Among the many unprecedented effects of the pandemic, the ‘V’ shaped pattern in consumer spending was something we’ve never seen before in a recession. The new paper looks into one particular cause of the pattern: the business closing and reopening policies that state governments pursued in order to stop the spread of Covid-19.
Early work has generally found that business shutdown policies didn’t have large effects on spending (Chetty et. al. , Goolsbye and Syverson), and that the pattern was caused mainly by fear of Covid. Our paper finds quite different results, that in fact the retail shutdowns substantially affected spending.
An advantage of our paper is the really great data that was provided by Earnest Research, which allowed us to really pinpoint the sectors that the shutdowns and reopenings affected.
We find reopening policies substantially increased spending for categories directly impacted by the laws: a 68.4 p.p. increase in non-essential in-store spending and a 16.7 p.p. increase in full-service indoor dining. For sectors not directly impacted — essential retail, limited-service restaurants, and online — we find a limited impact of reopenings. We estimate that retail reopenings are responsible for 34% of the total trough-to-peak recovery in spending, while restaurant reopenings are responsible for 15% of the recovery.
The current overall chain of command for the national supply chain seems to be:
(1) Federal Emergency Management Agency (FEMA) supply chain task force, lead by Rear Adm. John Polowczyk.
(2) Jared Kushner’s private sector team, which also seems to be working closely with the FEMA team. Kushner is the liason with the FEMA team to the White House, and can relay requests from Trump / others to the team.
The supply chain task force is providing resources in several ways. It is coordinating the airlift of materials from abroad to the US from private supply firms. Some of the materials it is buying for itself, for the FEMA stockpile, but most of it is still in the possession of the medical supply firms. The medical supply firms are then filling orders like normal, with no priority system.
As to how FEMA is distributing supplies, it seems that they are tapping into the private data on where materials are going, and they can see a little bit which areas need more supplies. They are then sending supplies to the places that need them the most. Before sending supplies from the stockpile, i.e. ventilators, Kushner is asking about utilization rates.
On April 2nd, the White House gave an update of the supply situation at the daily press briefing. So far, the US strategic stockpile has sent out: 27.1 million surgical masks, 19.5 N95 masks, 22.4 million gloves, 5.2 million face shields, 7,600 ventilators.
Production in the US is usually 30,000 ventilators per year, but apparently by end of June we will produce 100,000. In April and May, several thousand will be available each month.
When the Vice President first asked me to help on the task force with different tasks, I asked the President what he expected from the task force and how I can best serve him in the task force.
The task of the task force member is to perform the tasks which must be performed to complete the tasks.
What the President asked is that all of the recommendations that we make be based on data. He wanted us to be very rigorous to make sure that we were studying the data, collecting data. A lot of things in this country were happening very quickly and we want to make sure that we were trying to keep updating our models and making sure that we were making informed decisions and informed recommendations to him based on the data that we were able to collect and put together.
The task is clear: the data will be used to make informed decisions using data driven methods based on reliable data.
The President wanted to make sure that we had the best people doing the best jobs and making sure that we had the right people focused on all the things that needed to happen to make sure that we can deliver in these unusual times for the American people.
This was stated unironically.
The President also wanted us to make sure we think outside the box. Make sure we’re finding all the best thinkers in the country.
Once again, unironically.
Just very early this morning, I got a call from the President. He told me he was hearing from friends of his in New York that the New York Public Hospital System was running low on critical supply. He instructed me this morning, I called Dr Katz who runs the system. I asked him which supply was the most supply he was nervous about. He told me it was the N95 masks. I asked what his daily burn was and I basically got that number. Called up Admiral Polowczyk. Made sure that we had the inventory. We went to the President today and earlier today the President called Mayor de Blasio to inform him that we were going to send a month of supply to New York Public Hospital System to make sure that the workers on the front line can rest assured that they have the N95 masks that they need to get through the next month.
After using the word ‘data’ seven times, we now have an example of what data is being used and how. The president heard off hand from a friend in New York that they were having problems in the public hospital system, Trump told Kushner, who called the head of the public hospital system in NYC, and asked him for the one item that the hospital was having supply troubles with. Kushner then arranged for 200,000 masks to be sent the next day.
