WEBVTT - Inside China's Chaotic Mask Market

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<v Speaker 1>Welcome to Prognosis. I'm Laura Carlson. It's day forty one

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<v Speaker 1>since coronavirus was declared a global pandemic. Our main story.

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<v Speaker 1>U S hospitals have turned directly to Chinese manufacturers to

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<v Speaker 1>obtain badly needed masks for healthcare workers, but the skyrocketing

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<v Speaker 1>demand has created a Wild West scenario. Profiteering middlemen ratchet

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<v Speaker 1>up prices and buyers sometimes go to extraordinary lengths to

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<v Speaker 1>try to ensure quality. But first, here's what happened today.

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<v Speaker 1>The White House in Congress have agreed on a new

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<v Speaker 1>pandemic relief plan that will inject funds into a tapped

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<v Speaker 1>out small business aid program and offer aid for coronavirus

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<v Speaker 1>testing and overwhelmed hospitals. President Donald Trump said he'd sign

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<v Speaker 1>the measure and begin discussions on the next round of stimulus.

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<v Speaker 1>The measure could be approved by Congress as soon as Thursday.

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<v Speaker 1>The Justice Department will consider taking legal action against governors

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<v Speaker 1>who continue to impose stringent rules for dealing with the

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<v Speaker 1>coronavirus after the crisis subsides in their states, According to

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<v Speaker 1>Attorney General William Barr in an interview on The Hugh

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<v Speaker 1>Hewitt Show Tuesday, bar said measures like stay at home

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<v Speaker 1>orders and directives to shut down businesses are justified up

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<v Speaker 1>to a point, but states should eventually move to more

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<v Speaker 1>targeted measures. The comments come as the Trump administration and

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<v Speaker 1>states are fighting over the best strategy to deal with

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<v Speaker 1>the crisis. Trump has stoked tensions with some Democratic governors

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<v Speaker 1>who have defended strict social distancing rules, even as his

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<v Speaker 1>administration backs guidelines calling for states to reopen gradually. Earlier today,

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<v Speaker 1>President Donald Trump suggested in a tweet that his administration

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<v Speaker 1>will bail out the oil industry. Oil is the latest

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<v Speaker 1>sector to fall victim to cratering demand because of the coronavirus. Yesterday,

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<v Speaker 1>the price of a barrel of West Texas crewde fell

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<v Speaker 1>below zero for the first time in history. Trump tweeted

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<v Speaker 1>today that he was ordering his secretaries of Energy and

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<v Speaker 1>the Treasury to make a plan to make money available

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<v Speaker 1>to oil companies. The catalyst for yesterday's historic plunge in

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<v Speaker 1>prices was a contract expiration date that left traders in

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<v Speaker 1>a panic about having to take delivery of physical barrels.

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<v Speaker 1>But the industry has struggled since widespread shutdowns killed the

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<v Speaker 1>demand for fuel. An estimated nine percent of drilling and

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<v Speaker 1>refining jobs were lost in March. The oil price slide

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<v Speaker 1>continued today, suggesting it's the massive glut in the market

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<v Speaker 1>causing the route rather than any technical quirk. Finally, a

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<v Speaker 1>new roadmap for restarting the economy suggests the US would

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<v Speaker 1>have to increase its testing capability by ten to fifty

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<v Speaker 1>fold from its current levels. Today, the Rockefeller Foundation released

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<v Speaker 1>a plan that would partially reopen the economy once major

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<v Speaker 1>investments in healthcare had been made. The plan, which would

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<v Speaker 1>cost as much as ninety billion dollars a month, calls

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<v Speaker 1>for one hundred to three hundred thousand new public health

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<v Speaker 1>workers to create an adequate testing and contact tracing program.

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<v Speaker 1>Regieve Shaw, the Foundation's president, says doing this would allow

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<v Speaker 1>the economy to partially reopen until a vaccine is widely available,

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<v Speaker 1>and thus would pay for itself within a month. And

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<v Speaker 1>now our main story. The shortages of protective masks that

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<v Speaker 1>keep healthcare workers safe from COVID nineteen are well documented

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<v Speaker 1>by now. American hospital companies trying to meet the need

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<v Speaker 1>have turned to a fast growing, often chaotic mask market

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<v Speaker 1>that has sprung up in China. Reporter Riley Griffin recently

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<v Speaker 1>reported on the hospital groups and companies desperate for suppliers

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<v Speaker 1>and the strange measures they are taking to secure masks

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<v Speaker 1>and spot fakes. Why have we been seeing this surge

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<v Speaker 1>for the particular and what kind of companies are working

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<v Speaker 1>to alleviate this new demand. So the nine respirator is

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<v Speaker 1>a type of mask that is so named because it

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<v Speaker 1>filters out at least of airborne particles of this certain size.

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<v Speaker 1>It's become a tool used on front lines to prevent

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<v Speaker 1>doctors and nurses from contracting COVID nineteen. So during normal times,

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<v Speaker 1>this FDA approved device, really it isn't typically warned by

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<v Speaker 1>so many medical staff. Now, as you've mentioned, demand has

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<v Speaker 1>surged to unprecedented levels. One account has a seventeen fold

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<v Speaker 1>surgeon demand, and that's happening just as domestic supply has dwindled.

