by James A. Bacon
The Commonwealth of Virginia will pay $150,000 to global management consulting firm McKinsey & Company to help procure more personal protective equipment and testing supplies for COVID-19, the Virginia Mercury reported Friday.
“Given the really free-for-all in obtaining [personal protective equipment], we’ve gotten hundreds and hundreds of offers, some of which are not reputable,” said Virginia Health Secretary Daniel Carey. “We realized that we need some help to make sure we are doing this in a systematic and effective way.”
Besides estimating need and vetting suppliers, McKinsey will offer guidance on Virginia’s testing supply chain. Virginia has done less testing than neighboring states like Maryland and North Carolina. Carey talked to health secretaries in both states, said the Virginia Mercury, but couldn’t find an obvious reason why Virginia was lagging.
“When I talked about our strategies and their strategies, there weren’t any differences,” he said. “But in our engagement with McKinsey, I’ve asked — I want Virginia to be on the forefront of testing, not a laggard. So, how can we get there? We think we’re doing the same thing other states are doing, but we’re open to improvement. We want to get better and better and better.”
The irony is that two of the world’s leading supply chain companies — Owens & Minor and McKesson Medical-Surgical — are located in Richmond.
The Northam administration’s action comes a time when the competition between states for scarce personal protective equipment and testing kits has become a free-for-all. Today’s Washington Post describes the lengths that some states have gone to. Minnesota officials “leaned on a local company’s global connection” to airlift a load of N95 masks from a Chinese factory back to the state. Washington state purchased 750,000 cotton swabs for coronavirus tests, taking a risk because the product has not been approved yet by the Food and Drug Administration. California began buying 200 million masks per month to shore up supplies. Officials in one state are considering dispatching local police of National Guard to greet two FedEx planes scheduled to arrive with millions of masks from China.
There is a downside to this competition: Many states are asking for things they do not need, or likely won’t need for several weeks. FORO (Fear of Running Out) is driving states to replicate the behavior of individuals hoard everything from masks to hand sanitizers. Every man, every hospital, ever state for itself. But when everyone hoards, supplies get locked up in warehouses rather than being used.
For better or worse, the Northam administration has not played this game aggressively. The willingness to hire McKinsey is a sign that may be changing as COVID-19 spreads in Virginia, putting an increasing number of patients in hospitals and ICUs. The Virginia Hospital and Healthcare Association reports that seven hospitals in the state say they expect to have “difficulty in replacing or replenishing [personal protective equipment] in the next 72 hours. Two hospital say they expect to have difficulty with other supplies.
Owens & Minor, which is headquartered in Richmond, and McKesson Medical-Surgical, a Richmond-based subsidiary of Texas-based McKesson, source, manufacture and distribute precisely the kind of equipment in short supply. Judging by my Google search, both companies have kept a low profile throughout the COVID-19 crisis.
But Ed Pesicka, president of Owens & Minor, did talk to Jim Cramer on CNBC:
To give an idea of the magnitude of the increase in demand for personal protective equipment, Pesicka cited the example of one hospital in New York. Normally, the hospital buys between 10,000 to 20,000 masks per week. That 1o- to 15-fold surge in demand is typical. Owens & Minor has responded by ramping up production at manufacturing facilities in Mexico, Honduras and Thailand, as well as a fabric manufacturer in Lexington, N.C., by expanding to four shifts. The company now is supplying an incremental 40-50 million extra masks per month. It is also expanding plant capacity, but that takes five to six months.
So, who gets those masks? Does O&M fulfill the needs of existing customers over all others? Does it put up its masks to the highest bidder? Pesicka didn’t answer that question, simply noting that the company has “worked closely” with FEMA, the White House COVID-19 task force, and Health and Human Services. No hint that O&M is working with the Commonwealth of Virginia.
According to the New York Times, federal officials allow distributors to sell about half of their equipment to companies and counties that had previously placed orders. The other has goes to counties prioritized by the severity of the disease outbreak, based on Centers for Disease Control data.
Likewise, McKesson says, it is “collaborating closely with the federal government and other healthcare stakeholders.” The statement cited supplies arriving via Project Airbridge to expedite the shipment “to areas hit hardest by COVID-19” and also “helping with resupply of some high-demand inventory.” The company monitors demand and demand and usage by customer type with input from HHS.
According to HME News, which tracks the medical supply industry, McKesson has put restrictions on the distribution of personal protective equipment.
Unfortunately, customers may not be able to get enough PPE from McKesson to satisfy their needs,” the company stated in an update. “The demand for PPE continues to increase daily in the U.S., compounding the unprecedented global surge in demand for these items that started in late January. In addition to the increase in need, production delays from manufacturers in China continue to impact both current inventory and how quickly resupply can become available in our distribution centers.
It doesn’t sound like either McKesson or Owens & Minor have limited leeway to do any special favors for their home state. But their knowledge of the medical equipment supply chain is unparalleled. I have seen no indication that the Commonwealth has tapped into that expertise for advice if nothing else. But one can always hope that such communications are taking place behind the scenes.
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