Survey data shows that active cases of COVID-19 create surge demand of 17X the typical burn rate for N95 respirators, 8.6X for face shields, 6X for swabs, 5X for isolation gowns and 3.3X for surgical masks.
According to the survey, hospitals ranked the supply of N95 respirators as their top concern. Comparing the number of respirators the hospital used before and after confirmed COVID-19 cases were admitted, Premier calculated a surge need of up to 17X. The survey also found that the average respondent had 23 days of N95 inventory on hand. However, those with active COVID-19 patients had an average of just three days’ worth.
“To date, most attention about supply shortages has focused on N95 masks, which was one of the first PPE items to fall into short supply as consumption surged to provide care to COVID-19 patients,” Alkire says. “Although this supply remains a top concern, backorders for surgical masks, isolation gowns, thermometers and disinfecting wipes are surging and quickly surpassing demand for N95s. This is an early warning signal of product shortages that may be on the horizon and need to be planned around.”
According to the survey, hospitals ranked the supply of N95 respirators as their top concern. While the largest number of respondents (about 39 percent) reported having more than 1,000 N95s on hand, a plurality of respondents (23 percent) are burning through more than 100 masks a day, meaning that many systems have less than 10 days’ inventory.
Despite these concerns and the fact that nearly all respondents have implemented at least some conservation protocols for PPE, there is still significant room to further improve conservation measures specific to N95 masks, including extending the wear of N95s (a measure followed by 60 percent of respondents), re-using N95s (40 percent), using expired N95s (33 percent) and using industrial N95s (20 percent).
Shortages for hand sanitizer were the second most concerning shortage for survey respondents, with 64 percent reporting an active shortage. An additional 25 percent have less than two weeks’ supply. However, clinicians do have alternatives, as proper hand hygiene with soap and water can be more effective than alcohol-based hand sanitizers.
Surgical mask shortages were the third most concerning shortage for survey respondents. While most respondents (56 percent) reported having more than 1,000 surgical masks on hand, a quarter (26 percent) burn through that amount every day, meaning that the mask supply is generally a day’s supply or less.
Half of survey respondents (50 percent) reported having more than 1,000 isolation gowns on hand, however, about 25 percent also burn through that same quantity each day. In addition, about 17 percent of respondents had fewer than 250 gowns available.
Viral swabs are another area of concern, as most respondents (60 percent) have fewer than 250 swabs on hand, while about 21 percent burn through more than 100 swabs a day. The swab shortage was largely due to the fact that one of the top manufacturers is based in Italy, which has been hit particularly hard by the virus. However, the U.S. Air Force has committed to making shipments of the swabs, so the problem may resolve in coming weeks.
According to the survey results, 20 percent of respondents report needing additional ventilators immediately. Approximately 27 percent can take on an additional one to five patients before they require additional ventilators. About 24 percent can accommodate six to 10 more patients, and about 30 percent can take 11 or more patients before they need additional ventilators.
3M and half a dozen smaller competitors are making 50 million N95 masks in the US a month.
3M has doubled production since January.
3M began ramping up mask production after the World Health Organization on Jan. 11 reported the first deaths from Covid-19, the disease caused by the coronavirus. By mid-March 3M had doubled its output to nearly 100 million masks a month globally, and 35 million a month in the U.S., at plants in South Dakota and Nebraska. the company also has said it would import 10 million masks this month from its factory in China, which earlier this year was restricted from sending goods abroad.
Smaller manufacturers Moldex-Metric Inc. and Prestige Ameritech Ltd. make about 10 million N95 masks each month combined, according to the companies. Their output plus 3M’s mask production represents the bulk of current U.S. capacity, according to industry leaders, augmented by smaller quantities from companies including Alpha Pro Tech Ltd. and Louis M. Gerson Co.
The agency in March ordered 600 million N95 masks from five companies to distribute to hospitals and augment the national medical-supply stockpile over the next 18 months. The purchase includes orders for 190 million masks each from 3M and Honeywell and 130 million from medical-supplies company Owens & Minor Inc., the agency said in an email.
