Speaker 1: Welcome to Prognosis. I'm Laura Carlson. It's day forty one
Speaker 1: since coronavirus was declared a global pandemic. Our main story.
Speaker 1: U S hospitals have turned directly to Chinese manufacturers to
Speaker 1: obtain badly needed masks for healthcare workers, but the skyrocketing
Speaker 1: demand has created a Wild West scenario. Profiteering middlemen ratchet
Speaker 1: up prices and buyers sometimes go to extraordinary lengths to
Speaker 1: try to ensure quality. But first, here's what happened today.
Speaker 1: The White House in Congress have agreed on a new
Speaker 1: pandemic relief plan that will inject funds into a tapped
Speaker 1: out small business aid program and offer aid for coronavirus
Speaker 1: testing and overwhelmed hospitals. President Donald Trump said he'd sign
Speaker 1: the measure and begin discussions on the next round of stimulus.
Speaker 1: The measure could be approved by Congress as soon as Thursday.
Speaker 1: The Justice Department will consider taking legal action against governors
Speaker 1: who continue to impose stringent rules for dealing with the
Speaker 1: coronavirus after the crisis subsides in their states, According to
Speaker 1: Attorney General William Barr in an interview on The Hugh
Speaker 1: Hewitt Show Tuesday, bar said measures like stay at home
Speaker 1: orders and directives to shut down businesses are justified up
Speaker 1: to a point, but states should eventually move to more
Speaker 1: targeted measures. The comments come as the Trump administration and
Speaker 1: states are fighting over the best strategy to deal with
Speaker 1: the crisis. Trump has stoked tensions with some Democratic governors
Speaker 1: who have defended strict social distancing rules, even as his
Speaker 1: administration backs guidelines calling for states to reopen gradually. Earlier today,
Speaker 1: President Donald Trump suggested in a tweet that his administration
Speaker 1: will bail out the oil industry. Oil is the latest
Speaker 1: sector to fall victim to cratering demand because of the coronavirus. Yesterday,
Speaker 1: the price of a barrel of West Texas crewde fell
Speaker 1: below zero for the first time in history. Trump tweeted
Speaker 1: today that he was ordering his secretaries of Energy and
Speaker 1: the Treasury to make a plan to make money available
Speaker 1: to oil companies. The catalyst for yesterday's historic plunge in
Speaker 1: prices was a contract expiration date that left traders in
Speaker 1: a panic about having to take delivery of physical barrels.
Speaker 1: But the industry has struggled since widespread shutdowns killed the
Speaker 1: demand for fuel. An estimated nine percent of drilling and
Speaker 1: refining jobs were lost in March. The oil price slide
Speaker 1: continued today, suggesting it's the massive glut in the market
Speaker 1: causing the route rather than any technical quirk. Finally, a
Speaker 1: new roadmap for restarting the economy suggests the US would
Speaker 1: have to increase its testing capability by ten to fifty
Speaker 1: fold from its current levels. Today, the Rockefeller Foundation released
Speaker 1: a plan that would partially reopen the economy once major
Speaker 1: investments in healthcare had been made. The plan, which would
Speaker 1: cost as much as ninety billion dollars a month, calls
Speaker 1: for one hundred to three hundred thousand new public health
Speaker 1: workers to create an adequate testing and contact tracing program.
Speaker 1: Regieve Shaw, the Foundation's president, says doing this would allow
Speaker 1: the economy to partially reopen until a vaccine is widely available,
Speaker 1: and thus would pay for itself within a month. And
Speaker 1: now our main story. The shortages of protective masks that
Speaker 1: keep healthcare workers safe from COVID nineteen are well documented
Speaker 1: by now. American hospital companies trying to meet the need
Speaker 1: have turned to a fast growing, often chaotic mask market
Speaker 1: that has sprung up in China. Reporter Riley Griffin recently
Speaker 1: reported on the hospital groups and companies desperate for suppliers
Speaker 1: and the strange measures they are taking to secure masks
Speaker 1: and spot fakes. Why have we been seeing this surge
Speaker 1: for the particular and what kind of companies are working
Speaker 1: to alleviate this new demand. So the nine respirator is
Speaker 1: a type of mask that is so named because it
Speaker 1: filters out at least of airborne particles of this certain size.
