Not-So-Public Material Threat Determinations: If an Incentive Falls in a Forest . . .

November 10, 2020By Sara W. Koblitz & David B. Clissold

The Priority Review Voucher (“PRV”) program is a powerful incentive to encourage sponsors to develop treatments for conditions that are not ordinarily priorities for industry, such as infectious diseases for which there is no significant market in developed nations (tropical disease) or rare pediatric diseases.  These vouchers can be sold and historically have been worth up to hundreds of millions of dollars.  As we explained back in May, Congress, in the 2016 Cures Act, added medical countermeasures to the list of available PRVs in an effort to incentivize development of FDA-regulated product to assist in the “event of a potential public health emergency.”  The catch is that a medical countermeasure (“MCM”) PRV is available only if the Department of Homeland Security (DHS)—in consultation with Health and Human Services (HHS)—issues a determination that the potential public health emergency is a “material threat” under 42 USC 247d–6b(c)(2).  A “material threat” is defined as a threat “sufficient to affect national security.”  Yet, even as the world is facing the biggest public health emergency it has seen since 1918, and even as products to treat COVID-19 have been declared “security countermeasures,”  DHS has not made such a determination for COVID-19, rendering them ineligible for a material threat MCM PRV.  At least, that’s what we thought until October 2020.

On October 22, 2020, FDA announced the approval heard round the world (or at least the country): Veklury (remdesivir), for use in adult and pediatric patients 12 years of age and older and weighing at least 40 kilograms (about 88 pounds) for the treatment of COVID-19 requiring hospitalization.  Buried at the end of that FDA press release, in a single sentence, FDA noted that the product had been awarded a material threat MCM PRV.  Such an award is . . . interesting.  When we checked in with DHS and HHS in April, they confirmed that COVID-19 had not been designated a material threat, and a Congressional Research Services Report from September 2020 explaining medical countermeasures for COVID-19 made no mention of COVID-19’s designation as a material threat.  Indeed, a search of Federal Register notices shows DHS and HHS’s announcement of a Material Threat Determination for Ebola and Anthrax, which appear in a list of designated material threats in April 2007 (though no Federal Register notice was released for the initial determination for Ebola in September 2006).  EUAs issued in the Federal Register for Ebola and Anthrax also specifically refer to related “material threat determinations.”  No similar announcement or EUA including such specific language was published for COVID-19.  Nor have we been able to locate any other announcements from DHS or HHS, and our follow-up inquiry to the agencies as to the date of the Material Threat Determination has yet to receive a response.  All of this raises the question of whether such a designation was ever formally made.

Though no law expressly requires the publication of a material threat designation, section 319F–2(c)(3)(B) requires HHS to make publicly available its assessment of the ongoing availability of appropriateness of specific countermeasures to address the “specific threats identified” under section 319F–2(c)(2)(A)(ii) – or “material threats.”  Though the provision allows the withholding of some information that may “reveal public health vulnerabilities” or is otherwise confidential under FOIA (like the existence of specific pending applications), such a publicly available assessment should at least provide notice that a Material Threat Designation has been issued.  Historically HHS announces its statutorily-mandated assessments in its annual Public Health Emergency Medical Countermeasure Enterprise (PHEMCE) Strategic Implementation Plan, but a new version of that Plan has not been released since December 2017, precluding its utility for publicizing current material threat determinations.

As mentioned, COVID publicly has been declared a “security countermeasure” in the Federal Register since March 2020, but “material threats” under 319F-2(c)(2)(B) of the PHS Act are expressly distinct from “security countermeasures” under 319F-2(c)(1)(B).  If the “security countermeasure” declaration intended to suffice for a 319F-2(c)(2)(B) Material Threat Determination, HHS and DHS would not have stated back in April that “At this time, a Material Threat Determination (MTD) has not been issued for SARS-CoV-2 (COVID-19).”  Though there are some vague references to “material threat” in almost all of the Federal Register EUA announcements, nothing published since April suggests that HHS issued any formal Material Threat Determination under 319F-2(c).  Indeed, the language in EUAs related to “material threats” has not changed since April.  As such, even if a Material Threat Determination was made after April or May, it certainly wasn’t publicized.

