What a IV fluid shortage can tell us about America's weak supply chains?
Hurricane Helene decimated Americas IV fluid supply and hospitals have had to ration IV fluids. Using this shortage as a case study we will examine the shortcomings of Americas supply chains.
The Repercussions From Helene:
In late September Hurricane Helene thrashed through the gulf of Mexico and into the southeastern United States. In the end by some estimates Helene is expected to have caused some 250 billion dollars worth of damage and economic loss to the region1. More tragically Helene led to the deaths of an estimated 224 people as of writing.2
One of the less reported but more concerning effects of Helene was the intravenous (IV) fluid shortage it caused. Storm surge from Helene led to significant flooding at Baxter International’s North Cove IV fluid plant in North Carolina3.Baxter International is an S & P 500 medical equipment company that supplies roughly 60% of all IV fluid to US Hospitals4. With production crippled many hospitals were forced to conserve their limited supplies. At many hospitals there have been cancellations of non-urgent surgeries; at Oregon State Health University roughly 25% of surgeries have been canceled due to the shortage5. Although perhaps labeled as non-urgent, important surgeries are being canceled; in one case a women had her surgery for the removal of a cancerous tumor canceled6. In fact it is so bad that that per the American Medical Association “86% of U.S. health care providers are experiencing shortages of IV fluids, [with] approximately 54% reporting supplies of 10 days or less of IV fluids in their inventories”7. The shortage led the FDA to give the greenlight to import IV fluids from Baxter International plants in foreign nations, including Canada, China, Ireland and the UK8.
IV fluid Supply Chain Issues:
The importation of IV fluid from foreign nations shows a weak and insecure supply chain of IV fluids in the US. On the homefront, the United States relies on one single company for the vast majority of their IV fluids. Furthermore the second largest producer of IV fluids in the US, B.Braun had to temporarily close one of its main plants in Dayton Beach, Florida around the same time. The plant was closed for roughly two days as a second hurricane (Milton) ripped through the southeastern US, luckily the plant did not sustain any significant damage from Milton and returned to full operations9. These issues of Hurricanes and IV fluid production disruption surprisingly are nothing new. In fact Baxter International’s IV fluid plants in Puerto Rico were hit extremely hard by Hurricane Maria leading to a shortage of IV fluids; specifically saline bags10.
Today as the North Cove plant attempts to recuperate, the US must turn to foreign countries for their IV fluids. As previously mentioned the FDA gave emergency approval to import IV fluids from Baxter plants abroad, including those in China. This is concerning as there have been issues and continued questions on if Chinese medical & pharmaceutical industries are regulated to a high enough standard. In 2008 Heparin (a blood thinner) produced by Baxter11 in China was contaminated and led to the deaths of dozens of people in the United States12. More recently the U.S.-China Economic and Security Review Commission published a report in which they state that they do not believe that China has adequate regulations in the pharmaceutical industry and that the FDA lacks the ability to ensure the safety and efficacy of products coming from China13. Only through a more secure and resilient IV fluid supply chain at home can the United States truly ensure the safety and availability of IV fluids.
The Future of the IV Fluid Supply Chain:
Oftentimes supply chains become consolidated, as seen through the production of IV fluid in the US. One of the major reasons for this consolidations in IV fluids is the high material and regulatory cost to produce them; both which have been increasing in cost over the years14. This leads to a higher bar of entry into manufacturing and also promotes a system in which companies consolidate their manufacturing in an attempt to maximize profits15. Unfortunately no improvements have been made in an attempt to fix this issue, if anything it has been quite the opposite. Instead of opening more plants, Baxter did the opposite and actually closed one of its manufacturing plants in Alabama late last year in an attempt to cut costs16. At the same time, the United States’s reliance on foreign pharmaceutical manufacturing (especially manufacturing done in China) seems to be growing. Its reported that “Essential Medicine” imports from China to the US have grown by about 4 fold from about 540,000,000 dollars worth in 2015 to 2,020,000,000 dollars worth in 202317. This reliance is extremely concerning, a concern that Baxter, who has factories in China is even concerned about. In their SEC 10-K filing it is written that Baxter is concerned about supply chain challenges and increased costs if the conflict between China and Taiwan escalates18. Even so it seems as though both those in the American government and business have neglected to care about medical supply chains that tens of millions of Americans rely on every single year. America was given a warning after Hurricane Maria struck Baxters plants in Puerto Rico in 2018 and was just given another warning from Hurricane Helene. If change will happen it will most likely take a combination of both government policy and action from business leaders to move towards a resilient, non-foreign reliant supply chain.
The Greater Issue of Weak Supply Chains:
The IV issue is simply a recent example of the greater issues regarding weak supply chains in the US. In all industries across the United States it can be noticed that there is manufacturing consolidation or reliance on foreign manufacturers. Take another example from a few years back when there was a large-scale baby formula shortage across the United States. At the start of 2022 Abbot (who is one of 4 companies that produce about 90% of baby formula in the US) shut down one of their plants and issued a large recall due to contamination of the formula19. This led to shortages across the US and foreign imports of formula increased by about 465% in 2022 compared to the same time period in 202120. While these are just two examples they show the weakness of US supply chains in different industries. However, it's also important to see the pattern that emerges: both had a large amount of manufacturing concentrated in one place. To have a strong supply chain you need to ensure even if one node of manufacturing is cut off the effects will be minimal. Whether it be the production of antibiotics or artillery shells, it is unwise to have production over concentrated.
Advice for the Future:
Members of both government and business need to take action across the US to ensure stable supply chains, especially for critical goods. First off, action must be done to protect current manufacturing chokepoints and ensure they are protected from all sorts of “threats” whether they be from environmental catastrophes, foreign cyberattacks, or anything else that could cripple the supply chain. At the same time action needs to be taken to diversify supply chains and ensure the production and distribution of a critical goods is not reliant on one or a very few facilities for its distribution. If these two goals are moved towards the US will be able to develop more resilient supply chains and ensure that critical goods get to where they need to go while not relying on often unreliable foreign imports.
In reading I hope that you have a better understanding of the issues plaguing American supply chains, specifically for critical goods. While America will not fall apart tomorrow due to this issue, it would be remiss to not attempt to stabilize supply chains of important goods such as medicine, foods, electricity, etc. Hurricane Helene must be a wake up call to begin taking action and ensuring America's supply lines become strong and resilient as we continue further into a turbulent 21st century.
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Note: Was also produced by other companies but Baxter was by far the biggest producer.
Ahmed 12/2022 (US International Trade Commision)
Photo from:RDNE Stock project: https://www.pexels.com/photo/nurse-fixing-a-patient-s-dextrose-bags-6129232/