Medical supplies and pharmaceutical markets are unique in the context of Coronavirus contagion. Like other markets, supply disruption is already pertinent. Unlike other markets, the outbreak of the illness has also resulted in surging demand for these goods. Supply chain disruption paired with spiking demand can spell disaster for hospitals, medical service providers and individuals hoping to protect themselves from the virus.
Protective masks face an immediate shortage
The world is already grappling with an inadequate supply of protective masks. This especially holds true in China, where medical staff have an immediate need for protective gear and some regional governments, such as Guangzhou, are requiring individuals to wear protective masks in public. Part of the problem is that individuals are stockpiling masks that are immediately required by hospital patients and medical professionals. Around the world, people are also purchasing masks with the intent to sell at a higher price to gain a profit, depleting the supply. In November, a bundle of 20 masks sold by 3M were priced at 178 yuan ($25.72). In the last week of January, the same bundle was being resold at prices as high as 1,100 yuan ($158.93).
Fast facts: face masks and the Coronavirus
- According to the US National Community Pharmacists Association, 96% of local pharmacies in the United States are facing an inadequate supply of face masks and almost 40% are dealing with a shortage of N95 respirators.
- The majority of the world’s face masks are produced in China and Taiwan.
- In China alone, the demand for face masks is currently estimated in the tens of millions per day. Chinese retailer, Taobao, sold 80 million masks on January 20 and 21, alone.
- At full capacity, China can produce about 20 million masks, 2.2 million surgical masks and 600,000 N95 respirators per day.
A hard pill to swallow: pharmaceutical shortages on the horizon
The Coronavirus’s threat to the pharmaceutical supply in the United States and the rest of the world will materialize down the line. China is the largest producer of active pharmaceutical ingredients (APIs) in the world, though the final pharmaceuticals are often put together in other countries. China ships raw materials to pharmaceutical manufacturers globally, and these facilities tend to keep a limited inventory of essential raw materials for production. The supply chain interruption stemming from the Coronavirus, therefore, is only likely to materialize in several months after these factory inventories have been depleted.
Fast facts: pharmaceuticals and the Coronavirus
- An estimated 13% of pharmaceuticals in the United States are made with raw materials sourced from China.
- Two-thirds of India’s APIs are sourced from China. The Indian government has calculated that it has about two months of pharmaceuticals on hand before it encounters supply disruptions.
- According to the US Food and Drug Administration, the United States obtains 40% of its generic drugs from India. Generics make up about 90% of the pharmaceutical supply in the United States.
What’s in store for supply chains
When it comes to the United States, the Department of Health and Human Services (HHS) does keep a supply of protective equipment in case of shortage, including millions of protective masks. Regarding pharmaceuticals, Stephen Hahn, current FDA commissioner, notes that there have been no reported shortages of drugs or devices in the United States. However, as Hahn explained in early February, “the situation is fluid.”
The Coronavirus, named for the crown-like spikes on the surface of the virus, has infected more than 73,000 individuals as of February 18, most of them in China. While the future of the virus is unknown, the effects of the Coronavirus on global medical supply chains will continue to be material. For all stakeholders, one truth remains clear as these events unfold: heavy lies the head that wears the crown.
By: Remi Nathanson
Read more about how the Coronavirus is affecting the global economy:
From ProcurementIQ - Coronavirus Spotlight: The Automotive Industry
From ProcurementIQ - Coronavirus Spotlight: The Technology Sector
From IBISWorld - Industry Impacts of the Coronavirus
From IBISWorld - Going Viral: Coronavirus Weighs on Australian Economy
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