Government Officials Intensify Broad Chaos In Clinical Lab Supply Chain

Might ‘inept’ be apt description of FEMA’s supply decisions?

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CEO SUMMARY: Clinical labs throughout the United States are ready to meet the challenges of the COVID-19 pandemic. At the same time, there is widespread recognition that many barriers to increasing labs’ COVID-19 testing capacity are caused by the inappropriate actions of government officials at all levels. This is particularly true of ongoing disruptions to the supply chain of the products and COVID-19 tests needed by labs. Labs are also frustrated with the in vitro diagnostic firms, which are often caught in the middle.

NEVER BEFORE have the nation’s clinical laboratories battled so intensely to obtain the supplies and tests necessary—not only to maintain routine testing services—but to respond to the skyrocketing demand for COVID-19 tests.

From the earliest days of the SARS-CoV-2 outbreak, the shortage of supplies and kits has been pervasive. The Dark Report has yet to speak with a clinical laboratory that says it gets enough supplies to meet the demand for testing.

Throughout the United States, lab administrators and pathologists say their number one challenge is to obtain adequate quantities of collection supplies, viral transport media (VTM), test kits, reagents, and personal protection equipment (PPE).

Blame for this supply chain crisis—for it is a crisis because these widespread shortages put patients in many communities at risk if a timely routine test or COVID-19 test is unavailable—can be attributed to two factors.

The first factor is the fickle nature of the novel coronavirus. Since the onset of the SARS-CoV-2 pandemic in North America in February, the novel coronavirus has behaved unpredictably. Over the past six months, different states and different regions have seen the incidence of COVID-19 quickly surge, then rapidly wane—only to surge again weeks later.

When it comes to the supplies labs need for COVID-19 testing, government officials are often caught flat-footed when the pandemic in their state or city suddenly accelerates, generating a flood of patients into physicians’ offices and hospital ERs.

Second Supply Chain Factor

The second factor involves what many lab managers would characterize as poor decisions and mismanagement of the clinical laboratory supply chain by federal, state, and local officials. This applies equally to the in vitro (IVD) diagnostic manufacturers and other suppliers of the products needed by clinical laboratories.

Every lab director has examples of actions that constrict his or her laboratory’s access to essential collection supplies and COVID-19 test kits, thereby preventing the lab from using 100% of its existing capacity of instruments and technical staff to meet the demand for COVID-19 tests in its community.

If there is a third factor, it is the myriad of previously-unknown companies now offering clinical laboratories, hospitals, physicians, and other providers medical supplies and COVID-19 tests of uncertain quality. It is caveat emptor for labs when buying these items. Some buyers of COVID-19 supplies and tests have been stung by outright fraud, and news reports have identified some perpetrators as individuals with a known history of fraud and criminal activity.

FEMA’s Frequent Fumbles

Singled out for frequent criticism is the Federal Emergency Management Administration (FEMA). Both clinical laboratories and IVD manufacturers express dissatisfaction with the decisions and actions this agency has taken once it was given authority to manage medical supplies, diagnostic products, and COVID-19 tests during the pandemic.

Most of these complaints are off the record because lab managers and the executives at IVD companies and lab suppliers understand that such comments might motivate officials at the agency to work against their organization’s interests.

However, that has not stopped journalists from reporting the agency’s missteps. One example is FEMA’s award of a $10 million contract to a company named Fillakit, to supply lab specimen tubes. What the vendor delivered were plastic tubes used as blanks to produce 2-liter plastic beverage bottles. These were totally unacceptable for lab testing purposes.

It was also reported that the owner had incorporated the company only a few days before he was awarded this contract, along with the fact that this individual had faced multiple claims of fraud in recent years.

Another example involves the distribution of collection supplies. An executive at a prominent lab company told The Dark Report how FEMA was diverting essential collection supplies in a way that was counterproductive to the goal of enabling more COVID-19 testing.

She said that her lab had a contract with a government agency to perform COVID-19 tests across a large urban area. However, in this same region, FEMA had diverted lab collection supplies to the counties involved in this testing program. In turn, the counties had sent lab collections supplies directly to the nursing homes.

What made this FEMA decision counterproductive, explained the clinical pathologist, is that CLIA requires clinical labs to validate the collection supplies used by the lab for the testing. Because FEMA and the counties sent the collection supplies directly to the nursing homes—without allowing the lab that would perform the tests to validate these supplies—it put the lab in violation of CLIA were it to go ahead and use those specimens for testing.

