll and other eligible costs between Feb. 15, 2020, and June 30, 2020 (the covered period). To qualify to receive an SBA loan, entities must be a small business, nonprofit, veterans’ organization, tribal business, self-employed, or independent contractor, and employ fewer than 500 people or meet the North American Industry Classification System threshold in number of employees for a particular industry—which may exceed 500 employees in certain cases—as of Feb. 15, 2020. Interest rates during the covered period would be capped at 4 percent. These loans could be used to cover up to 250 percent of average monthly payroll costs as well as commissions, regular paid leave, healthcare benefits, mortgage payments, rent, debt, and utilities.
Taxes: The CARES Act provides businesses impacted by COVID-19 with a tax credit for keeping idled workers on their payrolls equal to half of what they spend on wages, up to $5,000 per worker. This credit applies to employers whose business operations are fully or partially suspended because of a governmental shutdown order or due to the COVID-19 outbreak, or businesses that have experienced a significant decline in gross receipts. The bill also allows companies to defer the 6.2 percent employer payroll and railroad retirement tax payments through the end of the year.
On March 18, President Trump announced his Administration would invoke the Defense Production Act (DPA) in response to the COVID-19 outbreak. The DPA allows the Administration to compel production by American manufacturers of medical supplies that are in short supply due to the COVID-19 pandemic. Supplies targeted include personal protective equipment (PPE) such as masks, gowns, and gloves for health professionals, but could expand into additional areas. On March 27, President Trump invoked DPA to compel GM to produce ventilators for the COVID-19 outbreak, and on Thursday, April 2, invoked DPA to urge 3M to produce N95 face masks. President Trump has also suggested he could compel Ford, which has partnered with GE Healthcare, to produce ventilators as well. Several Democratic senators have introduced legislation that would require the President to use the DPA to compel emergency production of additional medical equipment, including but not limited to: N95 respirators, ventilators, face shields, gloves, and surgical gowns.
Throughout the past few weeks, the Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS) have released a multitude of guidance documents providing resources in response to COVID-19. These resources include expanding telehealth services in both Medicare and Medicaid; detailing coding guidance for COVID-19; and outlining Medicare and Medicaid reimbursement policies for services relating to medical technology. Of significance to the medical device industry, CMS has also issued a recommendation that all adult elective surgeries and non-essential medical and surgical procedures be delayed during the COVID-19 outbreak. CMS’ recommendation is intended to preserve access to needed healthcare personnel and medical equipment amidst the crisis. The decision to proceed with non-essential surgeries and procedures will be made at the local level by the physician, patient, hospital, and state and local health departments, which may have an impact on the device sector to the extent that various local-level stakeholders deem certain procedures as non-essential.
In addition, at the time of writing this, CMS has approved over 30 Section 1135 Waivers, which are used by states to waive or modify requirements in Medicaid, Medicare, the Children’s Health Insurance Program, and the Health Insurance Portability and Accountability Act when a public health emergency is declared by the HHS Secretary. These waivers will enable states to utilize additional flexibilities in order to care for patients.
The U.S. Food and Drug Administration (FDA) has also been working to quickly approve COVID-19 diagnostic tests and potential treatments. One avenue in which the agency has approved new technologies is through Emergency Use Authorization (EUA). Under current law, FDA may allow the use of unapproved medical products, including medical devices, for an unapproved use under an emergency situation when there are no adequate, approved, or available alternatives. FDA may use this EUA pathway when the HHS Secretary has made an emergency declaration. At the time of this writing, the HHS Secretary has determined that in-vitro diagnostic products, PPE, and certain medical devices and therapies are eligible for EUAs for COVID-19.
Jeffrey J. Kimbell, president and founder of Jeffrey J. Kimbell & Associates Inc., represents 45 clients in the life sciences community seeking legislative and policy remedies in Washington. Founded in 1998, the firm provides strategic solutions to hand-selected clients seeking creation, modification, or proper implementation of public law.
David C. Rudloff is a senior manager of government affairs at Jeffrey J. Kimbell & Associates Inc.
Caroline P. Tucker is a senior manager of health policy and reimbursement strategy at Jeffrey J. Kimbell & Associates Inc.