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The author is a professor of management practice in business administration at Harvard Business School

The Covid-19 pandemic highlighted the fragility of supply chains for many medical products, with shortages ranging from generics and essential medicines to basic supplies such as blood sample collection containers and personal protective equipment.

Since then, there have been numerous calls in the US to rethink supply chain design, build national inventories and redesign domestic production. But three of the last five large-volume disposable syringe factories in the U.S. have closed in the past six months because it was cheaper to source products from China.

A recent visit to a Becton, Dickinson and Co (BD) factory in Canaan, Connecticut, one of the last two major syringe factories in America, raised some important questions about the magnitude of this challenge.

In the US, we use about 10 million syringes per day – two out of every three medical procedures involve one. Hospitals, pharmacies, and doctor’s offices use them for everything from intravenously injecting medications to infusing critical medications in the intensive care unit to maintaining catheters. Their quality and precision are critical to patient safety, yet they are surprisingly inexpensive, typically costing around 15 cents each.

In 1954, BD supplied disposable glass syringes for Jonas Salk’s first polio vaccine trial and supported the subsequent vaccination campaign.

The Canaan factory, which began operations in 1961, was a major supplier of H1N1 flu shots and, of course, Covid vaccines. The company employs approximately 400 people who produce more than 2 billion medical devices per year, which translates to over 5 million units per employee per year. Each syringe is individually packaged, sterilized, and then packaged in quantities of 100 or more.

I’m told the factory’s production fills between four and seven 53-foot semi-trailers per day, depending on the size mix (with 1 million units in each trailer). Eighty percent is shipped throughout the United States, the rest is exported. The factory is highly automated and runs 24 hours a day, so there are not as many people on the production floor.

From these observations I draw two conclusions. First, labor costs are not a problem because worker productivity is so high. And second, capital costs are low because most equipment is fully depreciated, with the exception of a relatively new electron beam sterilization system.

Why do these domestically made syringes cost a little more than those made in China?

Material costs, especially the polypropylene plastic for the syringe body or the polyisoprene stopper (a synthetic rubber) that is part of the plunger, account for more than half of the manufacturing cost. These are made from resins derived from oil, and currently oil is cheaper for Chinese manufacturers because they can buy it in Russia.

The Food and Drug Administration’s inspection of the BD factory took place in mid-September. A quick search of the FDA website for some Chinese manufacturers importing into the U.S. revealed that no inspections have occurred since 2018, well before the pandemic.

One of the reasons for wanting to inspect factories is to ensure consistent product quality and to avoid safety issues caused by over- or under-infusion of drugs due to size variations (this is particularly important in pediatric and neonatal patient populations). One would also want inspections to check drug stability and potency changes if prefilled and unqualified materials were used in manufacturing.

The other challenge with syringes is that most of these end users in hospitals and medical facilities do not know where syringes are because they and similar items are sold to medical product distributors and can go through multiple shifts before reaching the doctor, the product she ultimately used came from. And they have too many other immediate things to worry about rather than where it was made or whether they can get it in the next crisis.

But for just pennies per syringe, the U.S. appears to be on track to lose its last major domestic syringe production capacity. I recently got my Covid booster shot and my flu shot and would have happily paid a penny or a penny more for domestically made shots to ensure I could get them in the US next Pandemic.

Source : www.ft.com

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