Two Black Swans, One Devastated Region

A Hurricane Named Maria 

By:  Sandra K. Rodriguez, Market Analyst

Disclaimer:  Being based in Puerto Rico, I lived through Irma and Maria; however best practices recommendations apply to anywhere in the world that may suffer a catastrophic event.

A black swan event is one that is extremely rare and unlikely.  Hurricane Irma stormed through the Caribbean on September 6, 2017.  Two weeks later, on September 20, 2017, Hurricane Maria made landfall in Puerto Rico and collided with the supply chains of leading life science companies who have a manufacturing presence on the island.

Scott Gottlieb, M.D., Commissioner of the FDA, took notice immediately and issued a press release within five days to address how the agency would help the island recover and what steps should be taken to avoid critical drug supply shortages for US citizens residing on the island and the US mainland.  Gottlieb wrote, “News coverage has touched on an issue about which we at FDA are very concerned and we are working around the clock to address – the potential for shortages of critical life-saving and life-sustaining drugs needed by patients on and off the island.”

For decades, life science companies have had a large presence in Puerto Rico and are a vital part of the island’s economy.  Pharmaceutical and medical device companies manufacture a variety of medical products including cancer drugs, immunosuppressants and diabetes treatments on the island.  Shortage experts at the FDA have been working with these companies to assess the operational state of their facilities to avoid shortages.   Gottlieb also acknowledged, “ …the important role that the medical product industry plays in helping Puerto Rico sustain its economy and help in its recovery. The pharmaceutical industry in Puerto Rico is responsible for nearly 90,000 jobs, and the island will need them to recover and rebuild.”

On October 6th, FDA issued another press release announcing 40 critical pharmaceutical and biologic products manufactured in Puerto Rico have been identified whose shortages could have an impact on public health.  The agency has committed to act quickly to avoid shortages by securing fuel for generators at these manufacturing facilities and working with federal agencies including the Department of Homeland Security and Health & Human Services to provide logistics support.

The medical device manufacturing sector is also being closely monitored by FDA.  On October 20th, the agency issued another press release calling attention to the more than 50 medical device manufacturing sites on the island which are responsible for 1,000 different kinds of medical devices.  50 types of devices have been deemed critically important to patient care because they may be life-sustaining or life-supporting.  The agency is particularly concerned about the potential shortage of blood-related devices.

Of the 3.5 million US citizens in Puerto Rico, 100,000 are estimated to have relocated to the U.S. mainland since the devastating hurricanes unleashed their fury on the island (myself included).   However, the mass exodus is driven not only by a shortage of clean water, food, housing, electricity or access to medical care; many have already lost their jobs.  Residents working in the tourism industry and small business owners have been left without an income to support themselves.  The federal government cannot rebuild Puerto Rico’s economy but the private sector can.

While federally funded projects could support the rebuilding of the island’s infrastructure to include electricity, utilities and communication, the rebuilding of a once vibrant life sciences manufacturing industry will be the responsibility of the local government, its residents and the private sector.    J&J’s Chief Financial Officer, Dominic Caruso said on an October 17th earnings call, “the company did not foresee any material impact on future results from the hurricane and that all six of its plants on the island had reliable generator power and were working up to full capacity.”

Natural disasters are difficult to predict but must be planned for.  Axendia recommends life science companies implement solutions to address issues and concerns when collaborating with partners in a global and outsourced manufacturing environment.  In an article titled, Are Black Swans Colliding with your Supply Chain? we highlighted that the increasing frequency of these events calls for the implementation of contingency plans to improve supply chain resilience and balance the risks as well as the rewards of globalization.

To attain the sustained benefits of globalization and mitigate Black Swan events, life-science organizations must improve the endurance of their supply chains. This will allow them to capitalize on the opportunities set forth by globalization and outsourcing while proactively reducing and controlling risks. This calls for changing the business, technology, and regulatory models traditionally used in industry.

Now is not the time to reconsider Puerto Rico’s ability to support the global supply chain needs of life science companies.  FDA has committed to partner with the residents of Puerto Rico to secure their economic future.  Life sciences companies must do the same in order to offer a glimmer of hope to a decimated economy.   To avoid a demographic and population collapse, the private sector should take a hard look at a capable, educated and willing workforce that needs employment now more than ever.  With jobs come hope, and with hope comes a promising future for an island suffering from more than Mother Nature’s wrath.   A black swan event is one that is extremely rare and unlikely.

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