Merle M. DeLancey Jr. and Craig Stetson*
This is the first in a series of blog posts concerning the audits and investigations related to the contracts and grants awarded, and relief funds provided, in response to the COVID-19 pandemic. As of February 2021, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which created the Paycheck Protection Program (“PPP”) and supplemental funding such as the Families First Coronavirus Response Act, the United States government has made available an estimated four trillion dollars in relief funds to businesses and individuals, and the Biden administration is proposing roughly two trillion dollars more.
In addition to the relief funds, the Government has easily awarded more than billions in pandemic-related contracts for everything from vaccines to PPE to hand sanitizers. These levels of funding and spending are unprecedented and have been made at breakneck speed (for the government). Based on these factors and lessons from the past, audits of relief recipients and contractors to confirm appropriate use of government funds are inevitable. And the government has said as much. Of course, if an audit reveals potential wrongdoing or malfeasance, relief recipients and contractors should expect follow-on investigations and enforcement activity.
This first post identifies the myriad of entities that are or will be reviewing—and potentially investigating—relief recipient and contractor representations made to obtain, and subsequent use of, government funds.
Continue reading “COVID Audits and Investigations: The Enforcers”
Merle M. DeLancey Jr.
The Trump administration issued numerous Executive Orders seeking to rein in drug prices. (See Recent and Possible Executive Orders on Drug Pricing: What You Need to Know – Government Contracts Navigator and Administration Issues Executive Order Tying Medicare Drug Costs to International Prices – Government Contracts Navigator.) While the Executive Orders made for good sound bites, none of them actually impacted drug prices. At the end of the day, most of the Trump administration initiatives never made it to the regulatory rulemaking phase, and those that did were met with legal challenges. Since then, in less than a month since taking office, the Biden administration has issued multiple Executive Orders and memoranda reversing the Trump-era Executive Orders and freezing pending regulations and enforcement policies with respect to existing regulations. Beginning on its first day, the Biden administration took action impacting drug prices and potentially signaled, directly or indirectly, the polices we may see over the next four years. The new administration’s actions have continued at a rapid pace. Continue reading “Biden Administration Already Impacting Drug Prices”
Merle M. DeLancey Jr.
Protection of the workforce is a major focus of the Biden Administration. Rather than attempting to pass new legislation or amend existing statutes, the path of least resistance in the short term appears to be the use of executive orders to implement or, as here, rescind Trump Administration Executive Orders and put into effect many of the same policies as the Obama Administration. The starting point for the Biden Administration is to take the steps to implement rules with respect to the federal workforce and the workforce performing federal government contracts.
One of President Biden’s first actions in office was to direct federal government agencies to start the work to permit implementation of certain changes within the first 100 days of the administration through further executive action. These initiatives most likely will include an increased federal contractor minimum wage, requirements to offer employment to employees of an incumbent contractor, perhaps requiring contractors to disclose labor violations when seeking federal contracts, and increased Service Contract Act (“SCA”) enforcement.
Continue reading “Biden Administration Prioritizing Federal Contractor Workforce Protections”
- President Biden’s Executive Order 14003 on Protecting the Federal Workforce issued on January 22, among other requirements, directed the Office of Management and Budget to make recommendations regarding establishing a $15 minimum wage for federal employees and federal contractors and subcontractors (the current federal contractor minimum wage is $10.95) and to provide employees with emergency paid leave.
- President Biden’s Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government issued on January 20 revoked President Trump’s controversial Executive Order prohibiting certain types of workplace diversity trainings for federal government contractors.
Jay P. Lessler, John M. Clerici, and Merle M. DeLancey Jr.
President-elect Biden plans to nominate California Attorney General Xavier Becerra to serve as Secretary of the U.S. Department of Health and Human Services (“DHHS”). The current Administration has frustrated the pharmaceutical industry with numerous Executive Orders and proposed rules and regulations trying to impact drug pricing. DHHS’s interim final rule implementing a Most Favored Nations Model (i.e., an international pricing index) for reimbursement of certain Medicare Part B drugs is the most recent example.
Numerous pundits suggested that pharmaceutical companies manufacturing vaccines and other drugs to respond to the COVID-19 pandemic waited until after the November election to announce their progress. The rationale was that the companies would prefer working with a Biden Administration rather than suffer through four more years of acrimony with the Trump Administration. The Becerra announcement, however, could indicate the pharmaceutical industry is not yet out of the woods. Continue reading “What Could a DHHS Secretary Becerra Mean for the Pharmaceutical Industry?”
