While the public eye focuses on Hurricane Milton after its destructive path across Florida this week, some analysts are sounding the alarm about new data from Hurricane Helene’s devastating push into southern Appalachia just two weeks prior.
Healthcare improvement company Premier Inc. (NYSE: PINC) released survey data on Thursday showing more than 86% of U.S. healthcare providers across the country are currently experiencing IV fluids shortages in the aftermath of Hurricane Helene.
In the report, Premier stated that the IV fluid supply first became compromised after Baxter International’s North Cove facility in North Carolina was damaged by Hurricane Helene. Baxter (NYSE: BAX) is the primary manufacturer of IV fluids in the U.S. with over 60% market share.
A news release published by Baxter on Wednesday provided an update on the situation at the facility, stating that it was damaged by water flooding from Hurricane Helene. The company currently has six other manufacturing sites located in North America.
“As previously shared, Baxter is advancing multiple paths to help ensure we are appropriately managing inventory and minimizing disruption to patient care as we work to fully restore our North Cove manufacturing operations,” the release stated. “This includes implementing allocations, which limit what a customer can order based on historical purchases and medical necessity as well as available and projected inventory. Allocations help limit stockpiling and increase the likelihood of equitable access to available products.”
Effective Wednesday, Baxter said it would increase the current U.S. allocation levels of its highest demand IV fluids for direct customers from 40% to 60% and for distributors from 10% to 60% by increasing manufacturing at other sites.
“We are also increasing high concentration dextrose and sterile water for injection allocations and expect to be in a position to make additional increases for certain product codes by early November,” the release continued. “Due to the vulnerable patient population they serve, allocations for IV solutions and nutrition products for designated children’s hospitals were increased to 100%.”
The release stated that the company’s goal is to restart North Cove production in phases and return to 90%, then 100% allocation of certain IV solution products by the end of 2024.
“We will spare no resource — human or financial — to restart operations and help ensure patients and providers have the products they need,” said Baxter CEO Joe Almeida, in the release.
Benjamin Gordon, managing partner at the Cambridge Capital investment firm, is a leading adviser and investor in supply chain companies. He told FreightWaves in an emailed statement Thursday that Hurricane Helene caused extensive damage along hundreds of miles of coastline in Florida.
“The flooding, destruction of road infrastructure, and debris not only disrupted regional healthcare distribution operations, but also delayed the delivery of essential medications and specialized products, for example for emergency care and chronic conditions,” Gordon said. “Nearby areas and adjacent states also experienced secondary effects, as healthcare transporters are compelled to adapt by utilizing alternative routes, including air freight options, to bypass road closures and ensure critical supplies reach healthcare facilities.”
Gordon said Hurricane Helene also affected healthcare manufacturing, noting Baxter International’s North Cove facility was flooded in North Carolina.
“This situation necessitates additional collaboration and innovative solutions,” Gordon said. “In partnership with the FDA, Baxter has increased manufacturing capacity at its other facilities and implemented allocations that limit customer orders based on historical purchases, medical necessity, and available inventory. While the FDA has not declared any new shortages related to IV fluids produced at the North Cove facility, active inventory management remains, more than ever, essential to ensure equitable access and prevent stockpiling at certain medical centers.”
The impact
Premier’s survey stated 88% of respondents reported they were receiving less than half of their requested orders for IV fluids. This left 54% of respondents 10 days or less of IV fluids in inventory, which the report stated is down from a more typical supply of 15 to 22 days on hand.
“Smaller providers (those with 25 or fewer beds) were more likely than other types of providers to report receiving zero percent of their ordered quantities of IV fluids,” the Premier report continued.
The data also showed that nearly 17% of surveyed providers have canceled elective surgeries and other procedures with another 58% considering that option in the near term.
“In addition, 78 percent of providers report that they will be forced to consider canceling procedures in the next month if the situation does not improve,” the Premier report started.
That’s a real concern. The Premier survey found that 60% of respondents were worried about how long the current shortage will last.
While the report stated there were concerns about the second largest manufacturer of IV fluids in the U.S. manufacturing facility being in the path of Hurricane Milton, B. Braun announced that its Daytona Beach facility received no damage.
“Premier’s survey data underscores the need for Congress and federal agencies to leverage recent learnings and respond with a cohesive national strategy to help support and stabilize the U.S. supply chain in the long-term for better preparedness during emergencies,” the report stated.
And that’s where nearshoring comes in
Retired U.S. Army Colonel Vic Suarez has his finger on the pulse of America’s medical supply chain.
Suarez is a senior fellow on the Council of Strategic Risks nonprofit policy institute and has served as the senior medical acquisition consultant at the U.S. Army Medical Research and Development Command’s Tech Transfer, IP/Patent and Business Development Office at Fort Detrick in Maryland. He’s also the founder and Principal Growth Partner of the bioscience company Blu Zone Bioscience & Supply Chain Solutions.
In April, Suarez testified before the U.S. Senate Committee on Armed Services, Subcommittee on Personnel about how chronic drug shortages and overseas manufacturing in adversarial nations pose an existential public health threat to U.S. citizens. His full testimony can be read here.