Speaker 1: It's become a tool used on front lines to prevent
Speaker 1: doctors and nurses from contracting COVID nineteen. So during normal times,
Speaker 1: this FDA approved device, really it isn't typically warned by
Speaker 1: so many medical staff. Now, as you've mentioned, demand has
Speaker 1: surged to unprecedented levels. One account has a seventeen fold
Speaker 1: surgeon demand, and that's happening just as domestic supply has dwindled.
Speaker 1: So hospitals treating COVID nineteen patients have actually found they
Speaker 1: only have a three day supply, and big manufacturers of
Speaker 1: respirators like three M what they have done is ramp
Speaker 1: up and work to double production. But this domestic supply
Speaker 1: is simply not enough to account for what's needed in
Speaker 1: US hospitals. And that's the cold, hard truth. We've seen
Speaker 1: some institutions other organizations actually turned to China for these items.
Speaker 1: So I'm wondering if you might be able to explain
Speaker 1: how China's manufacturers have mobilized to meet this new I
Speaker 1: mean beyond the US, but a global demand. So China
Speaker 1: has always been a massive manufacturer of medical supplies, but
Speaker 1: now it's really at the center of this global gold
Speaker 1: rush for respirators. But remember, the country was the first
Speaker 1: to be hit hard by the coronavirus pandemic. When their
Speaker 1: own manufacturing shutdown, they turned to Japan, to South Korea,
Speaker 1: even the US for masks. Now, more recently, when the
Speaker 1: industry got up and running again, though, China's government encouraged
Speaker 1: facilities to make more personal protective equipment to meet domestic
Speaker 1: and foreign demand, and they've done just that. We've seen
Speaker 1: cosmetic makers, toy producers, even lingerie factories now producing respirators.
Speaker 1: These Chinese manufactured and regulated respirators go by a different name,
Speaker 1: and that's important to note. They are known as K
Speaker 1: and N and they're not f d A approved products.
Speaker 1: They are regulated by the Chinese equivalent of our U
Speaker 1: S Food and Drug Administration. But since desperate times call
Speaker 1: for desperate measures, and the US doesn't have enough manufacturing capacity.
Speaker 1: We've seen the US Food and Drug Administration recently give
Speaker 1: an emergency use authorization for this Chinese product. But there
Speaker 1: does seem to be a bit of wariness about these
Speaker 1: Chinese manufactured ppe or the Chinese manufactured respirators. Can you
Speaker 1: explain why there is this hesitancy about using these very
Speaker 1: needed products. I think, at the end of the day,
Speaker 1: working with Chinese manufacturers and intermediaries just comes with its
Speaker 1: own set of risks. Given how quickly the market is mobilizing,
Speaker 1: it's also become overrun with layers of profiteering middlemen, these
Speaker 1: bidding wars, prices that are are so volatile they can
Speaker 1: range for a can ninety five anywhere from uh, you know,
Speaker 1: a buck fifty to twelve dollars, and that's still higher
Speaker 1: than they are in typical times. The root of it,
Speaker 1: too is this concern about the goods quality, and US
Speaker 1: regulators essentially have said they can't serve as a body
Speaker 1: that is able to sift out the bad apples here,
Speaker 1: and so what can say the government's hospitals organizations, do
Speaker 1: you know if they're willing to source these products from China.
Speaker 1: What are some of the steps that they can take
Speaker 1: or that they are taking to make sure these products
Speaker 1: are actually good or safe to use. So, until fairly recently,
Speaker 1: guidance from the U S government agencies was inconsistent on
Speaker 1: whether China's version of respirators these k and were suitable
Speaker 1: for use. The FDA was allowing respirators made in other
Speaker 1: countries at first, but didn't include China on this list,
Speaker 1: this Emergency Use Authorization list. That guidance came much more recently.
Speaker 1: They have since amended that, but are stating that hospitals
Speaker 1: and other buyers should be careful in considering the product
Speaker 1: they end up using given these concerns about legitimacy of
Speaker 1: the product. In our story, we look at a company
Speaker 1: called Premier, Inc. Which serves as a group purchasing organization
Speaker 1: for more than four thousand US hospitals and health systems.
Speaker 1: It has more than sixty billion and purchasing power, and
Speaker 1: they knew that there simply wasn't enough US products, so
Speaker 1: it's scrambled to China. Some of the things that they're
Speaker 1: doing is actually using code words to first vet various facilities.
