At what point do the benefits of local production of medical supplies outweigh the potentially higher cost? The sudden and near-overwhelming demand for Covid-19 testing during the Omicron phase of the pandemic means that the U.S. is now at a critical point where we need better — and quicker — access to testing supplies via a domestic supply chain.
Over the last three decades, the world’s economy has become increasingly globalized, resulting in lower inflation-adjusted prices for goods and products and improved standards of living around the world. The Covid-19 pandemic has provided an opportunity to once again debate the United States’ reliance on inexpensive overseas manufacturing, and reconsider the value of high-quality domestic production.
Specifically, the pandemic has underscored the necessity of access to domestic supply chain for FDA-validated medical equipment in the U.S, especially testing supplies, which can help save lives. It can also have further-reaching effects, such as stimulating the economy with increased production from U.S. companies.
U.S.-based companies involved in the Covid-19 response for testing and other critical needs have, out of necessity, supported and, in many cases, established production of their key products stateside to respond quickly to demand. The domestic manufacturing capacity that my company and others in the testing and diagnostic industry have established must be protected from foreign competitors to ensure people have access to Covid-19 supplies and testing.
Before Covid-19 emerged, the U.S. medical supply landscape was far different from what it is now: Demand was consistent and manufacturers were able to handle small surges in capacity and limit excess inventory. Take, as an example, virus sample collection in January 2020. The major producer of swabs and sample-collection devices was based in northern Italy, with U.S. production making up less than half of an average year of U.S. demand. Copycat products were also manufactured in China, but not at large scale.
A few months later as the pandemic began sweeping the globe, all excess supplies and surge capacity were being purchased by China and countries in Southeast Asia, the major initial Covid-19 hot spots, while manufacturing was expanded in those regions to provide more supplies. As the pandemic then ravaged northern Italy and rest of the world, its production of swabs and sample collection devices shrunk. So to meet needs in the U.S., the president invoked the Defense Production Act and released government funds to help American companies build facilities and expand production capabilities.
The Department of Health and Human Services provided my company, Maryland-based Longhorn Vaccines and Diagnostics, priority for U.S. production of one of our key virus testing products, while searching for additional solutions to the shortage of other medical supplies such as masks, respirators, and disposable medical kits. Thankfully, U.S. companies were able to step up and produce a supply chain for what businesses like mine and the country needed in the short term.
The situation has improved since the pandemic’s early days surrounding the availability of testing — and all medical — supplies. Yet the government has not followed through on a long-term solution to support continued domestic manufacturing. Those in the testing industry are still navigating challenges as Covid-19 and its variants sweep the nation, so government support is needed for a clear, long-term plan for medical supplies to be made in the U.S. and meet the highs and lows of demand for testing and medical supplies.
More specifically, as the Covid-19 caseload fluctuates between new variant waves, U.S. testing businesses have seen a rapid shift from a position of overwhelming demand to one of large surpluses of inventory. The same thing happened in China. At a time when U.S. companies were in full-production mode, Chinese companies that had increased their manufacturing flooded the U.S. market with testing supplies as well as other medical equipment that was priced below production cost, undercutting American companies and rendering many of them noncompetitive. This put several American companies out of business, like those in mask manufacturing. In this type of situation, it is difficult for U.S. companies to sustain production capabilities and competitive pricing, even if the U.S. companies can provide better, FDA-validated products that are more accessible because they are made in the U.S.
Another major challenge that U.S. testing companies face is how to build up Covid-19 stores of supplies when there isn’t immediate demand, but there might be in the future. The answer is directly tied with U.S. government guidance for testing companies through a long-term plan, which could also encompass the larger medical supply industry. As Covid-19 testing declined from spring through the summer of 2021, companies large and small that were still going strong worked hard to calibrate their inventories, factoring in the supplies still coming in from China.
Then, when the surge prompted by the Delta variant took hold in August, competition was intense to balance inventory because of extreme competition from Chinese companies selling unregulated products well under cost. Even now, as the U.S. faces the next Covid-19 variant, Omicron, the medical supply industry is acting more cautiously and thoughtfully about handling inventory and new orders for supplies. My colleagues in the testing industry tell me they are taking a similar, cautious approach.
Factors driving the demand for testing materials are varied and complex, complicating supply chain issues. The need for testing supplies is affected by the mix of available products as well as the timing of new market entries, such as oral antivirals against SARS-CoV-2, and booster shots. Even the prevalence of other viruses, such as influenza, RSV, and cold-causing adenoviruses, can increase general demand for testing, as there has been a rise in these conditions, particularly among children (the same testing supplies used for Covid-19 can be used to test for other viruses).
For example, many schools now require students who have been out due to Covid-like symptoms, which can overlap with those of the flu, RSV, or adenovirus, to have a negative Covid-19 test result before returning to school. Some schools are also instituting “test-to-stay” policies where students can attend in-person classes provided they test negative every day. Many students no longer have remote schooling options, so quick access to testing and fast results is important for them.
On top of that, with the new Supreme Court ruling about vaccine mandates, private businesses of millions of people who choose not to get vaccinated can make their own requirements surrounding regular testing in lieu of vaccination — and many may choose to.
Although the federal government invested in Covid-19 testing and supplies through the Defense Production Act early in the pandemic, the follow-through has not supported a long-term solution to the issues surrounding Covid-19 testing supplies and the broader medical supply industry. The supply chain issues that Longhorn and other testing and medical supply companies experienced over the course of the pandemic underscore how important it is for the federal government to greatly expand U.S. manufacturing capacity for testing and medical supplies through long-term investment and policy decisions. This is especially important as the country adjusts to the reality that Covid-19 is likely to remain a long-term public health concern.
Not only would more federal investment in a domestic supply chain for medical supplies provide access to essential equipment during times of crisis, but it would also reduce transport delays, enabling a quicker response while providing for greater regulatory oversight and quality control from the Food and Drug Administration.
As new Covid-19 strains continue to emerge, and experts warn of increased frequency and severity of future pandemics, the need for such investment is getting to a critical level. As challenging as this pandemic has been, the U.S. can use the crisis as an opportunity, and the microcosm of the testing supply industry as teachable moment, to better prepare for the next one, minimize our loss and provide U.S. citizens with the best — and quickest — response possible. Without a sustainable U.S. industry, the country may again find itself in a health crisis situation without access to basic and necessary supplies.
Jeff Fischer is the president of Longhorn Vaccines and Diagnostics, based in Bethesda, Md.
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