Justin A. Chiarodo, Merle M. DeLancey, Jr., and Robyn N. Burrows
About two months have passed since the August 13, 2020, effective date of Part B of Section 889 of the FY 2019 National Defense Authorization Act. Part B, sometimes referred to as the Chinese telecommunications equipment ban, broadly prohibits the federal government from contracting with entities that use certain Chinese telecommunications (including video surveillance) equipment and services.
After the FAR Council published its July 10, 2020, Interim Rule, contractors, large and small, spent countless hours working to be able to certify compliance by August 13. This deadline was critical because the Interim Rule said that absent such a certification, a contractor was ineligible for future contract awards. That is, government agencies were prohibited from renewing or extending existing contracts with contractors unable to certify Part B compliance. Indeed, agencies were prohibited from issuing an order under an existing contract to a contractor that failed to certify compliance.
Yet, despite the Rule’s laudable policy goals, the government’s piecemeal and inconsistent implementation has placed government contractors in an untenable position. Continue reading “Where Are We Going with Section 889 Part B?”
Merle M. DeLancey Jr.
On Sunday, while everyone was watching the return of NFL football, the Administration was busy fulfilling a promise it made in July to lower drug prices paid by the United States and Medicare beneficiaries by tying pricing to certain foreign countries.
In July, the Administration issued three Executive Orders concerning drug pricing and access to critical therapies. At that time, the Administration also announced that, unless the pharmaceutical industry proposed a plan that would decrease prices paid by Medicare Part B by August 24, the Administration would move forward with its own plan. Apparently, no agreement with the industry was reached because on Sunday the Administration announced its own plan.
In what is being called the “Most Favored Nations” Executive Order, the Administration is re-starting its efforts to reduce the prices the United States pays for drugs under Medicare Parts B and D. The Order uses the “most-favored-nation price” as the benchmark for prices to be paid by the United States. Most-favored-nation price is defined as the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a comparable member country of the Organisation for Economic Co-operation and Development (“OECD”).
Perhaps most surprising is the increased scope of the Order. The Order goes beyond what was proposed in July by seeking to link not only Medicare Part B drug prices but also Medicare Part D prices to lower prices paid by other countries. With respect to both Medicare Parts, the Department of Health and Human Services’ (“HHS”) “payment model” is to test whether poor clinical outcomes improve as a result of patients paying lower prices—no more than the most-favored-nation prices—for certain high-cost pharmaceuticals and biologics.
While the Order makes for a snappy sound bite, any potential benefits of lower drug prices will not be seen anytime soon. First, HHS will need to complete its rulemaking, which could have its own challenges. For example, in November 2018, HHS published an Advance Notice of Proposed Rulemaking (“ANPR”) proposing to implement an international reference pricing payment model for use by Medicare and Medicaid. Ultimately, nothing became of the ANPR. Even then, implementation of the contemplated programs is precarious. Industry opposition to the Order has been palpable and any HHS plan will likely face legal challenges that could substantially delay implementation.
Merle M. DeLancey Jr. and John M. Clerici
On August 6, 2020, President Trump issued another Executive Order (“EO”) that will likely have dramatic and long-lasting effects on the pharmaceutical industry. The impact of the EO may be far greater than currently anticipated. It is well-considered, well drafted, and structured in a way that is likely to survive if there is a change in Administration. The EO will have a greater and immediate impact on Medical Counter Measures (“MCMs”) for chemical, biological, radiological, and nuclear threats, and emerging infectious diseases than on Essential Medicines. The inclusion of Critical Inputs (i.e., active pharmaceutical ingredients (“API”)) and starting materials potentially makes the impact far reaching, especially when coupled with the significant funding from the federal government to support onshoring efforts as a result of the COVID-19 pandemic. Continue reading “Executive Order Regarding Domestic Production and Purchase of Essential Medicines: A Lot to Unpack and More Than Meets the Eye”
Merle M. DeLancey Jr.
On July 24, 2020, President Trump signed three Executive Orders aimed at lowering prescription drug costs and increasing patients’ access to life-saving medications. A fourth Executive Order was discussed, which could reduce the prices Medicare Part B pays for drugs based upon international prices, unless the pharmaceutical industry implements measures in the next 30 days. Leaving politics and rhetoric aside, below are the key facts regarding the Executive Orders.
First Executive Order: Access to Affordable Life-Saving Medications
The Order: Click here to view the Order.
