University City, MO (AP) — When the coronavirus pandemic first hit America, sales of window coverings in Halcyon shades quickly darkened. So the suburban St. Louis business did what hundreds of other smaller manufacturers did: It spurred on to make protective supplies with the help of an $870,000 government grant.
But things did not go according to plan. The company stopped making face shields because it was not profitable. It still hasn’t sold a single N95 mask because of equipment, materials, and struggles to obtain regulatory approval.
“So far, it has been a net drain of money and resources and energy,” said Jim Schmershall, owner of Halcyon Shades.
Many companies that began producing personal protective equipment with patriotic optimism have scaled back, closed down or quit, according to an Associated Press analysis based on multiple interviews with manufacturers. Some have already sold equipment procured with state government grants.
As COVID-19 was hammering hospitals and shuttering businesses in 2020, elected officials stressed the need to boost US production of protective gear: “All this stuff must be made in the United States and not China,” Florida Gov. Ron DeSantis said. Comment echoed by others.
Yet many manufacturers who have answered the call have faced logistical constraints, regulatory disapproval, declining demand and fierce competition from overseas suppliers. On April 1, Florida-based American Surgical Mask Company became one of the latest to close.
“I’m done with the fight right now,” CEO Matt Brandman told the AP.
After the initial scramble for PPE subsided, many industry newcomers faced difficulty selling the product. Government agencies sometimes wanted huge amounts on tough deadlines. Hospital systems tend to contract with established suppliers. Retail sales plummeted after every virus surge.
“At the end of the day, when everyone said they wanted American-made, nobody’s buying, not even the state,” said Tony Blogumas, vice president of Green Resources Consulting, a rural Missouri firm that Received a state grant of $800,000 but only a few thousand masks were sold. “We are troubled by the whole situation.”
Missouri Gov. Mike Parson is also disappointed. His administration split $20 million in federal COVID-19 relief funds among 48 businesses to produce masks, gowns, sanitizers and other supplies. Parson hoped to plant a permanent field of producers.
“I still firmly believe in that — that we need to make PPE in this state,” Parson said. “Unfortunately, a lot of organizations have gone right back to where they were getting it before.”
The start of the pandemic showed that the US was highly dependent on foreign countries for protective gear. When China limited exports due to its fight against COVID-19, US reserves fell. Prices skyrocketed as federal officials, governors and health care systems competed for supplies.
Although federal stockpiles have been replenished, a reduction in domestic production has raised concerns that state governments, medical facilities and others may be scrambling for gear again during a future pandemic.
AP committed more than $125 million in grants to boost production of pandemic supplies made to more than 300 businesses in 10 states – Alabama, Hawaii, Indiana, Kansas, Louisiana, Maryland, Massachusetts, Missouri, New York and Ohio Identified. It is possible that grants have been given in additional states, but there is no central clearing house to track them.
In November 2020, Alabama provided one of the largest grants — about $10.6 million from the federal Epidemic Relief Fund — to Hometex Inc. The company was to equip a new Selma facility to manufacture 250 million surgical masks and 45 million N95 masks annually. The plant returned $1.8 million in state grants and has yet to do anything due to a lack of customers.
“I can’t produce a product that I can’t sell,” said Jeremy Wooten, president of Hometex.
Other companies also had trouble living up to political campaigning.
In October 2020, New York announced eight grants to then-lieutenants. Governor Kathy Hochul, who is now governor, said it “is a model for how we better build for the post-pandemic future.” These include $800,000 for the newly formed Alter Safety and $1 million for startup firm NYPPE.
But the NYPPE equipment was not ready until February 2021, by which time the market had changed, President Conor Knapp said.
So Knapp put the brakes on his plans. The NYPPE still hasn’t sold any N95 masks because it lacks regulatory approval. It recently ramped up production of surgical masks after receiving US Food and Drug Administration certification that came with the purchase of Alter Safety.
Some PPE manufacturers point to federal regulations as the reason for their struggle. Three-ply masks require FDA approval for medical use — an important designation for building a long-term customer base.
