N95 Mask Supply and Demand Mismatch Continues : The Indicator from Planet Money The start of the COVID-19 pandemic led to an N95 mask shortage. Now there's still a shortage, but many American mask manufacturers can't sell their masks. We break down the reasons why.
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15 Million N95s Without A Buyer

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15 Million N95s Without A Buyer

15 Million N95s Without A Buyer

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UNIDENTIFIED PERSON, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC'S "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

DARIAN WOODS, BYLINE: And I'm Darian Woods.

SMITH: And, Darian, you have come to us today with a mystery.

WOODS: I have a mystery. So remember how early in the pandemic we learnt about the N95 face masks?

SMITH: Oh, yes. This was the Cadillac of face masks, like, top of the line.

WOODS: They're really good.

SMITH: Yeah. In fact, they were so good that they were impossible to get. I actually remember very early days of the pandemic. I went online to try to get an N95 mask. And then I realized that we're not actually supposed to order them because they're only supposed to be for health care workers.

WOODS: I mean, there's good reason, right? Those shortages, astronomical demand and countries were restricting exports at the time. Now I've got some news for you, Stacey.

SMITH: Yes.

WOODS: That N95 mask shortage is still going on. You know, the richer, bigger hospital systems are generally doing OK now. But there are a lot of medical centers, especially the smaller ones, that are low on N95 masks or have completely run out of them.

SMITH: That is shocking. Like, what has gone wrong in the markets, Darian? this is exactly what, like, the free market is supposed to solve.

WOODS: This is the even weirder thing. There's actually an N95 supply glut at the exact same time.

SMITH: There's a ton of demand. There's a ton of supply. And somehow, like, the supply is not getting to the demand?

WOODS: Smells, tastes, sounds like a market failure.

LUIS ARGUELLO: Look at all these machines that are off.

WOODS: This is Luis Arguello, who runs a health supplies company in Miami.

ARGUELLO: Let me show you some of the inventory.

WOODS: OK.

I spoke with him on FaceTime, and here he's giving me a virtual tour of his mask factory.

Wow. So what I'm seeing is what looks like pallet load upon pallet load of masks in kind of wrapped in a blue kind of tape.

ARGUELLO: About 15 million N95s.

WOODS: About 15 million N95 masks. That's astounding.

SMITH: There are hospitals, doctors, nurses who cannot get their hands on N95 masks. And this guy is like sitting on 15 million of them.

WOODS: It's a mystery that only THE INDICATOR can solve.

SMITH: Thank goodness you're here to help us figure out what is going on here, Darian. After the break, we will get to the bottom of why there are hundreds of millions of American-made N95 masks just sitting in piles and warehouses while at the same time doctors and nurses are crying out for them.

(SOUNDBITE OF MUSIC)

SMITH: Darian Woods, you have been on a bit of a quest to figure out why hospitals are saying that there is an N95 mask shortage. They can't get their hands on them. And yet there is this huge supply of N95 masks just sitting around.

WOODS: So I learned about this problem talking to Luis Arguello. And before the pandemic, Luis's company, DemeTech, specialized in making medical sutures.

SMITH: Those are like stitches - sutures.

WOODS: That's right. They had about 500 staff. But when the coronavirus pandemic hit, orders suddenly stopped because people were getting way fewer surgeries. At the same time, though, hearing all about PPE shortages, so decided that's how they could help. They would start making masks.

ARGUELLO: We said, look. We're going to roll the dice and see if we make some masks and see what happens.

WOODS: They bought a new facility, new machines. They went through the wringer to get their N95 masks approved by the government. Luis went on a hiring blitz to scale up to 2000 staff. They were ready to make a million N95 masks a day. So they turned the factory on and started pumping them out. But Luis and other new American mask manufacturers are having a really hard time selling their N95 masks to hospitals. Luis's American-made masks are a little bit more expensive than the Chinese-manufactured masks, about 30%, he told me. But that doesn't explain why the hospitals with no masks aren't buying. I mean, surely a slightly more expensive mask is better than none at all. To figure out why this is happening, my first call was to Shikha Gupta. She's the executive director of a nonprofit called Get Us PPE. Shikha says that the first reason is dwindling budgets.

