OP-ED: Fixing the PPE shortage should top Biden's to-do list
In the run-up to the election, there were two devastating accounts of how President Donald Trump and his son-in-law Jared Kushner botched the government's response to the initial shortage of personal protective equipment — the masks, gloves, gowns and other gear hospital workers desperately need as they treat COVID-19 patients.
One was a lengthy article in Vanity Fair by Katherine Eban, an investigative health reporter. The other was a documentary, "Totally Under Control," by Alex Gibney, the Oscar-winning filmmaker, and co-directors Ophelia Harutyunyan and Suzanne Hillinger.
The story they both tell is classic Trump: Hubris and incompetence turn a serious problem into an utter disaster. Kushner sets up the COVID-19 Supply Chain Task Force, fills it with 20-somethings who know nothing about sourcing hospital supplies, and walks away. Not surprisingly, they fail.
Trump and Kushner take dark pleasure in watching desperate state governments — mostly in blue states — bid against each other for what supplies are available. The administration even impounds — "steals" is not too strong a word — imported PPE that hospitals and distributors had sourced and paid for. To this day, no one knows where that equipment resides.
President-elect Joe Biden, of course, has vowed to put the fight against the pandemic at the top of his agenda. On Nov. 9, he named a 13-member coronavirus task force, led by three scientists. He also listed a series of measures he plans to take as soon as he assumes office in January, including ramping up testing, providing the resources to allow schools and small businesses to reopen, implementing a national mask mandate — and taking steps to fix the chronic shortages of personal protective equipment.
Still a problem: I've been following the issues surrounding personal protective equipment since the shortages first became apparent in March. Here's what I can tell you: Although PPE shortages have largely dropped out of the news, they remain a reality that hospitals and other health care facilities deal with on a daily basis.
Hospitals now routinely reuse masks that are supposed to be discarded after one use. Nitrile gloves, which are primarily made in Malaysia, Vietnam and Thailand, have become almost impossible to get. (It didn't help that Malaysia, where 75% of the gloves are manufactured, was in lockdown recently.) By early next year, needles are going to be scarce, according to supply chain experts I've spoken to.
And that was before the recent spike in COVID-19 cases and hospitalizations. When I asked Marc Schessel what was in short supply now that daily positive cases in the U.S. were regularly topping 100,000, he replied, "Masks, gowns, all of it. It's going to be a real (expletive) very soon — much worse than Round One."
Schessel should know. He is the founder and chief executive officer of SCWorx Corp., a company that provides supply chain management software for the hospital industry. When it first became clear that the PPE supply chain was breaking down, hundreds of hospitals asked him to see if he could source protective equipment. He turned over much of his day-to-day duties at his company to other executives to focus on finding PPE.
Over the last nine months, Schessel has seen it all. Early on, he saw hospitals lose millions of dollars by naively making "down payments" for PPE that was being dangled by fraudsters. He watched deals for millions of masks — deals he thought he had locked down — vanish at the last minute. Warehouses that were supposed to be filled with N95 masks turned out to be empty. He's seen hedge funds flip shipments of PPE as if they were oil futures, driving up the price as they bought and sold. Sometimes, legitimate PPE orders from abroad got delayed by Food and Drug Administration problems. Most of the PPE he could get his hands on cost three, four or five times their pre-pandemic price. And on and on.
Pull out the stops: Thus, the first thing the incoming Biden administration will need to do is pretty radical: Use the Defense Production Act to take over all PPE sourcing and distribution. No one else has the resources to handle the task. Yes, there is protective equipment in the national stockpile. But it's not nearly enough — not because President Barack Obama depleted it (as Trump has alleged) but because the U.S. hasn't faced a national health emergency like this one since the 1918 influenza that killed some 675,000 Americans.
Biden can use the Federal Emergency Management Agency to create new supply chains. He can deploy the Defense Logistics Agency within the Department of Defense to distribute PPE where it is most immediately needed. (Unfortunately, none of the members of the president-elect's new task force are logistics experts.) He can use the government's vast reach to source PPE anywhere in the world. He can — and must — forbid trading by hedge funds, which is creating artificial demand that is exacerbating both the shortages of PPE and the exorbitant prices the equipment is commanding. And — again using the Defense Production Act — he can insist that certain companies begin manufacturing PPE, and that hospitals begin buying from American sources.
What nobody seems to have noticed is that, on a small scale, some of this is already happening. That may be the one good thing to have come out of the PPE crisis.
During a recent conversation with Schessel, he said he and a handful of others have begun to create their own supply chains. They now know which distributors and manufacturers can be trusted and which can't. Perhaps best of all, they are doing business with companies in North America that have decided to get into the PPE business.
In South Carolina, for instance, former Wells Fargo & Co. executive Lance Brown started a company called Rhino Medical Supply. His idea was that he would try to supply small hospital systems — the kind that are at the end of the line for PPE — by contracting primarily with U.S. manufacturers. He went down the usual rabbit holes, but he now has suppliers for masks, gowns, shields and even gloves.
"Having a domestic supply chain helps the economy and produces jobs," he said. "And it is going to be crucial going forward." One of the companies he is buying from is DemeTech Corp., based in Miami, that began making N95 and other medical masks this summer. "We know enough now to figure out whether a company is legitimate by asking what business they were before COVID-19," Brown said. " DemeTech made sutures and other surgical devices. That's the kind of news that gives you confidence."
Luis Arguello Jr. is the vice president of DemeTech. (His father bought the company in the 1990s.) "We took a risk as a family," he told me. "We invested a few million dollars to make surgical masks and N95s." The FDA approved DemeTech's PPE in June, and over the summer it sold masks as fast as it could produce them. Because the company's labor costs were higher than the Chinese manufacturers', their masks were a little more expensive.
Here to stay?: On the other hand, he added 600 employees to keep up with mask production.
I asked Arguello if he and his family planned to stay in the mask business. He wasn't sure, he said. The Chinese had started competing for his customers, and much to his amazement, they were winning a lot of the business. Despite everything, it appeared to him that distributors and hospitals care more about saving a few pennies than ensuring a supply of U.S.-made masks. If the government didn't get involved, he said, none of the companies that had gotten into the PPE business were likely to stay in it.
To solve the PPE problem, the incoming Biden administration needs to build on what's already begun to take place: new manufacturers, new distributors, new supply chains, new focus on U.S.-made PPE. And, of course, it needs to do so yesterday.
Schessel recently told me that things were already taking a major turn for the worse. Foreign governments were throttling back production to drive up the price of nitrile gloves. Getting goods shipped quickly was becoming an issue.
"Due to a lack of leadership, and an 'every-country-for-themselves' attitude, we are in for a very rough go, I fear," Schessel said. "The U.S. government needs to reengage in a real way or this is going to become a very serious issue."
I hope Joe Biden's new coronavirus task force is listening.
— Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."