That process can be time consuming. Facing delays, Angstrom Manufacturing in Missouri ended up buying another business that already had FDA approval, President Chris Caron said. By then, it had fallen to 2021, a year after receiving the state grant.
Companies need approval from the National Institute for Occupational Safety and Health to market products such as N95 respirators, which filter at least 95% of airborne particles.
During the first two years of the pandemic, NIOSH approved 30 new manufacturers – seven times the normal number during the same pre-pandemic period, according to agency data. Some applications are pending, while many have been rejected.
Halcyon Shades was denied N95 certification in October because its samples did not have headbands. While the company works on another application, its equipment sits idle inside the clear plastic-sheet walls of a “clean room” specially designed to shield the material from airborne contaminants. Partially finished masks are stacked on a conveyor belt, waiting to be stored in a cardboard box.
Without federal approval, “we’re just dead in the water,” said company owner Schmershall.
Progress reports filed with the Missouri Department of Economic Development show that nearly all PPE grant recipients faced challenges as of July 2021, particularly with sales.
CEO Rick Needham said Patriot Medical Devices, which received $750,000 from Missouri, hired nearly 100 people as it produced millions of masks during the COVID-19 boom in late 2020 and early 2021. There are less than 10 employees left.
“We felt it was our patriotic duty to do something to help solve the problem,” Needham said. But, he added, “it’s clearly a bit of a dysfunctional business model at this point.”
Ohio awarded $20.8 million to 73 businesses for manufacturing supplies related to the pandemic, according to state data. More than a third of the 60 businesses that recently complied with the reporting deadline no longer produced PPE by the end of 2021.
Cleveland Veterans Business Solutions, which received a $500,000 grant to get into the PPE business, has made approximately 5 million surgical masks since August 2020. It eventually halted production due to cheap imports and sold its machines this year, said co-founder Tanner Ehren.
“It was surprising and strategically disappointing that there was no support for the local PPE manufacturing industry,” Aren said.
The business was among several dozen that banded together to form the American Mask Manufacturers Association, with the goal of sustaining the industry. Group membership has dwindled as more and more people went out of business.
Association organizers say the industry has reached a critical point. They want the federal government to treat PPE manufacturers like the country’s defense industry – entering into long-term contracts to replenish a stockpile for future pandemics or emergencies.
Brent Dilly said, “If the federal government doesn’t come and help support the American manufacturing base, it’s almost certainly going to go back to China, and we’ll be as vulnerable as 2020 and early 2019. ” A Virginia manufacturer, the association’s president and co-founder, premium-PPE debuted during the pandemic, has shed nearly two-thirds of its nearly 300 employees.
The infrastructure law signed by President Joe Biden took a step toward consolidating domestic suppliers. Effective in February, it required PPE purchased by the departments of Health and Human Services, Homeland Security and Veterans Affairs to last at least two years and delivered to U.S. producers – as long as sufficient quantities are available at market prices and not quality.
The Departments of Health and Veterans said they had not purchased anything yet. Homeland Security has not responded to AP’s questions. Documents show the government had on December 6 sought a bid for 381 million US-made surgical masks over three years for its stockpile. No deal has been announced.
Other documents show the government is looking to sign contracts with three major suppliers — 3M, Moldex, and Owens & Minor — for a total of $115 million in US-made N95 masks over three years. A justification document states that non-competitive contracts are necessary to preserve capacity for future coronavirus surges or emergencies.
The Biden administration convened a task force of experts from federal agencies, health care providers, PPE manufacturers and distributors to develop a national strategy to ensure a “resilient public health supply chain.” Its work is expected to extend over the years.
Some manufacturers said they couldn’t wait long for a federal life saver.
Dentec safety experts are wrapping up a contract to supply 125,000 rubber reusable respirators and 500,000 filtration cartridges from its Kansas facility for the national stockpile, President Claudio Dante said. He said more orders are needed soon to stop the layoffs.
“I thought that COVID would really change the mindset of people, governments and manufacturing,” Dante said. But he added: “The general market is reverting to its old ways – meaning buying products from China.”