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<v Speaker 1>So hospitals treating COVID nineteen patients have actually found they

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<v Speaker 1>only have a three day supply, and big manufacturers of

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<v Speaker 1>respirators like three M what they have done is ramp

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<v Speaker 1>up and work to double production. But this domestic supply

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<v Speaker 1>is simply not enough to account for what's needed in

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<v Speaker 1>US hospitals. And that's the cold, hard truth. We've seen

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<v Speaker 1>some institutions other organizations actually turned to China for these items.

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<v Speaker 1>So I'm wondering if you might be able to explain

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<v Speaker 1>how China's manufacturers have mobilized to meet this new I

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<v Speaker 1>mean beyond the US, but a global demand. So China

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<v Speaker 1>has always been a massive manufacturer of medical supplies, but

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<v Speaker 1>now it's really at the center of this global gold

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<v Speaker 1>rush for respirators. But remember, the country was the first

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<v Speaker 1>to be hit hard by the coronavirus pandemic. When their

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<v Speaker 1>own manufacturing shutdown, they turned to Japan, to South Korea,

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<v Speaker 1>even the US for masks. Now, more recently, when the

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<v Speaker 1>industry got up and running again, though, China's government encouraged

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<v Speaker 1>facilities to make more personal protective equipment to meet domestic

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<v Speaker 1>and foreign demand, and they've done just that. We've seen

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<v Speaker 1>cosmetic makers, toy producers, even lingerie factories now producing respirators.

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<v Speaker 1>These Chinese manufactured and regulated respirators go by a different name,

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<v Speaker 1>and that's important to note. They are known as K

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<v Speaker 1>and N and they're not f d A approved products.

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<v Speaker 1>They are regulated by the Chinese equivalent of our U

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<v Speaker 1>S Food and Drug Administration. But since desperate times call

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<v Speaker 1>for desperate measures, and the US doesn't have enough manufacturing capacity.

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<v Speaker 1>We've seen the US Food and Drug Administration recently give

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<v Speaker 1>an emergency use authorization for this Chinese product. But there

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<v Speaker 1>does seem to be a bit of wariness about these

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<v Speaker 1>Chinese manufactured ppe or the Chinese manufactured respirators. Can you

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<v Speaker 1>explain why there is this hesitancy about using these very

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<v Speaker 1>needed products. I think, at the end of the day,

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<v Speaker 1>working with Chinese manufacturers and intermediaries just comes with its

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<v Speaker 1>own set of risks. Given how quickly the market is mobilizing,

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<v Speaker 1>it's also become overrun with layers of profiteering middlemen, these

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<v Speaker 1>bidding wars, prices that are are so volatile they can

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<v Speaker 1>range for a can ninety five anywhere from uh, you know,

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<v Speaker 1>a buck fifty to twelve dollars, and that's still higher

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<v Speaker 1>than they are in typical times. The root of it,

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<v Speaker 1>too is this concern about the goods quality, and US

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<v Speaker 1>regulators essentially have said they can't serve as a body

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<v Speaker 1>that is able to sift out the bad apples here,

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<v Speaker 1>and so what can say the government's hospitals organizations, do

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<v Speaker 1>you know if they're willing to source these products from China.

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<v Speaker 1>What are some of the steps that they can take

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<v Speaker 1>or that they are taking to make sure these products

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<v Speaker 1>are actually good or safe to use. So, until fairly recently,

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<v Speaker 1>guidance from the U S government agencies was inconsistent on

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<v Speaker 1>whether China's version of respirators these k and were suitable

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<v Speaker 1>for use. The FDA was allowing respirators made in other

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<v Speaker 1>countries at first, but didn't include China on this list,

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<v Speaker 1>this Emergency Use Authorization list. That guidance came much more recently.

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<v Speaker 1>They have since amended that, but are stating that hospitals

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<v Speaker 1>and other buyers should be careful in considering the product

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<v Speaker 1>they end up using given these concerns about legitimacy of

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<v Speaker 1>the product. In our story, we look at a company

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<v Speaker 1>called Premier, Inc. Which serves as a group purchasing organization

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<v Speaker 1>for more than four thousand US hospitals and health systems.

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<v Speaker 1>It has more than sixty billion and purchasing power, and

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<v Speaker 1>they knew that there simply wasn't enough US products, so

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<v Speaker 1>it's scrambled to China. Some of the things that they're

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<v Speaker 1>doing is actually using code words to first vet various facilities.

