Trump Gives U.S. Broad Control Over Health-Care Supply Chain

(Bloomberg) -- President Donald Trump signed an executive order Wednesday giving the federal government broad powers to direct the production and distribution of health protective gear, ventilators and other supplies if the coronavirus outbreak in the U.S. gets far worse.

As part of an emergency measure, the executive order lets U.S. Health and Human Services Secretary Alex Azar take priority over private contracts and agreements. The department could also get control over how needed health-care goods are distributed.

It’s not clear how extensively the government would use the powers outlined in the broadly-written order, or whether companies would start legal objections if they disagreed. In a tweet following the signing of the order, Trump said it would be used for a “worst-case scenario,” and hopefully wouldn’t be needed.

The White House cited the Defense Production Act of 1950, which gives the government authority to allocate private resources in a national crisis, as the legal basis for the new authority.

In a statement on Wednesday night, Azar said: “We are coordinating closely with private suppliers, health-care purchasers, and our federal partners like the Commerce Department to ensure that resources are going where they’re needed.”

Masks and ventilators are critical to protect health workers and to treat patients who get severe versions of the respiratory illness. Health workers, local governments and hospitals have complained of shortages of the equipment.

Broad Powers

The order says that HHS will get the power to “to promote the national defense over performance of any other contracts or orders, to allocate materials, services, and facilities as deemed necessary or appropriate.”

The executive order “absolutely is legal,” said David Ault, a lawyer at Faegre Drinker Biddle & Reath LLP, who worked at HHS.

“What’s novel about this is it’s not being used” for the production of military equipment, he said.

The law has been used during the Vietnam, Korean and Cold Wars, and to fight terrorism.

This act requires that manufacturers who make certain things the government needs to accept contracts with the federal government to make those items, and that the company has to meet the federal government’s needs before fulfilling any other agreements, Ault said.

Trump has described the U.S. as being at war with the virus, and has held discussions with private companies about increasing the supply of crucial medical goods amid a shortage of protective equipment used by doctors.

HHS will also decide “the proper nationwide priorities and allocation of all health and medical resources, including controlling the distribution of such materials.”

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