Inside China's Chaotic Mask Market

The White House in Congress have agreed on a new pandemic relief plan that will inject funds into a tapped out small business aid program and offer aid for coronavirus testing and overwhelmed hospitals. President Donald Trump said he'd sign the measure and begin discussions on the next round of stimulus. The measure could be approved by Congress as soon as Thursday.

The Justice Department will consider taking legal action against governors who continue to impose stringent rules for dealing with the coronavirus after the crisis subsides in their states, According to Attorney General William Barr in an interview on The Hugh Hewitt Show Tuesday, bar said measures like stay at home orders and directives to shut down businesses are justified up to a point, but states should eventually move to more

targeted measures. The comments come as the Trump administration and states are fighting over the best strategy to deal with the crisis. Trump has stoked tensions with some Democratic governors who have defended strict social distancing rules, even as his administration backs guidelines calling for states to reopen gradually. Earlier today, President Donald Trump suggested in a tweet that his administration will bail out the oil industry. Oil is the latest

sector to fall victim to cratering demand because of the coronavirus. Yesterday, the price of a barrel of West Texas crewde fell below zero for the first time in history. Trump tweeted today that he was ordering his secretaries of Energy and the Treasury to make a plan to make money available to oil companies. The catalyst for yesterday's historic plunge in prices was a contract expiration date that left traders in a panic about having to take delivery of physical barrels.

But the industry has struggled since widespread shutdowns killed the demand for fuel. An estimated nine percent of drilling and refining jobs were lost in March. The oil price slide continued today, suggesting it's the massive glut in the market causing the route rather than any technical quirk. Finally, a new roadmap for restarting the economy suggests the US would have to increase its testing capability by ten to fifty

fold from its current levels. Today, the Rockefeller Foundation released a plan that would partially reopen the economy once major investments in healthcare had been made. The plan, which would cost as much as ninety billion dollars a month, calls for one hundred to three hundred thousand new public health workers to create an adequate testing and contact tracing program.

Regieve Shaw, the Foundation's president, says doing this would allow the economy to partially reopen until a vaccine is widely available, and thus would pay for itself within a month. And now our main story. The shortages of protective masks that keep healthcare workers safe from COVID nineteen are well documented by now. American hospital companies trying to meet the need have turned to a fast growing, often chaotic mask market

that has sprung up in China. Reporter Riley Griffin recently reported on the hospital groups and companies desperate for suppliers and the strange measures they are taking to secure masks and spot fakes. Why have we been seeing this surge for the particular and what kind of companies are working to alleviate this new demand. So the nine respirator is a type of mask that is so named because it filters out at least of airborne particles of this certain size.

It's become a tool used on front lines to prevent doctors and nurses from contracting COVID nineteen. So during normal times, this FDA approved device, really it isn't typically warned by so many medical staff. Now, as you've mentioned, demand has surged to unprecedented levels. One account has a seventeen fold surgeon demand, and that's happening just as domestic supply has dwindled.

So hospitals treating COVID nineteen patients have actually found they only have a three day supply, and big manufacturers of respirators like three M what they have done is ramp up and work to double production. But this domestic supply is simply not enough to account for what's needed in US hospitals. And that's the cold, hard truth. We've seen some institutions other organizations actually turned to China for these items.

So I'm wondering if you might be able to explain how China's manufacturers have mobilized to meet this new I mean beyond the US, but a global demand. So China has always been a massive manufacturer of medical supplies, but now it's really at the center of this global gold rush for respirators. But remember, the country was the first to be hit hard by the coronavirus pandemic. When their own manufacturing shutdown, they turned to Japan, to South Korea,

even the US for masks. Now, more recently, when the industry got up and running again, though, China's government encouraged facilities to make more personal protective equipment to meet domestic and foreign demand, and they've done just that. We've seen cosmetic makers, toy producers, even lingerie factories now producing respirators. These Chinese manufactured and regulated respirators go by a different name,

and that's important to note. They are known as K and N and they're not f d A approved products. They are regulated by the Chinese equivalent of our U S Food and Drug Administration. But since desperate times call for desperate measures, and the US doesn't have enough manufacturing capacity. We've seen the US Food and Drug Administration recently give an emergency use authorization for this Chinese product. But there does seem to be a bit of wariness about these

