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Citing 'over-reliance' on Asia, Ballad Health hopes to diversify PPE supply

David Floyd • May 27, 2020 at 9:15 AM

Ballad Health CEO Alan Levine said the health system has experienced disruptions and potential harm to patients twice this year because of America’s over-reliance on Asia for medical supplies.

It happened in January when a manufacturing plant in China failed to meet U.S. requirements for sterile gowns, which made it necessary for the system to delay surgeries for two days. It happened again during the novel coronavirus (COVID-19) outbreak, when the system said nations producing the equipment closed their borders and prevented U.S. access to supplies.

Ballad said that decision caused widespread shortages of protective equipment for healthcare workers.

Ballad said in a press release Tuesday that PPE products critical for the daily operations of health systems are overwhelmingly sourced overseas, noting that approximately 80% comes from China and Southeast Asia.

“The United States has lost so much manufacturing to China that so much of our supply chain in healthcare relies on Chinese manufacturing and Asian manufacturing,” Levine said. “I think the COVID-19 pandemic was a big enough ordeal that it woke everybody up.”

As part of an effort to diversify its supply of personal protective equipment and support domestic suppliers, Ballad Health and Premier Inc., a healthcare improvement company partially owned by Ballad, announced in a press release Tuesday that they would partner with 15 American health systems to acquire a minority stake in Prestige Ameritech, which describes itself as the largest domestic manufacturer of face masks, including N95 respirators and surgical masks.

“We’re providing capital, they’re expanding production and we’re guaranteeing that we will buy that expanded production,” Levine said.

For up to six years, Ballad Health said it will commit to buy a portion of all masks it uses annually from Prestige Ameritech, which includes of a three-year renewal option.

Last week, Ballad announced a new program in partnership with Premier Inc. that involves investing in domestic and other manufacturers to ensure a ready supply of essential medical products. Premier Inc. will be acting an intermediary, bringing deals to Ballad that it can evaluate. 

The announcement on Tuesday marks the first official step of this partnership, but Levine said there are other agreements in the works.

Because they’re being confidentially negotiated, Levine said he can’t disclose what the next steps in the partnership will be, but the system will make announcements as soon as it is able.

“Because we’ve now taken an ownership stake in the company, we’re committing to buying from them, but they’re also committing to supply us,” Levine said of the agreement with Prestige Ameritech. “If there’s a shortage, we get to the front of the line and that is a clear advantage from where we were before.”

Levine added the system will still buy from other sources.

Ballad said Prestige Ameritech has a primarily domestic supply chain, drawing raw materials and production capabilities from the U.S. The company does 100% of its business with U.S. customers.

Dan Reese, Prestige Ameritech co-founder and CEO, said in the system’s news release that COVID-19 proves that the United States is “almost completely” at the mercy of other nations for vital supplies.

“We are ready, willing and able to surge our U.S. based production and help alleviate the national PPE shortage,” he said. “With the long-term commitment from Ballad Health, we have certainty that allows us to invest in increased production.”

Fundamentally, Levine said the healthcare industry has become too reliant on one source for the manufacturing of many of its products, adding that diversification will help minimize risk.

“Rather than complain about it, we decided to just sort of become part of a market-based solution,” Levine said.

Story courtesy of the Johnson City Press

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