The Government Will Likely Look to the Defense Production Act to Fulfill Its 500 Million COVID-19 Rapid, At-Home Test Kits Requirement

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Merle M. DeLancey Jr. and John M. Clerici*

Last week, in response to the Omicron variant, President Biden announced the Government intends to purchase 500 million at-home, rapid COVID-19 tests for distribution to Americans. According to the announcement, Americans will be able to order test kits to be delivered to their homes starting in January. While this may have been a good sound bite, as discussed below, it does not appear realistic. More likely, while Americans may be able to place orders in January, those orders may not be filled until several months into 2022.

As widely reported, rapid COVID-19 at-home test kits are already in short supply. Moreover, the Government has yet to enter into additional contracts beyond the limited contracts to a small number of suppliers previously announced by the Defense Logistics Agency (“DLA”) and a handful of “prototype” contracts finalized in 2020 under the Trump administration. The Government has not made any recent additional contract awards for rapid COVID-19 at-home test kits.

On December 22, one day after the president’s announcement, the Department of Defense (“DoD”), on behalf of the Department of Health and Human Services (“HHS”), issued a Request for Information (“RFI”) seeking information to assess market availability and sourcing for rapid COVID-19 at-home tests. The RFI, however, is not an actual procurement nor contract award and merely seeks information for 500,000 test kits for agency “personnel use.” Responses were due by 3:00 p.m. on December 24. (See, Rapid COVID-19 Antigen Test Kits.) Proposals to supply test kits are unlikely until after a Request for Proposal (“RFP”) has been issued. As of today, no RFP has been issued.

HHS’s Biomedical Advanced Research and Development Authority (“BARDA”), which is HHS’ lead response agency under the Assistant Secretary for Preparedness and Response (“ASPR”), reports that as of October 29, 2021, it had shipped more than 168.7 million COVID-19 diagnostic tests kits. The data covers BARDA industry partners only, and does not reflect non-BARDA-supported assays, any private-sector or state efforts, or laboratory-developed diagnostics. As of December 23, 2021, the Food and Drug Administration had issued Emergency Use Authorizations (“EUA”) to 14 companies for the production of COVID-19 at-home test kits. The vast majority of the companies issued EUAs have limited production capacity.

Thus, the Government will likely need to rely on the Defense Production Act (“DPA”) to fill its needs. Under the DPA, the Government can require companies to prioritize the delivery of products, here, at-home test kits, to the Government ahead of a company’s commercial customers. In addition, under the DPA, the Government can provide financial assistance to companies to increase or accelerate production capabilities. However, providing financial assistance to scale up production is generally not a fast process. Finally, it may be possible for the Government to use the DPA to “take” a company’s current inventory of at-home tests and/or even require companies that are not currently contracted with the Government to redirect all production efforts on behalf of the Government. This latter point has not been tested—in terms of whether the Government can require a private company, that does not hold a government contract for the requested product, to produce and deliver, here, at-home test kits, to the Government.

DPA issues are complex. Pricing and takings could be contested issues. Use of the DPA will likely cause or increase havoc on supply chains. Given the unlikelihood of any short-term increase in the quantities of at-home test kits, the result will really be a reallocation of the existing supply of test kits. That is, test kit manufacturers could be required to circumvent normal supply lines—perhaps to hospitals, clinics, and pharmacies—and instead to deliver the test kits to, or as directed by, the Government. Thus, rather than the private market prioritizing the allocation of at-home test kits to Americans based on need, per its announcement, it appears the Government intends to make at-home tests kits available to all Americans without regard to health conditions, age, or any other group that has received preferential treatment during the pandemic. To the extent the Government proceeds in that manner, this new distribution plan will not likely have its intended effect of helping the country respond to the Omicron variant.

*John M. Clerici is co-founder and chief operating officer of Tiber Creek Partners LLC, a highly specialized firm that has worked in the public health preparedness sector for over 20 years, including supporting dozens of medical countermeasure providers of diagnostics, vaccines, and therapeutics in response to the COVID-19 pandemic.

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