Synopsis and Market Implications of the CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Trump on March 27, 2020, with significant bipartisan support. The CARES Act essentially is an over $2 trillion economic relief package that serves to provide immediate financial aid for American families, workers, and small businesses in the hopes of keeping American industries prosperous and combat unemployment rates. The following provides a synopsis of the CARES Act, which can be found in its totality on congress.gov.

Synopsis of the CARES Act

To assist American citizens in these difficult times, the United States Congress has passed a $2.3 trillion bill that serves to have impactful consequences for individuals, small businesses, public health, federal safety net education, and state and local governments. The provisions include the following:

  • Households that earn less than $99,000 will receive a $1,200 check for every individual member and an additional $500 for every child. Forecasts indicate an approximate $290 billion relief fund for those that are deemed eligible.

  • Private insurance plans are required to cover COVID-19 treatments, vaccines, and testing.

  • Unemployment payments are granted an additional $600 per week set to last for four months, along with 13 weeks of unemployment insurance.

  • $350 billion are being allocated to the Small Business Administration (SBA) to deliver the Paycheck Protection Program (PPP) for small businesses to provide loans of up to $10 million per company. A significant benefit is that any portion of the loan used to maintain payroll, pay for rent, mortgage, and existing debt can be forgiven so long as workers stay employed until the end of June 2020.

  • Allocate $100 billion for hospitals responding to COVID-19 and $1.32 billion for Community Centers that serve to provide health care services for approximately 28 million people.

  • The Legislation is designating $339.8 billion for programs in several areas, including $150 billion in direct aid for state and local governments, $13 billion for K-12 schools, and $14 billion for higher education.

  • The bill designates approximately $500 billion to aid nonprofits and big corporations, such as the aviation industry, along with a $58 billion grant to help airlines stay in business.

Implications for the Healthcare Industry

The CARES Act includes several provisions designated to support and assist the financial burden on hospitals and health care providers due to the increased demand yet declining supply and revenue amid the COVID pandemic. Nevertheless, prognostications indicate that the CARES Act merely has the potential to alleviate short-term pressures. It lacks an accurate and detailed description of how the government plans to distribute the limited funds across the nation.

In the short-term, we can expect hospitals to continue seeing a rise in operating expenses as the coronavirus fails to stagnate and decline. A combination of the Public Health and Social Services Emergency Fund, Medical add-on payment, and accelerated Medicare prepayments hold the potential to alleviate increased costs and declining revenue in the short-term.

Unfortunately, the Act fails to hold promising potential when conducting a long-term analysis. Even after the rush of COVID-related hospitalizations passes and operating expenses begin to decline, hospitals will continue to face pressures associated with revenue expenses. The Act fails to take into account the gravity of unemployment levels and a realistic economic recovery pace that threatens hospitals' survival.

Implications for the Pharmaceutical and Biotechnology Industries

Fortunately, the CARES Act holds critical provisions that are set to impact the pharmaceutical and biotechnology industry positively. Such rules include a requirement that the strategic national stockpile includes necessary supplies to combat the pandemic such as personal protective equipment (PPE), medical supplies, drugs, vaccines, medical devices, and diagnostic tests. Furthermore, "covered countermeasures" during a public health emergency have been expanded to include personal respiratory protective equipment. An additional provision in place is a requirement for drug or device manufacturers to develop management plans that exhibit redundancy risk given the expedited nature of regulatory review and inspections.

The CARES Act also presents an exceptional array of opportunities through top research, development and manufacture organizations such as the Food & Drug Administration (FDA), the National Institute for Innovation in Manufacturing Biopharmaceuticals, the National Institute of Standards and Technology, the National Science Foundation (NSF), and the National Institute of Health (NIH).

Given the nature of the coronavirus pandemic, the following areas are preferred for the new federal funding opportunities:

  • COVID-19 related critical medications, vaccines, research, new countermeasures, therapies, and biomedical equipment.

  • Research and measurement science support for fast, simple, accurate testing of COVID-19.

  • Research conducted through the Rapid Response Research (RAPID) program and other research programs of COVID-19 prevalence.

In the year 2020, Congress has implemented the most substantial economic relief bill in U.S History. The CARES Act serves to mitigate public health and financial necessities and declines, yet more Legislation may be required. Other urgent needs that future bills must address include health coverage, food assistance for families in need, and state fiscal relief, to name a few. Overall, the Cares Act is a crucial initial bill to lend America a helping hand amid the Coronavirus pandemic.

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