Additionally, there was legal risk to the lab, she continued. If it turned out that the specimen collection supplies did not meet specifications or were compromised in delivery and storage at the nursing homes, thus causing inaccurate results if the lab were to test specimens collected with these supplies, then the lab would be exposed to lawsuits or regulatory penalties.

Laboratory directors recognize the Catch-22 elements in this situation. Other lab managers have shared similar FEMA stories with The Dark Report.

Lab Supply Problems

Unfortunately for clinical labs, the providers they serve, and patients, there is no short-term solution to the severe problems in the COVID-19 supply chain. This is true, whether the products are personal protection equipment (PPE), nasopharyngeal swabs, saliva swabs, and viral transport media (VTM) or COVID-19 test kits, reagents, probes, and analyzers.

Take the problem of expanding production of lab testing instruments, collection supplies, test kits, reagents, and similar items. Over the past three decades, manufacturers moved production to the lowest-cost nations, particularly China.

This has two consequences. One, it means there is little or no manufacturing infrastructure in the United States where a company can increase production by running three shifts per day and operating plants on Saturdays and Sundays. Keep in mind, this approach was used when Ford and GE signed contracts with the federal government in April for $336 million to manufacture 50,000 ventilators. Both companies repurposed existing manufacturing plants to produce ventilators and launched production literally overnight.

Outsourcing Overseas

Two, if manufacturing is outsourced to companies overseas, the U.S. companies receiving those products have much less control and influence when requesting their contractors increase production. Again, this constrains the ability of U.S.-based firms to increase production of their collection supplies, instruments, and test kits.

There is a third issue with the existing supply chain for medical products, lab automation and analyzers, and test kits. This problem comes from the fact that the major IVD companies typically have their own multi-national supply chain for the component parts that go into their products. Therefore, even if they want to quickly ramp up production of the final assembly of their products to deliver to labs in the United States, they must work through production constraints unique to the different countries where the components are being manufactured.

All of these are factors in what lab managers consider to be a non-functioning supply chain. Current indications are that quick improvements to supply chain problems should not be expected.

International IVD Manufacturers Must Serve Multiple Nations with COVID-19 Lab Supplies

ONE SUPPLY CHAIN FACTOR OFTEN OVERLOOKED BY LAB ADMINISTRATORS AND PATHOLOGISTS here in the United States is the fact that many vendors manufacture in multiple countries and sell their products to labs worldwide.

This is true of the IVD manufacturers that dominate the lab testing market in the United States. As multi-national companies, they are major suppliers to other countries across the globe.

For example, Roche is headquartered in Switzerland, with major manufacturing sites in Germany. Siemens Healthineers is headquartered in Germany. Sysmex is headquartered in Japan.

Thus, even as federal and state officials here in the United States press these companies to deliver more collection supplies, instruments, and test kits, government officials in other countries are making similar requests and demands. IVD executives face political pressure from many countries at the same time. Which countries will get the biggest slices from the supply pie?

Exports of IVD Products

This very issue surfaced when The Dark Report interviewed pathologist Mario Plebani, MD, Professor of Clinical Biochemistry and Clinical Molecular Biology at the University of Padova.

The interview was published in the April 20, 2020 issue. The following exchange illustrates how different countries can pressure IVD companies for access to supplies during this pandemic:

EDITOR: Within the European Union, is there a shortage of lab instruments and supplies for COVID-19 testing?

PLEBANI: In Germany, for instance, they want to run these COVID-19 tests on instrumentation produced in Germany. Does that mean labs here in Italy won’t be able to get the instruments we need?

EDITOR: In the United States, the FDA has approved COVID-19 test kits that a growing number of IVD manufacturers have developed under emergency-use rules. One of those IVD companies is Roche Diagnostics, which has manufacturing and distribution plants in Europe. Are you getting access to those kits in Italy?

PLEBANI: Oh, yes, Roche offered a lot of cooperation to our government and to our National Institute of Health. But I know that our government now has the problem of understanding the number of COVID-19 tests that we need. It’s not the offer of assistance. It’s how many tests do we need—not only in Italy, but in other European countries. As you know, Roche is not established in Italy. It’s established in Switzerland and partly in Germany. So, we have problems because it’s not easy to manage the shipment of reagents and instrumentation [across national borders]. It’s much more difficult now than it has been in the past.

In fact, as the pandemic surfaced in Europe, the European Union swiftly enacted export controls on certain medical devices like PPE and other such protective equipment. Items covered by this directive require authorization before they can be exported. The United Kingdom-based Medical Plastic News wrote that the new directive may make it “difficult for medical device companies contractually obliged to supply devices to countries outside of the EU [such as the United States—Editor].”

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