Effective Date: July 24, 2020
Purpose: Requires Federally Qualified Health Centers (“FQHCs”) to pass on the discounted prices they pay for insulin and epinephrine to low income patients. FQHCs are federally funded, community-based health care providers serving low income patients and underserved areas. Under the Health and Human Services’ (“HHS”) 340B Drug Discount Program, drug manufacturers charge FQHCs statutorily discounted prices, sometimes as low as $0.01, for drugs including insulin and epinephrine. But FQHCs are not required to pass on the discounted prices to their patients. This Executive Order requires FQHCs to make insulin and epinephrine available to their patients at the price paid by the FQHC. The FQHC is permitted to charge a minimal administration fee. Continue reading “Recent and Possible Executive Orders on Drug Pricing: What You Need to Know”
Justin A. Chiarodo, Merle M. DeLancey, Jr., and Robyn N. Burrows
We previously discussed key elements of the newly released interim rule (“the interim rule” or “the rule”) implementing Part B of Section 889 (“Part B”), which prohibits the federal government from contracting with entities that use certain Chinese telecommunications equipment. This post provides a more detailed analysis of the scope and application of the rule, as well as five compliance recommendations given the impending August 13th deadline.
Rule Applies to All Contracts Effective August 13, 2020
Part B applies to all solicitations, options, and modifications on or after August 13th, including contracts for commercial items, commercially available off-the-shelf (COTS) items, and contracts at or below both the micro-purchase and simplified acquisition thresholds. Like it did with respect to Part A, GSA intends to issue a Mass Modification requiring contractors to certify compliance with Part B. GSA has also released Q&As and FAQs to assist contractors with Part B implementation. The interim rule acknowledges that Part B will have a broad impact across contractors in a range of industries, including healthcare, education, automotive, aviation, and aerospace. The rule, however, does not apply to federal grant recipients (which are subject to a separate rulemaking). Continue reading “Part B Interim Rule Bans Contractors from Using Covered Technology Starting August 13th: 5 Steps for Meeting the Compliance Deadline”
Justin A. Chiarodo, Merle M. DeLancey Jr., and Robyn N. Burrows
On July 10, the government issued the long-awaited Interim Rule implementing Part B of Section 889 (here is a link to the pre-publication version, with the official version soon to follow). Part B prohibits the federal government from contracting with entities that use certain Chinese telecommunications equipment (previously discussed in our blog posts here and here). The Interim Rule is 86 pages and addresses issues related to compliance with Part B, as well as clarifying aspects of Part A.
These are the key points federal contractors need to know:
- Effective Date: The effective date remains August 13, 2020. The ban applies to solicitations, options, and modifications on or after August 13. However, as we previously discussed, the Department of Defense may allow its contractors more time to comply, despite the statutory deadline.
- Required Representation: An offeror must represent that, after conducting a reasonable inquiry, it does/does not use covered telecommunications equipment/services.
- “Reasonable inquiry” means an inquiry designed to uncover any information in the entity’s possession about the identity of the producer or provider of covered telecommunications equipment or services used by the entity. An internal or third-party audit is not required.
- Scope of “Use”: Applies to the contractor’s use of covered technology, regardless of whether it is used to perform a federal contract. Thus, a contractor’s commercial operations are included.
- Affiliates/Subsidiaries: The required representation is not applicable to affiliates or subsidiaries at this time. The FAR Council is considering whether to expand the scope of the representation/prohibition to cover an offeror’s domestic affiliates, parents, and subsidiaries. If expanded, it would be effective August 13, 2021.
- Subcontractors: The ban and required representation are not applicable to subcontractors at this time. The ban only applies at the prime contractor level and does not include a flow down obligation.
- Detailed Waiver Process: The Interim Rule includes a detailed and complex process for seeking a waiver (really a two-year delayed application).
- Suggested Compliance Steps: The Interim Rule suggests contractors adopt a “robust, risk-based compliance approach” to include educating personnel on the ban and implementing corporate enterprise tracking to identify covered equipment/services.
Regulators are still seeking feedback from industry, which suggests the government’s willingness to incorporate changes in a final rule. But prime contractors need to act now. In the next 30 days, prime contractors need to determine through a “reasonable inquiry” whether they use covered equipment, regardless of whether that use relates to performance of a federal contract. To demonstrate a reasonable inquiry, contractors should memorialize all steps taken and decisions made in performing the inquiry.
A more detailed analysis is forthcoming. In the meantime, if you have any questions regarding compliance, please contact one of Blank Rome’s Government Contracts practice group attorneys for guidance.