Where in the world…

Dear Reader,

Funny thing about crises, people usually think they’ll be short-lived.

This week it started to sink in that we aren’t going back to normal anytime soon.

There are fears of a second wave. In the US, there is chatter about cities getting close to reaching ICU capacity.

Here in Victoria, a spike in cases has brought in more restrictions, and it looks like panic buying is making a comeback.

Remember panic buying time?

Supermarket shelves were empty as people stored pasta and rice. Fights broke out over mundane things like toilet paper…if you could find any at all. 

It wasn’t only shortages in food, but medicine. Paracetamol was also flying from the shelves and there were limits placed on how much ventolin you could buy.

People started thinking about how stuff actually makes it to our shelves.

While all of this was happening, Dr David Sparling, Chief Executive officer of IDT Australia (a pharmaceutical company), spent his time making calls abroad. He was trying to source protective equipment and medicines.

As he told a parliamentary committee this week:

‘We were making calls to Europe late at night, making calls to our American colleagues in the morning, dealing with the subcontinent and China at the middle of the day, pretty much working around the clock.

‘After a week of effort we still hadn’t secured any of that material and the Covid-19 numbers in Australia had tripled in that particular week. That’s what still resonates with us here about having some robustness in those supply chains, so that we can potentially avoid those situations happening again.’

One particular call to a supplier stuck in his mind, because the sales representative said they had stock but couldn’t give him a price.

‘“And I said to her, “You realise that people are looking for this medicine around the world and there are people dying of coronavirus while we’re trying to access these medicines and I’m not quite sure why you can’t give me a price for this medicine; are you looking to profit from this disaster?” Her simple answer was, “Yes”.’

Another witness, Les Lewis from Detmold Medical Group, described it as the marketplace turning into a ‘bidding war’.

The parliamentary committee is looking into the impact COVID-19 is having on Australia’s foreign affairs, defence and trade. Here is what The Guardian reported on it:  

‘Australian companies were “shocked” to experience price-gouging and had trouble accessing critical supplies to make medicines and personal protective equipment at the height of the pandemic.

‘It has prompted fresh calls for Australia to build up its ability to manufacture critical drugs “without reliance on opaque and fragile offshore supply chains.’

It follows a call from Industry Minister Karen Andrews back in April when she said:

‘[W]e also need to work with our pharmaceutical sector to see how they can pivot and how they can start producing different medicines, different pharmaceuticals if need be.’

I’ve been writing for the last few weeks about how countries have realised the importance of securing their supply chains, diversifying and increasing manufacturing.

And one of those areas that’s ready for change is pharmaceuticals. 

Pharmaceuticals was our fifth largest import in 2019, making up $8.4 billion.

According to a report from the Institute for Integrated Economic Research, released in February this year, Australia currently imports 90% of its medicine and the top country those exports come from is the US.

But it’s not that simple.

The US outsources many of its active pharmaceutical ingredients (API) from China or India. According to News.com.au, the US imports 95% of ibuprofen and 40–45% of penicillin supplies from China.

The supply chain for pharmaceuticals is usually very complex and muddy and while some medicines will be manufactured in one country, ingredients can come from others.

Anyway, my point is that we could see some interesting initiatives coming out of this area.

After all, the biotech company CSL Ltd [ASX:CSL], for example, came about in 1916, in the middle of the First World War as Australia faced isolation.

There are already ideas out there like Arrowex’s, for example, that is proposing creating a manufacturing and technology hub in the next two years that could produce vital medicines. Their idea is to use robotics to keep costs down and work jointly with other mid-sized nations.

Obviously Australia won’t be able to manufacture everything but the trend is definitely moving for increasing manufacturing and diversifying supply chains. 

I’ll be keeping an eye out on this.

Best,