by Robbie Singh, MS, MBA
The current economic devastation of USA and Europe caused by the Coronavirus pandemic has produced a vision of how the Life Sciences industry could be shaped for the synergistic benefit to the two economies in the world. In order to develop a future state, let us look at the facts. According to Statista, there were 442 public life science and biotechnology companies in the United States (US) and 2,772 private companies and 234 public companies and 2,025 private biotechnology and life science companies in Europe. DateX Corporation states that according to the US General Accounting Office, there are 400 pharmaceutical manufacturing sites in China and 15% of the world’s pharmaceutical production and active ingredients needed to make 370 drugs are located in China whereas 21% are located in the US. To have US medical supply chains dependent on China is atrocious! Looking at the data on hospitals, according to the American Hospital Association, there were 6,127 hospitals in the US in 2018. There are approximately 19,316 hospitals in Europe according to data gathered in 2014 by the European Information Gateway of the World Health Organization. Imagine if the US and Europe encouraged life science companies operating in their territories to buy products “Made in the USA” or “Made in Europe.” This would be a winning strategy for revitalizing the US and European economies post-Covid-19.
Consider the employment needed to fill the demand created by a “Made in the USA” or “Made in Europe” plan for the life sciences supply chain. Unemployment is at 10% in the US, and legislators cautioned that unemployment could go to 20-30% without vigorous stimulation of the economy. Imagine that since mid-March over 26 million Americans have filed for unemployment. The US Bureau of Labor Statistics reports for the educational and health services sector for the month of March 2020 averages a loss of 76,000 jobs (90% confidence interval: -33,000 to -118,000). This represents many jobs lost in the life sciences and an employment increase will be needed to fill demand created by the Covid-19 pandemic and to move supply chains back to the USA. Relief is on the way for taxpayers and small and large businesses courtesy of the Trump Administration $2 trillion relief package (for taxpayers) and the nearly $350 billion Paycheck Protection Plan, part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. A nearly $500 billion stimulus passed the House and Senate and will include plus a stimulus $300 billion for small business paycheck protection, $60 billion for small business disaster funding, $75 billion for emergency aid for hospitals, and $25 billion for Covid-19 diagnostics and antibody testing. Some say this does not go far enough, others say it is too much and that the stimulus will cause the Federal deficit to balloon. For a historical context, the US has not engaged in this kind of stimulus plan since the Marshall Plan for Europe after World War II.
The Marshall Plan for economic recovery and reconstruction in Europe cost the US $19 billion ($128 billion in 2020 dollars) plus the Mutual Security Plan, that replaced the Marshall Plan in 1951, gave $7.5 billion annually through 1961 (over $77 billion annually in 2020 dollars), per Wikipedia. Looking at an average inflation rate of 3.79% from 1961-2020, this amounts to about $2.5 trillion. We cannot compare saving US industries to post-wartime expenses, but fighting Covid-19 is like a war. Back to my main thesis: moving the life science supply chain to the US or Europe can help in revitalizing our economies within the US and in various European countries.
Consider if each life science company (pharmaceutical, biotechnology, and healthcare companies, including hospitals were to spend $200,000 on supplies, equipment, reagents, and kits and equipment from other life science companies that have relocated their supply chains to the US or within Europe, this could net nearly $3.1 billion in revenue. This would amount to $934 million spent in the US and almost $2.2 billion spent in Europe. This estimate is not too far off as Lab Manager reported in 2011 that the average life science company in the US spent $48,700 on life science reagents and kits, $60,400 on general laboratory supplies, and $86,500 on instrument-related expenses. The average inflation rate from 2010-2018 was 1.77%, thus a nearly $200,000 average expense is probably an under-estimate, yet very realistic. Promoting national purchasing from other US or European companies is one way to promote recovery.
The life science and healthcare industry needs to be prepared for the next epidemic or pandemic that puts stress on global supply chains. Part of being prepared is relocating supply chains to the US for American companies. For those worried about cost and competitiveness, the US government is willing to pay for US companies to relocate their supply chains here. As for competiveness, technology is an asset and a skilled labor force will help implement technological changes and improvements. A growth in patriotism and favored vendor agreements will compensate for any product cost adjustments needed. A few words of wisdom for supply chain managers as the US and European countries prepare to reopen and lessen quarantine and social distancing guidelines.
Plan for the next epidemic or pandemic now: This entails finding approaches to lessen dependence on China and Asia. Make changes now and prepare to move supply chains to the US or Europe. The US Government has indicated that it is willing to pay for medical and pharmaceutical supply chains to relocate to the US. There will be costs associated with moving, but do not be afraid. Technology is the friend of manufacturing and such implementations will make up for increases in labor costs, along with rising anti-China sentiment among consumers who will justify paying more to buy products made in their own country.
Reassure customers that supply chains will not be interrupted: Many companies are doing so already. Reassurance to customers is important because many companies and research institutions have to continue operations despite the pandemic. Such companies and research institutions are dependent on you. Continuous supply chains are important whether the country is in a pandemic or not.
Make adaptations to critically needed products permanent: One of my fears is that companies in the US that have altered their manufacturing to produce gowns, masks, ventilators, or other personal protective equipment (PPE) will not make these as permanent changes. Rather they will revert to production of previous pandemic products. Why not do both if manufacturing lines can tolerate it? It is a supplement to revenue and continues to do a patriotic duty.
Protect your workers: As in all fields of endeavor, the work setting will be changed forever because of Covid-19. Follow social distancing and mask guidelines. Many companies have or will be making contingency plans for accommodating these guidelines. The health and safety of your employees is important because they are the heart of your company. As the great Jim Collins says in his book Good To Great, “… get the right people on the bus …” for success of your company.
NOTE: This article is a continuum of a recent article I wrotee about supply chain readiness for “Made in the USA” or “Made in Europe;” see the article here: <https://tinyurl.com/RPSingh-Article-BSMA>. Supply chains can lessen their reliance on China and Asia by making the necessary changes to be prepared for the next pandemic; action is too late for Covid-19. More importantly, what about revitalizing economies in the USA and Europe through the life sciences, biomedical, pharmaceutical, biotechnology, and healthcare supply chains?
Resources Consulted
Coronavirus May Disrupt U.S. Pharma/Life Sciences Supply Chain. DateX Corporation. https://www.datexcorp.com/coronavirus-may-disrupt-u-s-pharma-life-sciences-supply-chain/ Accessed April 20, 2020.
Current Labor Statistics. The US Bureau of Labor Statistics. Accessed April 18, 2020.
Witonsky, J. Laboratory Spending Trends. Lab Manager. 2011. https://www.labmanager.com/surveys/laboratory-spending-trends-17908
Zinn, D. Coronavirus unemployment: Everything you need to know about payments, applying and more. CNet. https://www.cnet.com/personal-finance/coronavirus-unemployment-payments-applying-and-more/ 2020.
