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Friday, May 20th, 2022

Manufacturers push for PPE made in the U.S. amid changing legal landscape, Chinese industry dominance

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As the CEO of American PAPR, a Brooklyn-based company that manufactures American-made personal protective equipment, Giles Kyser has hired lobbyists to make the case that the federal government should procure medical equipment whose raw materials are sourced and assembled in the United States. Sourcing it in this country has national security implications, he says.

However, Kyser has faced challenges getting his company’s PPE into places such as the federal government’s Strategic National Stockpile and the Centers for Disease Control and Prevention. This is despite that American PAPR products are certified by the National Institute for Occupational Safety and Health, or NIOSH, an agency under the auspices of the CDC.

“We’ve called all the people. We’ve sent emails. And we essentially got stonewalled,” Kyser said of his efforts to supply his company’s powered air purifying respirators, or PAPRs, to the government.

PAPRs are used by medical professionals when treating health conditions such as Ebola, and by nurses and physicians caring for COVID-19 patients. The respirators are worn around the head and filter ambient air, creating positive pressure within the helmet. This establishes a seal around the user’s face, preventing outside air from entering the headpiece. PAPRs are 250 percent more effective at creating a seal than N95 and KN95 masks and typically cost about $1,000, although American PAPRs are priced at $875. Manufacturers justify PAPRs upfront costs as long-term savings because the equipment lasts for years.

Kyser says 96 percent of the component parts of his company’s respirators are manufactured in the United States and depend on a 17-state supply chain to produce. This percentage is substantially higher than what the government requires for a made in the United States designation. Previously, ‘The Buy American’ Act required that products bought with taxpayer dollars must “substantially all” be made in this country. However, most products could qualify if just over 55 percent of the component parts were made here. Then in July, the White House issued an executive order proposing an immediate increase to 60 percent, which will eventually be phased to 75 percent. According to the order the change would create more opportunities for small-and medium-sized manufacturers such as American PAPR.

And in August, the Federal Trade Commission’s new ‘Made in U.S.A.’ labeling rule became effective. It says that labels may not contain unqualified ‘Made in U.S.A.’ claims unless the final assembly of a product occurs in the United States; that a significant portion of the processing of a product must occur in this country; and that all components of the product must be made and sourced in the United States.

In August of 2020, a year before Biden’s most recent executive order addressing PPE, an official from American PAPR approached the CDC asking if the agency would purchase the company’s respirators. In an email obtained by Homeland Preparedness News, a senior CDC contract specialist told American PAPR’s representative that they did not have time to extensively test the company’s product in the middle of the pandemic.

“This position established yet another artificial barrier for a small manufacturer, even though American PAPR met the CDC and HHS published NIOSH standard,” Kyser said.

The CDC official cited in the email said the organization was satisfied with the quality and consistency of the respirators it receives from 3M. The CDC did not return a request for comment.

In a written statement from 3M, a multinational corporation with operations in more than 70 countries, spokesperson Jennifer Ehrlich said the company is “a leader in personal safety equipment. We make PAPRs and other personal safety equipment in the U.S. and sell it to customers, including government stockpiles.”

3M did not respond to additional questions about whether its respirators were made end-to-end in the United States or whether they met the 60 percent threshold newly enacted by the White House.

China’s rise to PPE dominance  

Making PPE in the United States was a call to action in the second quarter of last year when masks from Asia, specifically China, were in short supply in this country. Chinese manufacturers prioritized selling medical equipment to their citizens as China tackled its initial COVID-19 outbreak. That is when American companies ramped up domestic efforts to create PPE to meet the U.S. demand, as 80 percent of our country’s PPE came from China in 2020. However, American companies were often stymied by production lags. Getting products certified by NIOSH or having production facilities inspected by the Food and Drug Administration took time. Meanwhile, two months after supplies had dwindled in the United States, Chinese suppliers began to increase by fivefold the manufacturing capacity of the specialized fabric used for masks, creating more masks for U.S. consumption compared to pre-pandemic levels.

Willy Shih, a professor at Harvard Business School who co-wrote an article earlier this year about PPE and supply chains, says producing masks was a whole-country effort for the Chinese. Large factories were not the only makers of masks. In March of 2020, much of the PPE that was shipped from Shanghai did not come on large pallets but were instead packaged in small boxes from numerous makers in China—including auto companies and electronic manufacturers—many of whom got into the mask-making business quickly at the start of the pandemic. The manufacturing boom was aided by many engineers in firms large and small whose inexpensive tools needed to produce masks flooded the Asian market. Masks became plentiful, and their ubiquity made them cheaper for the U.S. consumer.

