COVID-19 Global Supply Chains and “the Perfect Storm”

Addressing Access Disparity with Technology Sharing and Innovation.

As the number of global coronavirus cases exceeded 4 million last week, I would like to give a big shout-out to the many procurement and supply chain professionals around the world, who have been working tirelessly for the past months, across governments, United Nations, or other entities, on sourcing life-saving medical equipment and Personal Protection Equipment (PPE), as part of the global COVID-19 responds.

Procurement practitioners on the frontline of the responds have essentially been weathering the perfect storm in an acutely constrained global market for medical equipment and PPE, characterised by restricted production and supply due to nation-wide manufacturing lock-downs and export controls, combined with global flight restrictions impacting cargo movement and price, and fuelled by an intense global demand. In a nutshell, the global market situation is the result of a "perfect storm" of events.

To put the scale of the global stock-out in context, the global market demand-to-supply ratio for essential equipment was at some point estimated at around 20:1. Consequently, market conditions were altered, with massive price increases, demands for advance payment on future production, and validity of offers often limited to 24 hours only. As production gradually re-opens the surge on export demand is overwhelming transport infrastructures[1], and bottlenecks are building up around key inspection and logistics hubs, further choking distribution[2].

With prices soaring, a range of new suppliers also emerged, some opportunistic, requiring WHO to issue a Global Medical Product Alert[3] for falsified medical products related to COVID-19 due to a rise in fraudulent certificates and reports of sub-standard equipment being delivered. The range of new and unknown suppliers highlighted product quality risks and ESG supply chain transparency issues, requiring additional levels of due diligence and product QA reviews, enhancing the pressure on already stretched procurement and QA teams.

The media has described the global rush for medical equipment and PPE, as the “Wild West”, with buyers and brokers scrambling to secure products on behalf of governments around the world. There have even been media reports of shipments of masks being diverting on the tarmac of airports, international trade rules being stretched, factories moving highest-paying customers to the front of the line, and countries outbidding each other in the increasingly constrained global market[7]. As sourcing options failed, access to medical equipment has become increasingly politicized, with heads-of-states intervening to secure access to limited production, and even allegedly deploying national spy agencies to secure equipment[8], further shrinking the procurement space.

This alignment of the planets has stress-tested most procurement organisations in the past months and will likely have implications for how governments prepare for, and manage, public emergency procurement in the future. The COVID-19 crisis has for sure emphasised the strategic role of the public procurement function, and the need to invest in preparedness and robust emergency procurement capacities, including effective procurement risk management.

Despite the efforts of many procurement teams worldwide, it is also evident for many countries, that without the needed influence or spending power, accessing stock can be near impossible under these conditions. The crisis has thereby highlighted the lack of equity in the market for accessing affordable and quality assured health products, allowing for potentially disproportional impact across communities[9]. To bridge the global stock-out and access gap, several countries have explored options for re-purposing national production capacities to temporarily produce medical equipment and PPE at home. A partnership led by the Pasteur Institute in Senegal, together with a UK company, is also advancing a prototype for an affordable rapid test that could be produced at scale, and for only 1USD.[10] Other countries have been converting universities and non-health industries to improve access to PPE[11].

This is also the driving force behind initiatives like the Tech Access Partnership (TAP), launched by the United Nations. TAP is a new platform created by the UN Technology Bank, with support from the UN Development Programme (UNDP), World Health Organisation (WHO) and UN Conference on Trade and Development (UNCTAD), promoting the drive for such localised production. It is envisioned that TAP will connect global innovators, manufacturers, universities, and others with local manufacturers in developing countries to share data, knowledge, design specifications and other relevant information and support. TAP is guided by the 2030 Agenda for Sustainable Development and the UN’s call for shared responsibility and solidarity[12].

In responds to the COVID-19 crisis, new innovative open-source technology solutions have already been made available by research institutions, such as the Emergency Ventilator (E-Vent) Project from MIT/USA[13], or the Emergency Pandemic Ventilator from Aalborg University/Denmark[14]. The latter consists of less than 25 easily accessible industry parts, and with operating software available on GitHub for free. These innovative emergency solutions can be replicated at scale, and at a marginal cost compared to industry standards. Other examples of innovative open-source solutions include using molecular detection of SARS-CoV-2, as an alternative to the chemical-based kit shortage[15]. While not permanent solutions, open-source technology innovations have opened for more affordable alternatives to supplement emergency capacity gaps.

