According to GlobalData analysis, approximately 75,000 more ventilators and 5.6 billion N95 respirator masks are in demand due to the Covid-19 outbreak in the US. The crucial reality is that demand is much higher than domestic manufacturers’ ability to deliver. Supply chains have moved abroad for many years and are highly dependent on imports.
To secure medical supplies, many countries have ceased export of the essential medical devices to other countries. On 2 April, the US invoked the Defense Production Act to resolve supply chain issues related to the manufacturing of ventilators and to ensure the production of additional N95 face masks, requesting 3M to cease exporting respirators that are manufactured in the US to the Canadian and Latin American markets. In late March, the European Union announced it was restricting the export of personal protection equipment to all third-party countries. The Indian government has banned the export of ventilators and sanitizers since 24 March. As the pandemic continues to worsen, more countries are likely to introduce new export curbs.
Domestic manufacturing of essential medical devices can not only overcome trade barriers but also ensure product quality and market stability. During the pandemic, counterfeiting and price gouging of imported goods happen frequently with surging demand. The Netherlands has recalled nearly half of the shipment of 1.3 million masks imported from China, which do not meet quality standards. The price of masks made in Indonesia increased four times after the outbreak. Some ventilator distributors tripled the pricing for the same model and still sold out immediately, leading to inflation in the ventilators market.
China lies at the heart of many medical supply chains. According to the International Trade Centre, China exported approximately $73M of medical or surgical related instruments in 2019 with an increase of 8% since 2016. This does not include the raw materials that are required for medical devices manufacture, such as the rubber bands that hang masks on ears. China is the largest manufacturer and exporter of masks, with 50% of the global supplies. Many multinational medical suppliers, such as 3M and Kimberly-Clark, have increased production capacity in China for many years, resulting in 95% of the masks in the US being imported. Most manufacturers would be devastated if China followed other countries’ restrictions and stopped exporting essentials.
China has yet to issue any ban on the export of personal protection equipment, ventilators, and their raw materials for production since the Covid-19 outbreak. In fact, 3M received approval from China to export 10 million China-manufactured N95 respirator masks to the US this week in response to Covid-19. According to Chinese customs data, exports of essential hospital supplies only declined 15% in the first two months of 2020, despite of the surging domestic needs due to coronavirus and the trade war with the US. The Chinese government has offered to export protective equipment to Italy and other countries after the global outbreak.
However, despite the hope from China, ramping up domestic production capacity of medical supplies is the major focus for many countries as Covid-19 spreads. From a risk analysis perspective, relying on imports of essential medical devices is a serious threat to public health security. GlobalData expects a noticeable trend towards moving from a dispersed supply chain back in favour of domestic production for key medical devices.