Burned by COVID supply shortages, hospitals invest in manufacturing masks in the United States

LOS ANGELES, Jan 14 (Reuters) – Two days before Christmas, a cargo ship left Mumbai with a mask-making machine bound for Illinois-based OSF HealthCare, which will use the equipment to make its own N95 masks .

This is not the hospital group’s first foray into the manufacturing sector. After COVID-19 closed borders in early 2020, shipments from Asia were snuffed out, OSF and some other hospital groups began investing in U.S. production of key supplies, including masks, gowns and essential pharmaceuticals.

The goal: Avoid a repeat of the deadly shortages of critical protective gear from the first pandemic — an effort that has become vitally important as schools, employers, consumers and the federal government scramble for N95s high quality and other masks to protect against the highly contagious Omicron variant.

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Over the past eight months, OSF has produced about one million surgical masks for staff and patients at its facilities, which serve nearly 3 million people in Illinois and Michigan, said Pinak Shah, director of the OSF supply chain.

The new equipment is expected to arrive in February and, once approved by the Food and Drug Administration, will produce approximately 1 million N95s per year. OSF’s two mask-making projects will make it 100% self-sufficient, Shah said.

OSF declined to disclose the cost of the machines. It should pay for itself in two years, compared to 18 months for the surgical mask machine – a difference largely due to transport costs almost four times higher than usual, said Salvatore, Stile, president of logistics company Alba Wheels Up, which handled the shipment of N95 machines.

Investing is a hedge against uncertainty, Shah said.

“The manufacturing cost is a bit higher than sourcing from a lower cost competitor. However, this helps to control the market risk factor and shortages/backorders,” he said. .

Beyond that, participants say such projects help sustain and stabilize domestic manufacturing and domestic downstream supply chains, both of which are vulnerable to boom and bust demand cycles and the threat that China will flood the United States with very cheap, and sometimes low, products. -quality, alternatives.

LESSONS LEARNED

Michael Alkire, chief executive of hospital group purchasing organization Premier (PINC.O), told Reuters he had stepped up efforts to bolster US suppliers after January 2020 when China diverted shipments from N95 to Premier from Taiwan for its own use.

For more than 18 months, Premier and rival Vizient have supported US manufacturers through strategic partnerships, expansion funding, minority investments and joint ventures. While Premier declined to reveal the value of its investments, Vizient pegged the total at more than $12 million.

Prestige Ameritech is a beneficiary of these transactions. Premier and 15 of its hospital members took an undisclosed minority stake in the Texas-based company in May 2020. The hospitals also committed to purchase a portion of their surgical and N95 masks from Prestige for a period of up to six years. Vizient has separately committed to purchasing 9 million N95 masks over a 12 month period.

“That’s what a company needs. It needs stable revenue,” said Prestige Ameritech Founder and CEO Dan Reese, who added that he and other approved U.S. mask makers “prioritize and support health care providers”.

Prestige now supplies 100% of surgical masks and up to 80% of N95s to Baptist Health South Florida, said George Godfrey, vice president of supply chain for the Miami-based group.

“It certainly lowers the risk profile of getting those goods during times when everyone is trying to get hold of them,” Godfrey said of the deal with Premier.

Hospital leaders said the projects build influence in an industry where no operator has the power of a “big three” U.S. automaker or leading retailer like Walmart (WMT.N) or Amazon.com to exert significant influence over suppliers.

“We’re not just customers, we have a seat at the table,” said Bruce Radcliff, system vice president for supply chain at Advocate Aurora Health, involved in multiple Premier production projects.

“The healthcare industry is trying to take control of its supply chain,” said Luis Arguello, president of DemeTECH, a Florida-based maker of medical masks, sutures, COVID tests and other supplies. DemeTECH is talking to “several” hospital groups looking to invest, he said.

With sufficient production capacity, members of the American Mask Manufacturer’s Association (AMMA) believe that national hospital supplies will remain secure throughout Omicron’s surge.

Texas-based mask producer Armbrust American said demand from consumers and school districts had nearly emptied its 32,000 square foot distribution center, which just days ago was filled with unsold masks for adults and children.

“It’s great because I won’t have to go bankrupt,” said AMMA President and CEO Lloyd Armbrust, who is ramping up production again.

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Reporting by Lisa Baertlein in Los Angeles; Editing by Leslie Adler

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