As the COVID-19 crisis has evolved from a pandemic to likely becoming endemic in many countries, demand for basic medical equipment and PPE will persist. Harnessing technology transfer opportunities and establishing local manufacturing capabilities may be an important lever to empower countries to ensure access to the protective and life-saving equipment needed. In addition to providing health care security, local production can also provide an important boost to livelihood development initiatives, as countries re-open economies and address the longer-term socio-economic implications of the pandemic.

The global supply chain pain felt by governments during the COVID-19 crisis will likely also have implications for global health supply chain structures in a post-COVID-19 future. The crisis has highlighted the vulnerability of interdependent economies, and subsequent risks to medical and pharmaceutical supply chains. For example, about 97% of antibiotics used in the United States is imported from China[16] and 40-50% of generic drugs imported from India, with nearly 70% of its active pharmaceutical ingredients (APIs) imported from China[17]. In turn, Chinese manufacturers of ventilators have experienced production delays due to manufacturing lock-downs affecting sub-suppliers in Europe. The vulnerability of supply chains disruption is not exclusively centered on healthcare, and most sectors have recently experienced the flip-side of globalization.

In a post-pandemic world, it is clear that governments alike, big or small, will need to review and mitigate disruption vulnerabilities across critical sectors and establish more resilient, and potentially more equitable supply chains for medical equipment and PPE, whether through measures such as regional diversification or even re-shoring, or through localized manufacturing based on technology transfers and open-source innovation. Supply chain resilience will need to be an integral part of ensuring that lifesaving healthcare equipment reaches those communities that need them the most, and make them more resilient to the expected second wave of COVID-19, and to pandemics in the future.

[1] Deluge of medical cargo cripples Shanghai Pudong airport: https://www.freightwaves.com/news/deluge-of-medical-cargo-cripples-shanghai-pudong-airport?p=267686

[2] Videos show huge medical equipment backlog in China: https://www.aljazeera.com/news/2020/04/exclusive-videos-show-huge-medical-equipment-backlog-china-200430120452426.html

[3] WHO Medical Product Alerts: https://www.who.int/medicines/regulation/ssffc/medical-products/en/

[4] US accused of 'modern piracy' after diversion of masks meant for Europe: https://www.theguardian.com/world/2020/apr/03/mask-wars-coronavirus-outbidding-demand?CMP=share_btn_fb

[5] In Scramble for Coronavirus Supplies, Rich Countries Push Poor Aside: https://www.nytimes.com/2020/04/09/world/coronavirus-equipment-rich-poor.html?action=click&module=Top%20Stories&pgtype=Homepage

[6] Senegal: 10-minute coronavirus test may be on its way - for $1: https://www.aljazeera.com/news/2020/03/senegal-10-minute-coronavirus-test-1-200327053901231.html?utm_source=website&utm_medium=article_page&utm_campaign=read_more_links

[7] Access to lifesaving medical resources for African countries: COVID-19 testing and responds, ethics, and politics: https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)31093-X/fulltext#%20

[8] Mossad officer describes covert global battle to obtain ventilators at all costs: https://www.timesofisrael.com/mossad-officer-describes-covert-global-battle-to-obtain-ventilators-at-all-costs/

[9] Help developing countries to manufacture their own medical equipment to solve supply shortages: https://www.telegraph.co.uk/global-health/science-and-disease/help-developing-countries-manufacture-medical-equipment-solve/?WT.mc_id=tmg_share_em

[10] MIT-based team works on rapid deployment of open-source, low-cost ventilator: https://news.mit.edu/2020/ventilator-covid-deployment-open-source-low-cost-0326

[11] Emergency Ventilator to Alleviate Severe Shortages of Equipment and Personnel: https://www.news.aau.dk/news/emergency-ventilator-to-alleviate-severe-shortages-of-equipment-and-personnel.cid459836

[12] An alternative workflow for molecular detection of SARS-CoV-2 - escape from the NA extraction kit-shortage: https://www.medrxiv.org/content/10.1101/2020.03.27.20044495v1

[13] MSCI Podcast – Episode 68: The ESG Weekly: Drug shortages and the coronavirus, from whence your drugs came: https://www.msci.com/esg-now-podcast

[14] Fears of US drug shortages grow as India locks down to curb the coronavirus: https://www.cnbc.com/2020/03/24/us-drug-shortage-fears-grow-as-india-locks-down-due-to-the-coronavirus.html