Honeywell, which primarily made masks outside the U.S. before the pandemic, said it plans to hire 1,000 workers to make 20 million N95 masks a month by May at plants in Rhode Island and Phoenix. 3M said it will be making 50 million masks a month in the U.S. by June.
Moldex-Metric said it is making eight million N95 masks a month, and Prestige Ameritech said it is making two million masks a month. Dozens of smaller manufacturers are also buying equipment to start making masks.
But many of their new machines won’t be installed for months, manufacturers said. Some mask components, including a filtering material called polypropylene, are also in tight supply.
Total Petrochemicals USA, a division of France’s Total SA, is a major supplier of polypropylene to manufacturers including 3M, according to a person familiar with 3M’s supply chain. Total said it has boosted global production of polypropylene to meet rising demand.
Strong Manufacturers, a medical-equipment distributor, recently installed three mask-making machines at a factory in North Carolina, but can’t find enough raw materials to use them. The machines need a hard-to-find shape of elastic band, said Charles Fatora, the company’s head of global procurement.
Medicom Group, a Montreal-based mask maker, said it is opening a factory in Canada to make N95 and surgical masks after signing a supply agreement with the Canadian government. The company wants a similar commitment from officials in the U.S., where Medicom operates a surgical-mask plant, to buy its masks even after the pandemic ends.
“If we do not have a long-term agreement, how can we invest more and more dollars into equipment that is going to sit and rot,” said Medicom Chief Executive Ronald Reuben.
In the U.S., the 3M facility at Aberdeen, a city of 28,000, was built in 1974. The 450,000-square-foot factory and a sister plant in Omaha together produce 400 million respirators of myriad types annually. Within the next year, they will be producing many more.
Imports of N95 masks from China, the world’s top producer of medical gear, have resumed after a weekslong export stoppage as officials diverted production to fight the outbreak in the country where it began.
Lloyd Soong, chief executive of Singapore-based Pasture Pharma Pte, which makes one million N95 masks a day in China and other Asian countries, said raw material shortages have made it hard to boost output. A chunk of his output is still being requisitioned by government entities in China, leaving him with limited supply for eager customers in the U.S.
The most recent delivery of medical-grade N95 masks arrived from China about a month ago, on Feb. 19. And as few as 13 shipments of non-medical N95 masks have arrived in the past month — half as many as arrived the same month last year. N95 masks are used in industrial settings, as well as hospitals, and filter out 95% of all airborne particles, including ones too tiny to be blocked by regular masks.
Tamer Abdouni is a Beirut-based consultant who facilitates the trade of, among other things, 3M respirators. Usually he can buy them for $1.25 apiece and resell them for a dime more. Lately the best purchase price he can get is $7.25. Even if he were willing to buy at that price, he says, selling respirators at multiples of his usual price during a pandemic would tarnish his reputation.
“3M makes the Rolls-Royce of masks,” Abdouni says. “People are holding stocks of masks and waiting for them to increase in value before selling them off. This is becoming very unethical. This is a war on coronavirus, and I don’t want to be a warlord.”
3M says it hasn’t raised respirator prices and can’t control what happens after it sells its products to distributors. Roman wrote to U.S. Attorney General William Barr on March 24 to offer 3M’s help in rooting out medical device counterfeiting and price gouging.
With demand soaring, 3M’s respirator sales could nearly double this year, to $600 million, according to William Blair & Co. analyst Nicholas Heymann. The company, despite its $32 billion in annual revenue, could use the boost.
First, the supply chain that served hospitals well in the past has broken down. For years, many hospitals bought supplies from the same suppliers. And for years, those suppliers relied on the same manufacturers. Trusted relationships were formed. Now the system isn’t working; suppliers and manufacturers are out of stock and flooded with requests. So hospitals have to find new sources of PPE, right when thousands of other hospitals are frantically doing the same thing. And once they do, they need to negotiate new agreements and payment terms — often with completely unknown suppliers sourcing PPE from known and unknown factories. As one person searching for hospital supplies put it, “It’s like the Wild West out there.”