Speaker 1: So when they are screening manufacturing facilities. They have people
Speaker 1: on the ground at those facilities using gibberish that they've
Speaker 1: pre planned to ultimately assure that the communication is real
Speaker 1: and the person on the other end of the screen
Speaker 1: is who they think they are. Once a facility has
Speaker 1: passed that initial test, Premiere was deploying its employees based
Speaker 1: in Asia to these various facilities to actually go inspect
Speaker 1: K on the line as they were packaged and as
Speaker 1: they were sent. And logistics also plays a big part
Speaker 1: of this. It's quite costly and difficult to be shipping
Speaker 1: these products out of China into the US. Once that
Speaker 1: that product has arrived here domestically in the States, they've
Speaker 1: inspected that product again, and then they've worked with their
Speaker 1: own logistics companies to get product to various emergency rooms.
Speaker 1: But something that's worth underscoring, Laura is that there's no
Speaker 1: clear playbook and everybody is approaching this differently. Since US
Speaker 1: regulators have taken somewhat of a back seat and push
Speaker 1: the risk towards US hospitals, health systems, group purchasing organizations
Speaker 1: that are determining whether or not this product legitimate, these
Speaker 1: entities have to make those decisions for themselves, so we're
Speaker 1: still seeing an influx of some faulty product here into
Speaker 1: the country. What is China doing to try and tamp
Speaker 1: down all these these fakes that are are popping up everywhere. Well,
Speaker 1: China has certainly faced some pressure to crack down on
Speaker 1: subpar suppliers, counterfeitters, and these unscrupulous middlemen that have been
Speaker 1: surging the prices by investigating cases of companies making fake
Speaker 1: or unreliable equipment and face masks um. The Chinese government
Speaker 1: actually announced this month that its customs agency would inspect
Speaker 1: every shipment of medical respirators and other medical protective clothing
Speaker 1: before they export. They've also worked to create lists, essentially
Speaker 1: of what they see as legitimate manufacturers. These moves have
Speaker 1: led to reports in delayed shipments of product getting to
Speaker 1: the US, and there's some frustration about that actually among buyers,
Speaker 1: but others say it's a much needed layer of scrutiny
Speaker 1: into this market that has both good and bad product
Speaker 1: coming out quickly. What exactly is the rough timeline they're
Speaker 1: trying to shoot for in terms of someone making the respirators,
Speaker 1: verifying them, and then getting them, let's say, onto US
Speaker 1: soil or to emergency room. What is their goal for timeframe.
Speaker 1: I think that will vary day to day. But the
Speaker 1: first shipment Premiere was able to secure and bring to
Speaker 1: the US touchdown in Chicago nine days after they had
Speaker 1: initiated a partnership with a Chinese manufacturing facility. So that
Speaker 1: was the timeline. Bake in a day or two for
Speaker 1: it to be delivered across the country from California to
Speaker 1: New York, perhaps to get to actual healthcare workers. But
Speaker 1: that nine day timeline is pretty quick. This is a
Speaker 1: company that usually takes months to vet products coming from
Speaker 1: outside the US, and they've never done this with k
Speaker 1: and before. I think that if you're a glass half
Speaker 1: full person, you look at Premiers work and you say,
Speaker 1: this is incredible. Look at American ingenuity and ability to
Speaker 1: to look elsewhere and source quickly. If you're a glass
Speaker 1: half empty person, you're concerned that every company is doing
Speaker 1: this on their own timeline, by their own standards, and
Speaker 1: you got to trust that they're doing it right. This
Speaker 1: is ah, this is the wild West. That's how suppliers, traders,
Speaker 1: government officials have put it to me. It's every man
Speaker 1: for themselves and you just have to be trusting of
Speaker 1: the entity you're working with to make sure that this
Speaker 1: is legitimate product. That was health reporter Riley Griffin. For
Speaker 1: more on the messy mask market in China, read Riley's
Speaker 1: April fifteenth story with Lauren Etter on Bloomberg dot Com.
Speaker 1: And That's our Show. For more on the outbreak from
Speaker 1: one D and twenty bureaus around the world, visit Bloomberg
Speaker 1: dot com, slash Coronavirus and one Small favor. If you
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Speaker 1: help more listeners find our global reporting. The Prognosis Daily
Speaker 1: edition is hosted by Me Laura Carlson. The show was
Speaker 1: produced by Me, top foreheads, Jordan Gospoure and Magnus Hendrickson.
Speaker 1: Today's main story was reported by Riley Griffin. Original music
Speaker 1: by Leo Sidron. Are at readers our Francesco Levi and
Speaker 1: Rick Shine. Francesco Levi is Bloomberg's head of podcasts. Thanks
Speaker 1: for listening. H