Chinese manufactured ppe or the Chinese manufactured respirators. Can you explain why there is this hesitancy about using these very needed products. I think, at the end of the day, working with Chinese manufacturers and intermediaries just comes with its

own set of risks. Given how quickly the market is mobilizing, it's also become overrun with layers of profiteering middlemen, these bidding wars, prices that are are so volatile they can range for a can ninety five anywhere from uh, you know, a buck fifty to twelve dollars, and that's still higher

than they are in typical times. The root of it, too is this concern about the goods quality, and US regulators essentially have said they can't serve as a body that is able to sift out the bad apples here, and so what can say the government's hospitals organizations, do you know if they're willing to source these products from China. What are some of the steps that they can take or that they are taking to make sure these products

are actually good or safe to use. So, until fairly recently, guidance from the U S government agencies was inconsistent on whether China's version of respirators these k and were suitable for use. The FDA was allowing respirators made in other countries at first, but didn't include China on this list, this Emergency Use Authorization list. That guidance came much more recently.

They have since amended that, but are stating that hospitals and other buyers should be careful in considering the product they end up using given these concerns about legitimacy of the product. In our story, we look at a company called Premier, Inc. Which serves as a group purchasing organization for more than four thousand US hospitals and health systems. It has more than sixty billion and purchasing power, and they knew that there simply wasn't enough US products, so

it's scrambled to China. Some of the things that they're doing is actually using code words to first vet various facilities. So when they are screening manufacturing facilities. They have people on the ground at those facilities using gibberish that they've pre planned to ultimately assure that the communication is real and the person on the other end of the screen

is who they think they are. Once a facility has passed that initial test, Premiere was deploying its employees based in Asia to these various facilities to actually go inspect K on the line as they were packaged and as they were sent. And logistics also plays a big part of this. It's quite costly and difficult to be shipping

these products out of China into the US. Once that that product has arrived here domestically in the States, they've inspected that product again, and then they've worked with their own logistics companies to get product to various emergency rooms. But something that's worth underscoring, Laura is that there's no

clear playbook and everybody is approaching this differently. Since US regulators have taken somewhat of a back seat and push the risk towards US hospitals, health systems, group purchasing organizations that are determining whether or not this product legitimate, these entities have to make those decisions for themselves, so we're still seeing an influx of some faulty product here into the country. What is China doing to try and tamp

down all these these fakes that are are popping up everywhere. Well, China has certainly faced some pressure to crack down on subpar suppliers, counterfeitters, and these unscrupulous middlemen that have been surging the prices by investigating cases of companies making fake or unreliable equipment and face masks um. The Chinese government actually announced this month that its customs agency would inspect every shipment of medical respirators and other medical protective clothing

before they export. They've also worked to create lists, essentially of what they see as legitimate manufacturers. These moves have led to reports in delayed shipments of product getting to the US, and there's some frustration about that actually among buyers, but others say it's a much needed layer of scrutiny into this market that has both good and bad product

coming out quickly. What exactly is the rough timeline they're trying to shoot for in terms of someone making the respirators, verifying them, and then getting them, let's say, onto US soil or to emergency room. What is their goal for timeframe. I think that will vary day to day. But the first shipment Premiere was able to secure and bring to the US touchdown in Chicago nine days after they had initiated a partnership with a Chinese manufacturing facility. So that

was the timeline. Bake in a day or two for it to be delivered across the country from California to New York, perhaps to get to actual healthcare workers. But that nine day timeline is pretty quick. This is a company that usually takes months to vet products coming from outside the US, and they've never done this with k and before. I think that if you're a glass half full person, you look at Premiers work and you say, this is incredible. Look at American ingenuity and ability to

to look elsewhere and source quickly. If you're a glass half empty person, you're concerned that every company is doing this on their own timeline, by their own standards, and you got to trust that they're doing it right. This is ah, this is the wild West. That's how suppliers, traders, government officials have put it to me. It's every man for themselves and you just have to be trusting of the entity you're working with to make sure that this

is legitimate product. That was health reporter Riley Griffin. For more on the messy mask market in China, read Riley's April fifteenth story with Lauren Etter on Bloomberg dot Com. And That's our Show. For more on the outbreak from one D and twenty bureaus around the world, visit Bloomberg dot com, slash Coronavirus and one Small favor. If you appreciate the show, please leave us a review and rating on Apple Podcasts or Spotify. It's the best way to

help more listeners find our global reporting. The Prognosis Daily edition is hosted by Me Laura Carlson. The show was produced by Me, top foreheads, Jordan Gospoure and Magnus Hendrickson. Today's main story was reported by Riley Griffin. Original music by Leo Sidron. Are at readers our Francesco Levi and Rick Shine. Francesco Levi is Bloomberg's head of podcasts. Thanks for listening. H