Second, N95 masks, which offer extra protection, are particularly hard to procure right now because they’re almost entirely made in China, and trusted large-scale Chinese manufacturers like 3M are supplying China and other Asian countries battling their own pandemics. Often, the masks that U.S. hospitals are able to buy from them are “leakage” — extra supplies sold through side businesses that have launched to meet the rising demand. That’s not sufficient for the enormous need we have in the U.S.
Third, there’s a technical issue holding things up. The Chinese equivalent of N95 masks are called KN95s. They’re authorized by the CDC, but they aren’t yet authorized by the FDA for emergency use. That may change; those authorizations are updated regularly. But for now, U.S. hospitals following FDA rules — nearly all of them — aren’t buying KN95s, which means the pool of suitable masks is even smaller.
The number of Covid-19 cases, hospitalizations, and deaths is growing, and the best estimates from epidemiologists and health policy experts say the overall peak for the country is two weeks away. With D-day fast approaching away, there will not be time to meaningfully increase the crucial medical supplies available to the health system: ventilators, masks and other PPE, virus testing materials. We must go to war with the army we have.
Although we are desperately short on resources, there are two aspects of the overall strategic situation which in principle greatly increase our chance of having the medical resources available to care for the coming crush of Covid-19 patients. First, not every state or locality will hit the peak at the same time. For example, California’s epidemic peak is expected to be April 28, while New York’s peak is April 9th. Second, not every area is expected to be equally affected. There are some areas which will be more affected, and areas which will be less affected.
Both these factors mean that it will be possible to concentrate resources first to the areas that need them the most. This includes (i) doctors and other health care workers (ii) ventilators and associated equipment (iii) masks and other PPE.
There is no shortage of aircraft to transport to transport the resources (passengers are not flying, so air craft are idle). In fact in order to secure their share of the stimulus, many airlines are flying empty planes around the country. There is no shortage of accommodation for the health care workers, hotel rooms across the country largely empty.
A trickier question is whether there are currently enough doctors available. But given the fact there are mass layoffs of doctors and healthcare workers around the country, it seems to be the case there is a large current reserve of current doctors that could be enlisted to help see patients. Different specialists can chip in. Recently retired doctors are another potential pool, however since the elderly are most affected it may be too risky to put them in the line of action. We could potentially import more foreign doctors, but this is potentially months down the line.
Doctors must be able to easily move between different hot zones: between different hospitals in a county, areas of a state, and even between different states. Ventilators and associated equipment must be able to move between different states.
It turns out there are actually existing organizations and systems to shift health care resources, but they are unknown, unorganized, ineffective, and poorly resourced. It is criminal that a national medical resources board has not been set up to organize the distribution of materials during the crisis, and a national medical labor board has not been set up to organize the medical workforce.
The US did have a strategic reserve of equipment, but unfortunately it was disbursed on the basis of political favor, and is now empty. There is a strategic reserve of 10,000 ventilators which is being held back, and which will undoubtedly be given to the right wing state which sucks up the most to the administration.
State governments are slowly trying to put into place systems to transfer health care resources, but from what I’ve read it doesn’t seem particularly organized. Andrew Cuomo has created a statewide command center, and apparently has convinced public and private hospitals to share resources.
But even more crucially, there does not seem to be any plan in place to get volunteers to the places that need them the most.
Individual states are pursuing the following policies:
New York has started a Medical Reserve Corps, with Governor Cuomo calling on volunteers from across the country to chip in. They have 11,000 volunteers so far, and so far 358 have signed up for shifts at health care facilities.
It is sometimes said that economics is the study of the scarce allocation of resources. Here’s an allocation problem for you!
We are currently in the early stages of a pandemic the likes of which this country has not seen for a hundred years. Certain areas of the country such as New York City are seeing an incredible surge of Covid-19 patients as hospitals and ICU rapidly fill up.
Other areas of the country have less Covid-19 patients and hospitals are emptying. In addition, due to the cancellation of elective surgery and patients delaying outpatient visits, other areas of the health care system have fewer patients.
The result: across the country, hospitals are laying off employees en masse. This is coming from UI statistics as well as anecdotal reports. Other than workers in accommodation and food service, the sector with the most layoffs is health care. It accounts for 10% of the UI claims in Oregon, and 13% of the UI claims in Michigan. This was actually noted in the national UI report.
