This is an excerpt from Medically Necessary, a health care supply chain newsletter. Subscribe here.

The problem: Companies making masks, swabs and diagnostic tests are laying off or furloughing thousands of workers as demand for their products is dropping quickly. News reports have tallied nearly 8,000 layoffs at various companies due to declining demand.

Masking: The American Mask Manufacturers Association, a trade group representing about 30 smaller PPE producers, reported that by the end of June member organizations had laid off nearly 5,000 employees. Member organizations employed about 7,800 people at their peak.  

In addition, Honeywell International, a large company that produces PPE, laid off about 470 workers at a Rhode Island manufacturing facility in May, according to the Associated Press.

A Honeywell spokesperson told the Rhode Island CBS affiliate WPRI that demand for masks is falling and the company plans to switch to more automated production lines.

Testing: In May, Abbott Laboratories, which makes devices used to test for COVID-19, restructured its manufacturing network to account for declining demand for tests. 

In a statement, the company noted that lower case numbers and the success of vaccines had lowered demand for testing. In June, the company cut its 2021 financial guidance because of falling demand for COVID-19 tests. 

“We’ve recently seen a rapid decline in COVID-19 testing demand and anticipate this trend will continue,” Abbott CEO Robert Ford said, according to a statement.

Abbott recently laid off 2,000 workers at a plant making COVID-19 tests in Gurnee, Illinois, according to a report from suburban Chicago’s Daily Herald.

Now, Abbott will lay off 300 workers at a plant making COVID-19 tests in Maine, according to local ABC affiliate WMTW. The company notified Maine’s state government about the layoffs in early July.

Earlier this month, Puritan medical supplies, a major producer of the swabs used to test for COVID-19, announced that it would extend a furlough for 180 employees in Maine, according to Bangor Daily News.

The furloughs are happening at one of two manufacturing locations Puritan opened last year to increase production, Bangor Daily News reports. 

What’s next? Many of these companies played a crucial role in producing supplies to fight the COVID-19 pandemic. 

As the delta variant drives up COVID-19 cases in some parts of the U.S., American Mask Manufacturers Association Chairman Brent Dillie said he’s worried domestic manufacturers won’t be in a position to scale up production if things start to get bad. 

“Everybody agrees we have to have manufacturing in this country or we’re significantly vulnerable again,” he told FreightWaves. “We need a solution now, like yesterday, or else you’re not going to have that manufacturing base.”

White House wants even more info on health care supply chains

(Photo: White House/Adam Schultz)

The news: Last week, President Joe Biden issued a wide-ranging executive order that is supposed to promote competition in the U.S. economy. 

Some of the big-ticket items were efforts to reduce prescription drug prices and rein in the power of large tech companies. 

In addition, the recent order also tasks the Department of Health and Human Services with producing yet another report about enhancing the domestic pharmaceutical supply chain.

The others: HHS has already released one report on the pharmaceutical supply. The new executive order, and a few previous orders, call for three more.

Last month, HHS issued its first report, an initial check-in after Biden’s first 100 days in office. The 100-day report recommended incentives to encourage manufacturers to improve reliability, add visibility and increase domestic production.

The next report, mandated by a January executive order, appears to be due next week. That report will be a “strategy to design, build and sustain a long-term capability in the United States to manufacture supplies for future pandemics and biological threats.”

The strategy includes an analysis of the United States’ reliance of foreign supplies and the role of the Strategic National Stockpile, among other topics.

The initial 100-day report was in response to an executive order issued in February. The same executive order also directs HHS to create a more in-depth report by early next year.  The in-depth report will focus on supply chains for the public health and biological preparedness industrial base.

The goal of the report included in the most recent executive order will be reducing the prices paid by the federal government for prescription drugs. The report will also examine ways to prevent price gouging. That report will be due by the end of August.