The Sad Saga Of The Masks

April 22nd, 2020 by Tom Lynch

face masks

Michael Einhorn is CEO of Dealmed, a medical supply importer and distributor for the New York, New Jersey, Connecticut Tri-State area, the hottest COVID 19 spot in the U.S (so far).

Although Dealmed buys gowns, gloves and other medical supplies from manufacturers around the world, it gets all its masks from China. Prior to the COVID 19 pandemic, Einhorn would buy medical masks for about $.50 apiece. He would then, at a cost of around $15,000, or $.05 per mask, put 300,000, or so, of them on a container ship, which would reach the U.S. a couple of weeks later, whereupon, under contract, he would sell them for between $.70 and $.80 per mask, garnering a tidy, volume driven profit.

At the beginning of January, Einhorn’s world turned upside down thanks to an unfortunate series of events.

  1. On 8 January, the CDC announced “a pneumonia of unknown cause” was spreading in Wuhan, China. This greatly alarmed Einhorn. “It was then I knew that something shocking was happening”;
  2. On 25 January, the Chinese new Year, the Year of the Rat, began. Lasting 23 days, this is the major vacation period for Chinese workers. Think Paris is August;
  3. Wuhan is the “world capital” of medical mask manufacturing. All of Dealmed’s masks come from three companies within one hour’s drive of Wuhan;
  4. On 23 January, China issued the Wuhan (Hubei province) lockdown, which lasted 76 days until 8 April; and,
  5. The Chinese government allowed mask-manufacturing to begin again in early March, but all masks stayed in China to fight its own COVID 19.

Meanwhile, back on the home front, the COVID 19 tsunami was washing over America.

  • In early January, U. S. intelligence agencies began warning the Trump Administration that China wasn’t being honest about the scale of the crisis.
  • On 10 January, former Trump Homeland Security Advisor Tom Bossert urged action on COVID-19, saying,“We face a global health threat…a new kind of coronavirus.”
  • On 21 January,  The CDC’s Nancy Messonnier said in a congressional briefing that more cases were expected in the United States.”This is an evolving situation and again, we do expect additional cases in the United States”
  • On 28 January, former FDA Administrator Scott Gottlieb and Luciana Borio penned an op-ed in the Wall Street Journal offering a 4-point plan to prepare for COVID-19.
  • And on 29 January, both the New York Times and The Atlantic published articles detailing the woeful shortage of masks in the U.S., and reporting, in the words of the Times, “the hoarding has begun.”

Two decades ago more than 90% of America’s masks for the healthcare community were made in the USA. But then, China entered the game. China with significantly lower manufacturing costs. The result: Now U.S. firms make only 5% of the masks we need. China has cornered the market.

So, in early January, when the fecal matter impacted the whirring instrument, Michael Einhorn was catapulted overnight into a new wild west style universe where everyone in the health care community all over the world was competing with each other for a finite number of masks.

Eventually, his Chinese manufacturers were willing to once again make his masks, but at greatly elevated prices. A mask that used to cost him $.50 was now $2.00, or more. Because of the urgent need, he could no longer use container ships; they took too long. Enter Air Freight. At first, “We were paying $40,000 to $60,000 for cargoes that were one-fourth what we’d put on container ships,” he says. “Then, the cargo planes were in such short supply that the cost went to $80,000 to $90,000.” Consequently, his total costs are now in the $3.50 to $6.00 range for masks, which he sells to his health care clients for about $5.00, which is more than six times higher than pre-COVID 19.

If you didn’t know any better, you’d think Einhorn is price gouging, but he’s not. The Chinese manufacturers and the air freight companies on the other hand….

People, this did not have to happen. Our federal government, yes, the Trump administration, should have seized control of this supply chain fiasco from the beginning and put in place a comprehensive and coordinated program to secure and distribute the essential medical equipment the nation was going to need during COVID 19.

If the Trump administration had done that governors would not have to compete with each other, hospitals would not have to compete with each other, and no one would have to compete with the federal government for a single mask.

And maybe, just maybe, a lot of health care heroes who have given their lives saving others would still be with us.

 

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