There are many more. Just google news search for “hospital furlough”.
Well, it doesn’t take a Ph.D. in economics to have the obvious idea that we can redistribute resources from areas that are hit less hard by COVID to areas that are hit harder. This can help increase patient capacity when the virus as at its apex.
Andrew Cuomo has asked local health departments to share resources, but has not organized anything formally. But resources can be shared across the health departments as well within state boundaries, and across states as well.
As far as I know there is no preparation for the widespread of medical distribution of medical resources, both within and across states. If you know of anything like that, leave a comment or send an email.
On the questions of what industries are the most affected, data is starting to trickle in. The Oregon Employment Department has released some great data on the industry breakdown on who filed for unemployment last week. The raw data is here. Michigan has also released some data, which was summarized by the Upjohn Institute. If you know of any more state data released leave a comment or shoot me an email.
(1) The most affected industry by far is Accommodation and Food Services, which accounts for 47% of the total new claims in Oregon and 32% of the claims in Michigan. Restaurants are completely shut down, and these workers are being laid off right and left.
(2) Surprisingly, the second most affected sector is health care and social assistance ! This was actually noted in the national UI report. It accounts for 10% of the claims in Oregon, and 13% of the claims in Michigan.
On the surface this is puzzling, for it seems like that the health care sector should be bulking up to fight the coronavirus rather than shrinking. At this point I can only speculate, but there have been a number of news reports about hospitals laying off workers because elective surgeries are being canceled.
(3) Not surprisingly, retail workers are being hit hard. 6.4% of the claims in Oregon, and 6.5% in Michigan.
(4) Layoffs are widespread. To see this, for each industry I take the average of weekly claims from Jan 1st to March 7th, i.e. before the virus started affecting employment. In Oregon, manufacturing claims are up 100% over a normal week, Trade and Transportation 209%, Information Tech 355%, Finance 135%, Professional and Business Services 128%, Education 964%, Other Services 455%.
The one thing that everyone agrees on, from doctors, to public health officials, to clueless newspaper op-ed writers, to clueless economic bloggers, is that mass testing for Covid-19 should be a national priority. The case is obvious: to control the spread of the virus, we need to know who has the virus and isolate them. And to return to work, you need to know your colleague is not going to infect you, so everyone at works needs to be tested. Everybody gets tested weekly, and voila, the country gets back on track.
Given its national importance, you would assume that somewhere in the bowels of the United States government there is a small group of smart, highly trained, and dedicated team of professionals working behind the scenes to make this happen. And you would be wrong.
Instead, the response is being lead by the group of criminals, incompetents, bootlickers, and general misanthropes who are intent on using the crisis for financial and political advantage. Their leader, the president, would condemn tens of thousands to die to save his ego, $50, or 150 votes . Again, no serious person can disagree with these obvious statements.
The most serious problem is that, incredibly, but not surprisingly, there is no overall plan to contain the virus. With no overall virus strategy, of course there no plan for the rollout of mass testing. We will have to rely largely upon the uncoordinated movements of hundreds of private companies, local and state governments, and the federal government. Somehow, grasping in the dark, with limited resources, they will have to make do.
And the results are, tragically, just what one would expect. The response of the CDC can only be described as a bureaucratic farce. The American health care system was designed suck the financial blood from the stones that are its patients, not to heal the sick. Our American Chernobyl lurches from one disaster to the next. In these trying times I truly feel for the cognitive dissonance Americans are facing who believe we have the greatest health care system in the world. They should be receiving hazard pay.
After the CDC failed to widely distribute a test kit, dozens of private companies have developed their own and are now ramping up production. Until the past few days we have only had the capacity to test individuals that are hospitalized and health care workers. We have now recovered somewhat, and we are now running about 65,000 tests per day, but the system is creaking. There are long backlogs in testing labs, and serious shortages of the basic materials that labs need to run the tests.
Will the system be able to ramp up to mass testing fast enough? That depends if the companies can increase production fast enough, and if the supply chain holds up. Public health officials have called for 150,000 tests a day, or 4,500,000 per month. For “mass testing”, the ability to test everyone in the United States over the course of a year, that would mean 27.25 million tests per month.