And therein lies the real issue: As FDA explains in guidance, “Section 565A of the FD&C Act was designed to encourage development of new drug and biological MCMs, by offering additional incentives for obtaining FDA approval of certain MCMs.”   (After all, Congress did entitle the provision “Priority review to encourage treatments for agents that present national security threats,” and the statute itself refers to a PRV as an “incentive program” and a “supplement” to “any other provisions . . . that encourage the development of medical countermeasures.”)  But if a “material threat determination” – necessary to obtain that incentive – is not public, how can such a material threat Priority Review Voucher encourage development?  It’s unclear how a reward can serve as motivation when it remains a secret.

And there is no reason to believe that this is a problem that will be limited to COVID treatments, as the statute does not mandate the publication of the Material Threat Determination in the Federal Register; rather, the statute requires only a vague “assessment,” which apparently HHS has not published in three years.  With no way to request a Material Threat Determination and no knowledge of a preexisting Material Threat Determination, small drug development companies—particularly those that focus on rare diseases—have no incentive to even consider whether a drug could be repurposed to treat a material threat or whether exploring development of a material threat could provide any return on investment.

Further, FDA requires sponsors to request a material threat MCM PRV at time of application submission.  This suggests that FDA expects some sort of announcement, such as a published Material Threat Determination, to be public.  Otherwise, how could a sponsor know to request the MCM PRV?    Perhaps FDA informs a sponsor of a Material Threat Determination at a meeting, but, if that were the case, the material threat MCM PRV does not serve as an incentive for other companies to develop treatments, as Congress clearly intended.  Reviewing FDA’s Material Threat MCM PRV Guidance, it is apparent that the Agency expected HHS to publicize “identified material threat agents that may qualify an MCM application for a PRV,” and it even directs sponsors to reach out to HHS for confirmation during development.  If the goal is to broadly encourage development of such therapies, informing sponsors of a material threat determination at the soonest opportunity would seem to be the most efficient approach to achieving that objective

Regardless, now that the world knows that a Material Threat Designation has been made, and because a PRV is not limited to the first treatment for a Material Threat MCM, other sponsors have the opportunity to obtain such a voucher.  As long as an additional treatment is a new active moiety and otherwise eligible for Priority Review – it’s for a “Serious Condition” and demonstrates potential to be a significant improvement in safety or effectiveness – other Material Threat MCM PRVs should be available for COVID-19 treatments.  But those companies who are planning to invest in COVID-19 treatments are likely already doing so, rendering our new-found knowledge of the Material Threat Designation relatively useless for purposes of encouraging innovation.  Perhaps, as we said in May, if DHS and HHS had made an early Material Threat Determination and actually publicized it—whenever it may have been issued—maybe some of the companies that really could have used the incentive to develop a treatment for COVID-19 would have jumped into the game.

Moreover, the Material Threat Designation has potentially created a different issue that companies should think about: dilution of the incentive.  Many companies are investing in COVID-19 therapeutic products.  If all or most of them are eligible for a PRV, the resulting supply of PRVs on the market may be expected to decrease the value of all PRVs—even those unrelated to COVID-19—such as those awarded for the approval of a drug to treat an infectious disease for which there is no significant market in developed nations (tropical disease), or a rare pediatric diseases.  Much of the value of a PRV is that it can be sold as a commodity; an oversupply would inherently decrease its market value.  Without significant market value – especially for small companies that may not have other products in the pipeline to utilize the PRV internally – will a PRV still serve as incentive?

In sum, the government’s approach to the material threat MCM PRV does not seem to further Congressional intent to provide incentives for the development of drugs to treat material threats.  And, to be clear, the problem with the lack of Material Threat Determination publication is bigger than COVID.  Veklury just put a spotlight on the problem, which ultimately is whether an incentive program can really function as an incentive if important information is not public.