April 13, 2022

Why is 'made in America' PPE shutting down?

Daily Briefing

    When the pandemic highlighted the United States' dependence on foreign manufacturers for personal protective equipment (PPE), the government encouraged U.S production of these materials—an effort that most U.S. companies have since scaled back or shut down completely, according to an analysis by the Associated Press.

    How Covid-19 will impact the supply chain

    The push for domestic PPE production

    According to AP, Covid-19 revealed the United States' reliance on foreign manufacturers for PPE. For instance, when China restricted exports amid its own shortages, U.S. stockpiles significantly declined. Then, prices increased as federal officials, governors, and health care systems competed for the remaining limited supply of PPE.

    In response, many elected officials emphasized the need to increase U.S. production of these materials. "All this stuff should be made in the United States and not in China," said Florida Gov. Ron DeSantis (R).

    To support the domestic production of PPE, more than $125 million in grants were distributed to over 300 business in 10 states, including Alabama, Hawaii, Indiana, Kansas, Louisiana, Maryland, Massachusetts, Missouri, New York, and Ohio, according to an Associated Press analysis.

    PPE manufacturers struggle to gain regulatory approval, sell products

    Manufacturers that answered the call to produce PPE domestically have since faced logistical hurdles, regulatory rejections, decreased demand, and price competition from foreign suppliers.

    For instance, during the first two years of the pandemic, National Institute for Occupational Safety and Health (NIOSH) approved 30 new manufacturers to make N95s—more than seven times the typical number during a similar pre-pandemic period, AP/ABC News reports.

    However, some manufacturers say the process is time-consuming and has caused setbacks.

    In Missouri, Gov. Mike Parson (R) divided $20 million in federal Covid-19 relief funds between 48 businesses to produce PPE such as masks, gowns, sanitizer, and other supplies. Parson hoped to use the grants to establish a permanent pool of manufacturers.

    This included Halcyon Shades—which like other small manufacturers—started manufacturing PPE when the pandemic halted its everyday operations, with the help of an $870,000 government grant. But its N95 certification was rejected in October because its samples didn't have head straps attached.

    Halcyon still hasn't sold a single N95 mask because of struggles to obtain equipment, materials, and regulatory approval.

    "So far, it has been a net drain of funds and resources and energy," said Halcyon Shades owner Jim Schmersahl. Ultimately, with no federal approval, "we're just dead in the water," he added.

    In addition, cheaper foreign competition has hindered many companies' efforts. Ohio awarded $20.8 million to 73 businesses to manufacture pandemic-related supplies—but of 60 businesses that complied with a recent reporting deadline, more than a third no longer produced PPE by the end of 2021.

    Cleveland Veteran Business Solutions, which received a $500,000 grant, made about 5 million surgical masks beginning in August 2020. It ultimately halted production in the face of cheaper imports and sold its machines this year, according to co-founder Taner Eren.

    "It was surprising and disappointing strategically that there wasn't support for a local PPE manufacturing industry," Eren said.

    Decreased demand has also inhibited domestic manufacturing. In November 2020, the state of Alabama distributed almost $10.6 million in federal pandemic relief funds to HomTex Inc. The company was supposed to use the grant to establish a new facility in Selma to produce 250 million surgical masks and 45 million N95 masks every year.

    However, the HomTex plant returned $1.8 million of the original grant and has still not made anything because of a lack of customers. "I can't produce product that I can't sell," said HomTex president Jeremy Wootten.

    "At the end of the day, when everybody said they wanted American-made, nobody's buying, not even the state," said Tony Blogumas, VP of Green Resources Consulting, a rural Missouri firm that received an $800,000 state grant but has sold only a few thousand masks.

    Although federal stockpiles have been replenished in recent months, shrinking domestic production has heightened concerns that state governments, medical facilities, and others could be left vulnerable, and scrambling for PPE in a future pandemic.

    "I'm still a firm believer in that—that we need to be making PPE here in [Missouri]," Parson said. "Unfortunately, a lot of entities went right back to where they were getting it before."

    PPE manufacturers call for federal support

    To garner support for PPE manufacturers in the United States, dozens of businesses have formed the American Mask Manufacturer's Association (AMMA) with the goal of sustaining the industry. Unfortunately, the group's membership has declined as more and more manufacturers have gone out of business.

    According to AMMA organizers, the industry has reached a critical point. The association is pushing the federal government to treat PPE manufacturers like the U.S. defense industry, with long-term contracts to maintain and replenish stockpiles for future pandemics and public health emergencies.

    "If the federal government doesn't come in and help support the U.S. manufacturing base, it's almost certainly going to go back to China, and we'll be just as vulnerable as we were in early 2020 and 2019," said Brent Dillie, AMMA chair and co-founder of Premium-PPE.

    In February, President Joe Biden signed legislation requiring any new PPE contracts purchased by HHS, Homeland Security, and Veterans Affairs to be awarded to U.S. manufacturers and extend for at least two years—unless they do not have sufficient quantity and quality at market prices.

    In addition, the Biden administration formed a task force to develop a national strategy that will create a "resilient public health supply chain." But this will likely take years to implement, and  manufacturers say they can't wait long for federal assistance.

    Dentec Safety Specialists is currently finishing a contract to supply 125,000 rubber reusable respirators and 500,000 filtration cartridges to the U.S. stockpile. However, Dentec President Claudio Dente said the company will need more orders soon to prevent layoffs.

    "I thought that Covid would really change the mindset of the people, the governments and manufacturing," Dente said. However, "[t]he general marketplace is reverting back to their old ways -- meaning looking to buy product from China." (Lieb, AP/ABC News, 4/11; AP/Modern Healthcare, 4/11)

    Learn more: How Covid-19 will impact the supply chain

    supply chain

    Covid-19 has revealed critical shortcomings in the health care supply chain. Shortages of personal protective equipment (PPE), ventilators, and other vital supplies have hindered the U.S. health care system‘s response to this crisis, and additional waves of shortages are likely in coming months.

    Read our take to learn three requirements for a more resilient, transparent supply chain in light of Covid-19.

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