The supply situation
Testing capacity is currently limited by the number of tests kits and associated equipment available, as well as the lab technicians and machines needed to run the tests. Until recently the US only had capacity to test patients hospitalized for coronavirus and health care workers. Only in the past few days has testing been expanded.
The task of running a single test is not straightforward, and consists of a number of separate processes:
Swab the nose of throats with test swabs
Put the swabs in vials with growth media
Vial transported to lab
Technicians extract the virus’s RNA using test extraction kits
Technicians use reagents to turn the RNA into DNA and to amplify the DNA
A PCR test is run, which takes time and materials
Some of the steps can be automated. Expensive automated systems can run many tests at once, but their prohibitive cost means they must be kept in centralized locations that samples are sent to. Smaller testing systems are also available, which may be able to tested at the point of care.
Each of the components in the supply chain have their own complex manufacturing process and their own bottlenecks. Bottlenecks in several areas of the chain are currently preventing widespread testing. Even when samples are taken, there are backlogs in laboratories and it often takes 3 or 4 days to get a result.
The major manufacturer of test swabs is Copan, which has its headquarters and manufacturing facilities in Lombardy, Italy. US government has been airlifting about a million of the swabs per week.
The other manufacturer is Puritan, located in Guilford Maine. They produce a million per week. They are extending its five days a wekk schedule to six days, and running “at least” 20 hours a day. Biggest challenge for Puritan is a shortage of workers.
Extraction kits are now made by a number of companies, including Roche, Quiagen, Thermo Fisher. The extraction kits use reagents with fairly complex chemicals.
Roche currently ships around 400,000 test kits a week to the United States, or 1.6 million per month. Roche is also ramping up its production. Roche’s kits only work with its proprietary machine. The fully automated test can deliver 384 results per eight-hour shift on its cobas 6800 system, and 960 on its larger cobas 8800.
Thermo Fisher’s TaqPath COVID-19 Combo Kit on its Applied Biosystems 7500 Fast Dx real-time PCR hardware in certain high-complexity laboratories nationwide. It can produce about 5 million per month. It plans to initially distribute the available tests to about 200 labs in the United States. Thermo Fisher is based in Waltham Massachusetts.
Qiagen currently produces about 1.5 million kits per month, hopes to produce 6.5 million per month by April, and 10 million per month by June. Qiagen is ramping up its production. These are global production numbers, however, and it is unclear can be used in the United States.
Hologic expects to produce nearly 600,000 of the tests every month by April. Massachusetts based Hologic manufactures the kit assays in San Diego, where it has 900 employees. Hospitals and labs can run the test on Hologic’s Panther Fusion platform, which in a 24-hour span can process up to 1,150 coronavirus tests.
In order to test for the virus, need to convert the RNA into DNA, and then to amplify the DNA. Both need reagents. There are currently shortages of these reagents.
Transcriptase converts RNA to DNA. Primers — short stretches of DNA designed to match up with the viral genetic material — latch onto DNA.
Labs themselves need to source everything else to run the tests. This includes hardware: vortex mixers, microcentrifuges, specially-treated tubes, specially-designed racks, micropipettes to squirt tiny bits of liquid from place to place.
As Covid-19 cases continue to sweep up its exponential growth curve, the health care system is in the race of its life to prepare for the coming crush of patients. Whether we can win this race depends upon how fast new cases grow, the current resources of our health care system, and how fast we can produce and buy the health care materials we need.
Covid-19 attacks the respiratory system, inflaming the lungs and making breathing difficult. Once the virus starts to affect the lungs, one of the only treatments available is mechanical ventilation, which uses a breathing tube to increase the flow of oxygen and to make the process of drawing a breath easier. Ventilators are used to treat a number of diseases other than Covid-19, and most hospitals have several of them. However, there are currently only enough ventilators to treat patients with diseases other than Covid-19.
The sudden realization the the country needs ventilators has set off a mad dash as hospitals, state governors, and the federal governors frantically try to purchase the few remaining ventilators that are on the market, driving up prices. As this is a global pandemic there is worldwide competition for the ventilators, as well as rich private individuals who are looking to purchase them.