“Were [the Chinese masks] NIOSH certified? Not likely for most of them. Is China capable of producing high-quality products? Yes,” Shih said.

If anyone questions China’s ability to make a high-performing product, Shih says to look no further than the iPhone. And when it comes to the condition of manufacturing facilities, he says many Chinese factories—though certainly not all— rival that of those in this country. When the United States offshored its own textile industry to Asia in the early 2000s, the Chinese built up their skills and infrastructure in textile manufacturing. This positioned China to become the largest supplier of hospital gowns and other PPE.

In contrast, with little domestic textile infrastructure in place, the United States could only utilize a few specialty makers for PPE production. To reestablish a domestic industry, it would take time for this country to create enough production capacity to make masks and other PPE at China’s scale, Shih says. And if the United States did reestablish a textile industry, what would be the price tag? The Chinese typically pay their factory workers $2 to $3 an hour as compared to the $18 to $30 per hour for U.S. manufacturing jobs, costs which must be passed down to the consumer.

Higher Costs, Peace of Mind?

The quality of Asian goods and the consistency of supply should be the focus of debate when it comes to PPE procured by the government, says Kyser.

“China will likely always be part of the American supply chain when it comes to lifesaving equipment required to respond to contingencies,” Kyser said. “But the incentives and priority should be given to U.S. manufacturers, not subject to the shocks imposed by a global supply chain dominated by our adversaries.”

He added: “China can stop the supply chain any time they want.”

Kyser is not alone in his sentiments.

In the last year, federal legislators have called for a reevaluation of whether foreign-made goods should be purchased for government agencies. In a letter dispatched this summer to Health and Human Services Secretary Xavier Becerra, five U.S. representatives called on him to tap domestic manufacturing and new technologies to grow the national stockpile, specifically for pharmaceuticals. Approximately 75 to 80 percent of all active pharmaceutical ingredients are imported to the United States. “While this has historically had its advantages, dangers became realized last year when India’s Ministry of Commerce and Industry restricted the export of 13 [ingredients] and any formulations made from them, even as the COVID-19 pandemic got underway,” Homeland Preparedness News reported in August.

Bipartisan legislation proposed last week— the Promoting Readiness and Ensuring Proper Active Pharmaceutical Ingredient Reserves of Essential Medicines (PREPARE) Act of 2021— would also incentivize domestic manufacturing of the key ingredients used in essential generic medicines as a means of bolstering the nation’s supply chain.

The Infrastructure Investment and Jobs Act, H.R. 3684, requires HHS and other government organizations to establish long-term contracts with U.S. domestic manufacturers to make items such as masks and PAPRs. The goal is to give suppliers the financial stability they need to remain in the market. There are some exceptions to the legislation, including whether the product is available in this country and if a trade agreement is in place.

A spokesperson for ASPR told Homeland Preparedness News that, “The HHS Office of the Assistant Secretary for Preparedness and Response (ASPR), which manages the Strategic National Stockpile (SNS), has expanded SNS supplies of personal protective equipment to enhance the federal government’s pandemic response capability now and for the future. The SNS deploys items when states, tribal nations, large metropolitan areas and territories cannot meet response needs from their own stockpiles and are unable to secure sufficient product from the commercial market. In 2020, ASPR awarded two COVID-19 contracts for powered-air purifying respirators (PAPRs) and both were to U.S. companies. At this time, procurement of additional PAPR supplies for the SNS is not needed.”

The ASPR spokesperson added that the department strictly follows Federal Acquisition Regulation (FAR) Part 5 relevant to publicizing contract actions for the procurement of goods and services.

Officials from a growing number of U.S. companies producing American-made PPE, including American PAPR, say they are ready to supply the government. But they say they are going up against agency bidding processes that don’t prioritize small-to-medium sized U.S. manufacturers.

This might be changing soon. In a White House executive order issued in January, the Federal Acquisition Regulatory Council, or FAR Council, the primary regulation used by executive branch agencies in their acquisition of supplies and services, must “increase the numerical threshold for domestic content requirement for end products and construction materials” and “increase the price preferences for domestic end products and domestic construction.”

Supporting domestically made goods will undoubtedly mean higher prices for government agencies, Shih says. However, that doesn’t mean there can’t be a middle ground. Foreign producers can meet surges in demand, he says.

“If what you want is American manufacturers to be around for the next pandemic, what you want to do is to make sure [they] have stable demand so that they stay in business,” Shih said about granting annual government contracts. “You can’t have American makers who are high cost be the swing producer, because they can’t survive this boom-and-bust cycle.”