SHIKHA GUPTA: It's really the small facilities or the mid-sized facilities that are most struggling with trying to find funding. Early on in the pandemic, they bit the bullet, and they paid these massively inflated prices for PPE.

WOODS: Shikha says that some of these small clinics' budgets are completely wiped out from paying huge amounts in the early days of the pandemic. Which brings us to the second reason for why Luis's masks can't sell - mistrust in the market.

GUPTA: They are really hesitant about who to trust and who not to. We've heard so many devastating stories about overpaying for PPE that didn't show up or that was counterfeit, and it's taken a massive financial toll.

WOODS: And then when someone with the real deal comes along like Luis and his masks, the buyers don't know if these masks are going to be legit.

SMITH: Yes. Economists like to call this problem asymmetric information, meaning one side of a situation has information and the other side does not have that information. In this case, the buyer doesn't know a lot about how good the sellers' masks are going to be, but the seller is an expert on how good their masks are. And that asymmetry breeds mistrust, which is kind of a toxic thing for markets.

WOODS: That's right. So I wanted to hear from someone who actually does the purchasing.

KATIE DEAN: Katie Dean. I'm administrative director of supply chain at Stanford Healthcare

WOODS: Stanford Healthcare is a big health care network with over 10,000 staff. Katie says she needs to know not just that the mask is good quality, but also that the supply chain is reliable.

SMITH: Right. Like, can they rely on this company to deliver masks month after month into the future?

DEAN: Some of the bigger companies with the benefits that they bring is that they have manufacturing plants distributed geographically.

WOODS: And Katie says you're more resilient if you've got factories spread out, diversifying your risk. One snowstorm in Texas, for example - not going to totally threaten the supplies.

SMITH: So we've got budget constraints. We've got a lack of trust in the markets. We've got issues with supply reliability. You know, Darian, I think I'm beginning to understand this mystery, why this is happening, the 15 million masks in Miami.

WOODS: So I asked Luis, what about selling directly to consumers? And he said he had set up a website for selling up one box at a time. But there's one big roadblock that he's facing, and that applies to every other maker of N95 masks approved by the federal regulator, NIOSH.

ARGUELLO: The difficulty that I have is that I'm not able to advertise, so I can't let people know on Google or on Facebook or Instagram. We're blocked. Now, Chinese face mask that does not work that cost the same or more than my NIOSH-approved mask can advertise, but I cannot.

WOODS: Ads for N95s are banned on Facebook, Instagram and Google. The reason for this, they've emailed me, is that they want to keep PPE for health care workers. They're taking into account advice by the World Health Organization and the Centers for Disease Control and Prevention, the CDC.

SMITH: I mean, I understand this policy, right? Of course we should be reserving N95 masks for health care workers, but it seems to have had an unintended consequence for mask producers like Luis.

WOODS: It really does. I mean, Luis reckons there are hundreds of millions of N95s just sitting in factories around America. And he says he could easily double his production just by turning on his idle machines and ramping up hiring. But instead, he's going backwards. Remember how Luis hired over 1,500 people to make masks? Luis said just over a month ago he had to lay off about 500 of them.

WOODS: We're laying people off, making a product that's needed, that is in huge shortages in the country. It's - it defies all logic, to be honest with you.

WOODS: I mean, how do you even explain that to the employees? It must be - it's baffling.

ARGUELLO: I mean, it's - for me, it's taking a big personal toll because it's - you know, it's not that we're not selling a product that's not needed.

SMITH: That is a really frustrating mystery and market failure.

WOODS: Yeah.

SMITH: I hope there's a solution on the way.

WOODS: There could be. He's holding out for potential federal purchases. He's holding out for the word getting out that there are these masks for sale. Until then, the factory is running at half capacity.

SMITH: Thank you, Darian, for bringing us this story.

WOODS: Thanks, Stacey.

(SOUNDBITE OF MUSIC)

WOODS: This episode of THE INDICATOR was produced by Emma Peaslee, with help from Gilly Moon. It was fact-checked by Sam Tsai (ph). Jolie Myers edited the show. And THE INDICATOR is a production of NPR.

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