The result has been complete and utter chaos, with most states unable to complete their purchases, with the federal government orders for the national stockpile taking priority. Unfortunately, the national stockpile is controlled by our current criminal administration, who is doling out the supplies according to political favor rather than medical need.
Whether we will have enough ventilators in time depends on the measures the country takes to increase production, purchases, and efficient distribution of ventilators.
The scale of the problem is immense. Ventilators are enormously complicated devices produced with thousands of separate parts. They must be operated in specialized rooms with centralized oxygen supply, by trained technicians. We may need to produce or buy 100,000 ventilators, which would almost double the current supply. There is a possibility of creative solutions, modifying ventilators to take more patients, or designing a system of mobile ventilators to travel to hot spots, but at this point these are untested ideas, not rigorous plans.
My basic analysis of the supply situation (details below) is that we unlikely to significantly increase our supplies of ventilators in the next 1-3 months, thus efforts must focus on the efficient distribution of resources between affected regions. Total monthly production of ventilators in the US is only about 1,500, and that is already after dramatically scaling up production lines. With individual states requiring several thousand ventilators each, production cannot meet requirements.
An allocation plan would mean a plan to determine exactly which areas receive the few new ventilators that are on the market. It would mean a plan to quickly move ventilators, associated equipment, and the necessary operators to the localities that are being hit the hardest by Covid-19. It would mean procedures in place that can modify existing ventilators to handle more than one patient.
In the slightly longer term it would in theory be possible to scale up production if the country could mobilize its economy towards this goal. However, the federal government does not want to take control of the supply chain. Although our president has made noises over the past month about using the Defense Production Act (DPA), its actions have made clear it has no intention of actually using it. In fact, President Trump’s theory of invoking the DPA is similar to Michael Scott’s (from The Office) theory of declaring bankruptcy:
Under a non-criminal administration, using the DPA would be an idea solution to the problem. The federal government would become the sole purchaser of all ventilators in the country, banning export and private sales. It would promise to purchase the ventilators whether they were ultimately needed or not. It would determine the national requirements and whether new factories are needed or just new production lines. It could force companies to accept contracts to make ventilators, although hopefully it would not need to do this. It would use the same powers to ensure the supply chain of all the components and natural resources are available. It would provide the financial resources and manpower to make the factories run 24 hours a day, 7 days a week.
Under the current administration, however, the problem with using the DPA is that the federal government will be in charge of all of the ventilators. Due to the level of incompetence and corruption, it is likely they will bungle the response.
Private companies are reluctant to increase production on their own because making ventilators means building factories with high fixed costs and large amounts of uncertainty about demand. If the pandemic dies down in 3 months, they will be left with worthless factories and large stocks of unwanted ventilators. As a result, they have been incredibly slow to increase production.
Number of ventilators needed
The key unknown in the ventilator supply situation is the number of ventilators that will be needed to treat Covid-19 patients. Public health estimates vary, from 70,000 to several hundred thousand. A potential complicating factor is that Covid-19 patients are remaining on ventilators a lot longer than is usual, sometimes upwards of two weeks.
One way to get an estimate on the number of ventilators is to first get an estimate of the number of ICU beds needed. If we know roughly the number of ventilators per ICU bed, we can then back out the number of ventilators. A recent Harvard model estimates the number of ICU beds that will be necessary under a variety of different outbreak scenarios. Under a “moderate” scenario, i.e. 40% of the population is infected over 12 months, 150,000 ICU beds will be needed for Covid-19 patients. If half of ICU patients need ventilators, this mean 75,000 ventilators are needed for Covid-19 patetiens alone.
Some studies suggest that between 1% and 2% of COVID-19 patients require ventilation. One study of patients in Wuhan, China, found that 5 percent of individuals with coronavirus ended up in the ICU, while 2.3 percent needed invasive ventilation (Guan 2020). A separate study on Wuhan found the rate of invasive to non-invasive ventilation is roughly 50-50.
