Government Retail Therapy: Congress Removes Cap on OTA for Public Health Emergencies

In an effort to combat the spread of COVID-19, Congress is seeking to eliminate some red tape surrounding biomedical research and development. Specifically, Congress has removed approval requirements on specific transitions to support advanced research and development initiatives.

In terms of the mechanics, the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (aka the CARES Act) modified an existing statute that authorized expenditures on advanced research for developing “a qualified pandemic or epidemic product.” 42 U.S.C. § 247d–7e. To understand the scope of the modification, it’s important to have a little perspective on what a qualified pandemic or epidemic product is, as well as how the government had previously procured research and development of such products.

As a starting point, a “qualified pandemic or epidemic product” is defined as a drug, biological product, or device that is “a product manufactured, used, designed, developed, modified, licensed, or procured [1] to diagnose, mitigate, prevent, treat, or cure a pandemic or epidemic; or [2] to limit the harm such pandemic or epidemic might otherwise cause[.]” 42 U.S.C. § 247d-6d(i)(7). Importantly, any qualified product also needs to be able to be approved or cleared under one of the mechanisms in the Federal Food, Drug, and Cosmetic Act.

To support development of these products, Congress created the Biomedical Advanced Research and Development Authority (“BARDA”) within the Department of Health and Human Services. 42 U.S.C. § 247d–7e(c). Among BARDA’s responsibilities is to support research and development initiatives, as well as general innovation for qualified pandemic or epidemic products.

To facilitate this objective, the Secretary of Health and Human Services has authority to enter into “other transactions.” While the wording may seem ominous, Other Transaction Authority (“OTA”) is merely “transactions, other than procurement contracts, grants, and cooperative agreements.” 42 U.S.C. § 247d–7e(a)(3). OTA refers to procurement activities that are generally exempted from other federal procurement laws, such as the FAR. Such exemptions allow agencies greater flexibility to structure acquisitions for goods and services. This can be particularly advantageous for research and development activities where greater flexibility is required to meet developmental challenges.

Under the implementing statutes, any OTA acquisitions supporting BARDA that exceed $100 million would need “written determination by the Assistant Secretary for Financial Resources, that the use of such authority is essential to promoting the success of the project.” 42 U.S.C. § 247d–7e(c)(5)(A)(ii)(II). This approval authority was not to be delegated, and was designed to prevent run-away transaction costs.

In the face of the COVID-19 pandemic, however, Congress has acted to remove some of the hurdles to putting federal money to work on research and development initiatives. Specifically, the CARES Act has eliminated the approval requirement for OTA acquisitions supporting research and development efforts of qualified pandemic or epidemic products during public health emergencies.

While the $100 million threshold may sound like a high bar, when talking about biomedical research at a national scale, it can be a real challenge. The modifications within the CARES Act appear targeted to get research and development money flowing faster to combat pandemics such as COVID-19. For those federal contractors in the biomedical research industry, this could provide much needed capital to continue development efforts to combat the virus.