Web Zap*Germs Archive

January 12, 2006

US Drug Stockpiles Low Due to "Just-in-Time" Inventories

The Just-in-Time (JIT) manufacturing & distribution philosophy was started by Japanese automakers back in the '80s, and their use of it -- along with higher-quality specs -- forced Detroit to improve their then-lousy product lines and manufacturing processes in order to compete. JIT (also called "lean manufacturing") keeps the entire manufacturing-and-distribution supply chain running efficiently (i.e., cheaply) by ensuring that factories only have the parts on-hand for making a few days' products, not huge stockpiles. Warehouses, in turn, receive detailed sales data daily -- if not more often -- in order to keep the minimum number and types of stockpiled products ready for radio-tracked trucks delivering to local stores.

Of course, all this efficiency depends on massive computer databases, complex supply-chain-management software, and broadband communications via fiber and/or satellite. In the consumer world, no one does this better than Wal-Mart.

US pharmaceutical companies are getting good at this too, according to an article in today's WSJ. So good, in fact, that the nation has very low stockpiles of medicines that would be needed in the event of a flu pandemic or other serious health crisis. Some snippets:
Like many big hospitals, the University of Utah Hospital carries a 30-day supply of drugs, in part because it would be too costly or wasteful to stockpile more. Some of its hepatitis vaccine supply has been diverted to the hurricane-ravaged Gulf, leaving it vulnerable should an outbreak occur closer to home. About 77 other drugs are in short supply because of manufacturing and other glitches, such as a drug maker shutting down a factory.
In the event of a pandemic flu outbreak, that [supply] chain is almost certain to break. Thousands of drug-company workers in the U.S. and elsewhere could be sickened, prompting factories to close. Truck routes could be blocked and borders may be closed, particularly perilous at a time when 80% of raw materials for U.S. drugs come from abroad. The likely result: shortages of important medicines -- such as insulin, blood products or the anesthetics used in surgery -- quite apart from any shortages of medicine to treat the flu itself.

The very rules of capitalism that make the U.S. an ultra-efficient marketplace also make it exceptionally vulnerable in a pandemic. Near-empty warehouses are a sign of strong inventory management. Production of drugs takes place offshore because that's cheaper. The federal government doesn't intervene as a guaranteed buyer of flu drugs, as it does with weapons. Investors and tax rules conspire to eliminate redundancy and reserves. Antitrust rules prevent private companies from collaborating to speed development of new drugs.

Most fundamentally, the widely embraced 'just-in-time' business practice[...]is at odds with the logic of 'just in case' that promotes stockpiling drugs, government intervention and overall preparedness.

A report issued last month by the Trust for America's Health, a public-health advocacy group in Washington, concluded that 40% of the states lack enough backup medical supplies to cope with a pandemic flu or other major disease outbreak.


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