This complex, sluggish supply chain raises questions about whether the US government can effectively intervene in the market. “It’s a production capacity problem,” says Kaufman, the former FEMA official who is now the vice president and director for safety and security at the think tank CNA. “The DPA is designed to stimulate that, but it’s not an overnight solution.”
The DPA grants the federal government the authority to force companies to put orders from the US government ahead of others. It also grants the government the power to provide financial guarantees and support for certain types of production. While the DPA’s powers are expansive, they are far less so than the WWII-era production acts that it grew out of.
The Trump administration has already invoked the DPA to force General Motors to manufacture ventilators, but public health experts point out that protective gear may be a far more immediate problem. Without proper protective gear, doctors, nurses, and hospital staff are far more likely to fall sick. The availability of ventilators won’t matter much without staff available to operate them.
Under the DPA, the federal government could allocate protective gear to the hardest hit areas of the country, but so far the Trump administration has declined to do so—perhaps because the federal stockpile is nearly depleted and the government lacks gear to allocate.
In the absence of a coordinated approach, US officials appear to be seizing 3M supplies wherever they can find them, though whether the DPA actually grants them that power is far from clear. On Friday, a shipment of 200,000 N95 masks bound for Germany were reportedly seized and diverted to the US, leading one German official to describe the incident as an act of “modern piracy.”
After directing most production of medical gear to the Chinese medical system during that country’s outbreak, factories in China and other Asian manufacturing hubs are beginning to shift supply toward beleaguered medical systems in the US and Europe, according to supply chain experts.
Chinese manufacturers have in several cases rapidly retooled factories to abandon old product lines and shift to medical protective gear. BYD Precision Manufacture, which makes electric cars and lithium batteries, is now churning out a Chinese equivalent of an N95 mask, which the US Food and Drug Administration finally approved on Friday for emergency use by American doctors.
Around the world, a small army of consultants and supply chain specialists have mobilized to locate suppliers and vet new manufacturers coming online. Andre Thuvesson, a managing director at the supply chain consultancy Inverto, has teams scouring the Chinese market for producers and matching them with European demand. “We do the best we can to consolidate demand within one country and match it with supply on the market.”
But to get access to N95 masks, countries are paying a premium. N95 masks that could be bought for 30 cents before the coronavirus outbreak are now selling for a dollar a piece in bulk orders. And demand remains massive. European hospitals and health care authorities are purchasing three to six months’ production from Chinese factories that are churning out about 1 million masks per month, Thuvesson says.
In the US, health authorities are making similarly large purchases. On March 21, the Department of Health and Human Services placed an order for 600 million N95 masks. With a lack of domestic manufacturing capacity, the federal government is instead expediting the delivery of supplies from Asian manufacturing centers, with a FEMA-organized air bridge delivering 80 tons of medical supplies to New York on Sunday, with additional flights expected to be carried out. A report Monday from the Office of the Inspector General at the Department of Health and Human Services found that some hospital systems are still experiencing three- to six-month delays in replenishing PPE supplies.
State medical authorities are continuing to make purchases of medical gear, and they report that competition among them is helping to drive up prices. Ed Raeke, who oversees the purchasing of supplies for Massachusetts General Hospital, says he is seeing 10-fold price increases. Preexisting orders for supplies are sometimes falling through, and his days are spent going through spreadsheet after spreadsheet comparing his hospitals’ quickly rising burn-rate with the supplies he has on hand. “It’s been a mad scramble,” Raeke says. (The situation is so bad that Patriots owner Robert Kraft is using the team plane to ferry supplies to Boston hospitals.)
