PPE Demand and Supply

I am a Managing Member of a Medical Supply Company, Glenmedicon LLC and over last 1 year, I have been inundated with fake suppliers, fake buyers, and fake products and on top of that price gouging. As I have over 25+ years of Finance, M&A, Demand and Supply, negotiations, and cash and over 8 years now in Pharmaceutical space, I thought of summarizing my understanding of PPE shortage and price escalation.

1). Hospitals and lot of service industry to save on working capital have been working on just-in-time inventory and have over the years cut down inventory on hand. So, last year, when we started seeing COVID, everyone just woke up and rushed to market at the same time. This is the time we saw people cleaning shelfs in departmental stores, hoarding and just buying anything they could get their hands on. It is simple demand and supply equation and as demand outstrips supply, prices shoot up.

2). Use of PPE by non-health care workers – masks, gloves, face shields, sanitizing wipes, gels. That again added to the demand but supply lagged. USA in 2019 was already importing about 1/3rd of global medical gloves and face masks production and that was mostly being used by health care workers. Then, say at least 10% of US population of about 30 mm more people started using some PPE.

3). US Government did not have enough strategic safe supply and/or released safety pile on time. In addition, there have been cuts in Government organization like CDC over the years that have further contributed to exaggeration of issue. There was not much Government support provided or controls executed on cost and price gouging. Amazon and Ebay may have canceled few thousand accounts but it did not stop price gouging.

4). China stopped shipping of certain PPE last year and put a lot of controls on shipping some of PPE items and in fact, started to buy some PPE from world vs. exporting. In addition, there was a huge backlog of shipping containers from Asia coming into USA and delays at ports have again led to exaggeration of problems.

To alleviate the issue, some domestic production has picked up but it has not been enough. Also, there has been some cheaper low-quality imports as everyone who was in garment or some rubber or other manufacturing business set-up glove, masks, and sanitizer production plants. As demand outstripped supply, people including hospitals etc. have been forced to buy cheaper low-quality PPE goods. It is also because they have not been able to pass on higher costs to their customers.

 I personally think it may take at least 1-2 years for the things to get somewhat normal but we should learn from this totally dysfunctional demand supply over last 1 year and take corrective actions so this does not happen again.

1). Government should have enough strategic supply of PPE.

2). Increase domestic production and not just rely on imports. Also, it will create more jobs in USA.

3). Increase oversight and improve distribution to Hospitals and essential workers

4). Hospitals, Schools, Airlines, Essential Public and Private facilities move away from just-in-time and maintain enough stockpile of PPE to handle minimum 2-3 months of usage.

I am sure there are more things we can do. But what I really want to put forth is that all of us need to work together in PPE industry not just for making money but to be really in this to serve people, save lives, build communities, improve communication and distribution, take out and expose bad players and let the good ones shine to make this industry not be a Wild West but be a role model for the society. That’s what motivates me and hope, it motivates some of you as well.

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