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<v Speaker 1>So when they are screening manufacturing facilities. They have people

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<v Speaker 1>on the ground at those facilities using gibberish that they've

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<v Speaker 1>pre planned to ultimately assure that the communication is real

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<v Speaker 1>and the person on the other end of the screen

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<v Speaker 1>is who they think they are. Once a facility has

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<v Speaker 1>passed that initial test, Premiere was deploying its employees based

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<v Speaker 1>in Asia to these various facilities to actually go inspect

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<v Speaker 1>K on the line as they were packaged and as

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<v Speaker 1>they were sent. And logistics also plays a big part

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<v Speaker 1>of this. It's quite costly and difficult to be shipping

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<v Speaker 1>these products out of China into the US. Once that

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<v Speaker 1>that product has arrived here domestically in the States, they've

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<v Speaker 1>inspected that product again, and then they've worked with their

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<v Speaker 1>own logistics companies to get product to various emergency rooms.

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<v Speaker 1>But something that's worth underscoring, Laura is that there's no

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<v Speaker 1>clear playbook and everybody is approaching this differently. Since US

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<v Speaker 1>regulators have taken somewhat of a back seat and push

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<v Speaker 1>the risk towards US hospitals, health systems, group purchasing organizations

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<v Speaker 1>that are determining whether or not this product legitimate, these

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<v Speaker 1>entities have to make those decisions for themselves, so we're

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<v Speaker 1>still seeing an influx of some faulty product here into

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<v Speaker 1>the country. What is China doing to try and tamp

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<v Speaker 1>down all these these fakes that are are popping up everywhere. Well,

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<v Speaker 1>China has certainly faced some pressure to crack down on

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<v Speaker 1>subpar suppliers, counterfeitters, and these unscrupulous middlemen that have been

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<v Speaker 1>surging the prices by investigating cases of companies making fake

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<v Speaker 1>or unreliable equipment and face masks um. The Chinese government

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<v Speaker 1>actually announced this month that its customs agency would inspect

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<v Speaker 1>every shipment of medical respirators and other medical protective clothing

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<v Speaker 1>before they export. They've also worked to create lists, essentially

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<v Speaker 1>of what they see as legitimate manufacturers. These moves have

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<v Speaker 1>led to reports in delayed shipments of product getting to

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<v Speaker 1>the US, and there's some frustration about that actually among buyers,

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<v Speaker 1>but others say it's a much needed layer of scrutiny

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<v Speaker 1>into this market that has both good and bad product

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<v Speaker 1>coming out quickly. What exactly is the rough timeline they're

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<v Speaker 1>trying to shoot for in terms of someone making the respirators,

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<v Speaker 1>verifying them, and then getting them, let's say, onto US

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<v Speaker 1>soil or to emergency room. What is their goal for timeframe.

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<v Speaker 1>I think that will vary day to day. But the

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<v Speaker 1>first shipment Premiere was able to secure and bring to

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<v Speaker 1>the US touchdown in Chicago nine days after they had

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<v Speaker 1>initiated a partnership with a Chinese manufacturing facility. So that

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<v Speaker 1>was the timeline. Bake in a day or two for

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<v Speaker 1>it to be delivered across the country from California to

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<v Speaker 1>New York, perhaps to get to actual healthcare workers. But

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<v Speaker 1>that nine day timeline is pretty quick. This is a

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<v Speaker 1>company that usually takes months to vet products coming from

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<v Speaker 1>outside the US, and they've never done this with k

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<v Speaker 1>and before. I think that if you're a glass half

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<v Speaker 1>full person, you look at Premiers work and you say,

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<v Speaker 1>this is incredible. Look at American ingenuity and ability to

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<v Speaker 1>to look elsewhere and source quickly. If you're a glass

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<v Speaker 1>half empty person, you're concerned that every company is doing

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<v Speaker 1>this on their own timeline, by their own standards, and

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<v Speaker 1>you got to trust that they're doing it right. This

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<v Speaker 1>is ah, this is the wild West. That's how suppliers, traders,

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<v Speaker 1>government officials have put it to me. It's every man

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<v Speaker 1>for themselves and you just have to be trusting of

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<v Speaker 1>the entity you're working with to make sure that this

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<v Speaker 1>is legitimate product. That was health reporter Riley Griffin. For

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<v Speaker 1>more on the messy mask market in China, read Riley's

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<v Speaker 1>April fifteenth story with Lauren Etter on Bloomberg dot Com.

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<v Speaker 1>And That's our Show. For more on the outbreak from

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<v Speaker 1>one D and twenty bureaus around the world, visit Bloomberg

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<v Speaker 1>dot com, slash Coronavirus and one Small favor. If you

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<v Speaker 1>appreciate the show, please leave us a review and rating

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<v Speaker 1>on Apple Podcasts or Spotify. It's the best way to

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<v Speaker 1>help more listeners find our global reporting. The Prognosis Daily

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<v Speaker 1>edition is hosted by Me Laura Carlson. The show was

0:14:47.280 --> 0:14:52.240
<v Speaker 1>produced by Me, top foreheads, Jordan Gospoure and Magnus Hendrickson.

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<v Speaker 1>Today's main story was reported by Riley Griffin. Original music

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<v Speaker 1>by Leo Sidron. Are at readers our Francesco Levi and

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<v Speaker 1>Rick Shine. Francesco Levi is Bloomberg's head of podcasts. Thanks

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<v Speaker 1>for listening. H