Several studies have estimate the number of total patients that will need to be ventilated due to the virus over the course of the pandemic, ranging from 64,000 for a moderate outbreak, to 320,000 in an intermediate outbreak, to 720,000 in a pandemic similar to the 1918 Spanish flu. A recent AHA webinar estimate the total number of patients needed to be ventilated is 960,000. It is unclear how many patients will need to be ventilated at once, which will determine the number of ventilators necessary.
The United States has approximately 62,000 full featured mechanical ventilators and 98,738 older ventilators available in hospitals. Scraping together ventilators from other health care facilities yields 200,000 ventilators. Many of the are older units may not be capable of sustained use or of adequately supporting patients. This includes the approximately 12,700 in the National Strategic Stockpile.
But remember, these are just the ventilators that are need for Covid-19 patients. Most currently extant ventilators are being used for non Covid-19 patients. To estimate the number of new ventilators that must be produced, we must first calculate the current stock which is free to treat Covid-19 patients — “unoccupied ventilators” and are not already in use. In Illinois, there are 1,467 ventilators available, but 75% (1,093) are in use, leaving 374 available. In New York there are about 9,150 ventilators, but the vast majority are being used. Even with the state’s own emergency stockpile, there are only 2,800 (30%) available. To get a rough estimate of the stock of unoccupied ventilators that can treat Covid-19 patients, we assume 25% of the current stock of ventilators are free, which yields a total of 50,000 unoccupied ventilators. This is at the upper end of a recent study that found that US hospitals could absorb from 26,000 to 56,000 in the event of a pandemic.
Distribution of Ventilators
The distribution of ventilators is a disaster. There is no system for determining who is getting the ventilators, or to shift them to hospitals that need them the most. State governments are competing on the open market with foreign and private bids. An illustration of this is the fact that Tesla recently bought 1,000 ventilators, which they then donated. The National Strategic Stockpile has 12,700 ventilators in reserve, which are currently being doled out by Donald Trump based on political goals.
Individual hospitals are holding back from purchasing ventilators because of their high costs, and the fact that these may only have a short-term spike in demand. Hospitals do not have the financial resources to spend hundreds of thousands of dollars on these new machines. Lower-cost home ventilators can’t generate the precise air delivery needed to treat potentially fatal coronavirus symptoms while hospitals are reluctant to stockpile higher-cost devices in numbers beyond what’s ordinarily needed. Top ICU models are mostly imported from foreign manufacturers.
Production of Ventilators
Production of new ventilators in the United States will be a challenge. About half of production of ventilators in in the United States, while half is imported. Some countries — including Germany — have decreed that life-saving equipment be prioritized for their citizens. There are fewer than a dozen domestic manufacturers that are largely backlogged with international orders; the United States has been slower than other countries at implementing policies for speeding up ventilator production.
US manufacturing facilities in the United States are already at 100 percent production capacity, and producers and are looking to ramp up production by another 15 or 20 percent. Additional production will take months. Companies are adding third shifts and repurposing production lines.
Medtronic is based in Ireland for tax purposes, but most of its market is in the United States. Medtronic produces ventilator in Galway, Ireland, where the company makes “PB980” and “PB840” ventilators. By bolstering and transferring staff to Western Ireland, the facility will also operate on a 24-7 basis. Medtronic has already doubled its production of high end ICU units and produces 1,000 per month. Production is difficult because there are 1,500 unique parts supplied from 14 countries. Medtronic said it is aiming to produce 500 per week.
Ventec produces about 250 mid-range ventilators per month, midway between home ventilators and ICU units. The devices have a reduced need for medical personnel to manage patients.They are trying to ramp up production to 1,000 per month within 90 days.
Total production is thus 1,420 per month.
Although there have been large amounts of headlines touting potential new manufacturers like GM and Tesla, it is unknown if this will actually take place. Companies are wary of investing in building factories that produce ventilators which may not have a demand in the many months it will take to ramp up production. As recently as March 19th, GM put out a statement that “Right now it’s just an internal feasibility study on whether it‘s possible for us to help out in the production of medical equipment”.
Royal Phillips is a major manufacturer of ventilators and is ramping up production, but serves a global market and not just the US; it is unclear how many can be shipped to us.