“A couple things that have occurred since [the testimony] is that there’s been a recent follow-up letter or two from that same Senate Armed Services Committee recently to the FDA inquiring about some of these risks that were brought up at that hearing,” Suarez told FreightWaves in a phone interview. “There’s been several pending bills or legislation, ones like the PILLS Act, and there’s a couple that preceded that [which] are being evaluated.”
The Producing Incentives for Long-Term production of Lifesaving Supply of medicines (PILLS) Act introduced to congress in October 2023 proposes tax credit incentives to businesses manufacturing medicines within the U.S.
Suarez also mentioned the BIOSECURE Act, which passed in the House and is awaiting a vote in the Senate.
“The BIOSECURE Act takes a very strong security standpoint on certain Chinese companies that had a history of being flagged by the U.S. government due to things like intellectual property theft and patient information when it comes to genomic sequencing and genomic data,” Suarez said. “That’s had a really chilling effect on the industry in, [what] some people would say a [is] good sense and some people say is a concerned sense. But that has really changed the landscape of the discussion from the investor community more than I’ve seen prior to March of 2024 when the bill got introduced.”
Suarez said that the BIOSECURE Act now has venture capitalists, investment funds and companies themselves doing a deeper dive into supply chain risk management.
“They’re looking at what they call their bill of materials (BOMs) and they’re saying, down to the component level, down to the chemicals, where are they being sourced from?” Suarez said. “And is there a potential risk there of being dependent on a material to make our pharmaceutical [or] medical product that is reliant on an adversarial nation or a non-Trade Agreement Act compliant nation.”
Suarez explained that this results in investors using that screening criteria to make a good investment or good bet on a company.
Additionally, Suarez said that the Drug Supply Chain Security Act (DSCSA) approved in 2013 was supposed to go into implementation on Nov. 27 this year.
“The Drug Supply Chain Security Act was supposed to go into full enforcement after having given [the] industry 11 years to implement,” Suarez said. “The DSCSA was really meant to secure the supply chains, because back in the early 2000’s, there were concerns about counterfeit medicines getting in the supply chain. These were often coming from overseas and they were getting into the safe supply chain sometimes through what we call the ‘gray market’ or these niche gray market distributors.”
But then came the hurricanes.
“The problem is that these two storms have really compelled the FDA to even delay the full enforcement of those enforcement actions and phase them in [next year],” Suarez said.
This phase-in would take effect in a timeline depending on what level trading partner was involved; whether they were a distributor, pharmaceutical manufacturer or a pharmacy.
“I think that’s another kind of near-term impact of the storms on the supply chain, and how it’s really impacting the enforcement of a federal law,” Suarez said. “Instead of full enforcement on the 27th, there was concern amongst the industry and some influential groups that are trying to resolve the supply chain shortages we have in the industry saying, ‘Hey FDA, you know, you got all these natural disasters coming right now. You’ve got damage in the southeast, you’ve got an election year. What about if we extend the full enforcement and we start doing some risk assessment and phasing the enforcement in over an extra period of months?’”
On Thursday, the FDA issued exemptions to its DSCSA enforcement originally scheduled for Nov. 27.
“FDA has determined that use of the authority to issue exemptions under section 582(a)(3) is appropriate at this time, in order to maintain public health and help ensure continued patient access to prescription drugs in the United States at a time of increased concern about potential shortages or supply chain disruption,” the FDA statement said.
What about PPE?
Readers may recall significant shortages of respirator masks and other personal protective equipment (PPE) during the 2020 pandemic.
With the recent hurricanes causing IV shortages, FreightWaves reached out to the International Safety Equipment Association (ISEA) for information on possible shortages PPE manufacturing members of the trade association might be seeing.
“We represent primarily manufacturers of pretty much any type of PPE you can think of, anything from hard hats, protective eyewear [and] high visibility vests [to] first aid kits,” said ISEA President Cam Mackey, in a virtual interview with FreightWaves. “For that community we create American National Standards advocacy, and then we do a lot of education.”
ISEA also has members who create medical PPE like masks and nitrile gloves. Mackey said that the PPE supply chain is very global, but where companies “make their stuff” varies.
“Some products like head protection, a lot of that higher end stuff is actually made here in the states,” Mackey said “A lot of the medical PPE, however, that supply chain moved overseas years ago. There are some exceptions, definitely. But a lot of … that supply chain [moved to] Malaysia, Vietnam [and] China. Almost exclusively, a lot of respirators – like the M95s– are made overseas.”
That’s where Mackey said ISEA’s advocacy steps in to help make sure the U.S. has more capacity for these products for when the next pandemic hits.
“[Concerning M95 masks,] I think we found in the pandemic that we as a country have lost a lot of our production capacity for that critical piece of PPE,” Mackey said. “So the U.S. Government fortunately put into force the Defense Production Act, which basically helped spur production of those critical respirators in the states.”
Four years after the pandemic, however, the challenge has returned for domestic production of medical PPE like M95 masks.
“Companies, as much as they want to do the right thing, they can’t keep plants and facilities open forever,” Mackey said. “We’ve seen a lot of respirator capacity in the states shutter or move over to different products. One of the things that ISEA and a lot of other groups think is important is to have some type of ongoing commitments to maintaining readiness.”
Mackey said the recent hurricanes have not had a huge impact on ISEA PPE manufacturers. The organization has donated thousands of PPE gear to first responders involved in rescue and cleanup efforts.