The U.S. Senate Finance Committee held a public hearing July 28 covering the global medical supply chain of products and equipment and the shortages, illicit operations and government action in response. This was the first meeting to address the “integrity” of the country’s medical supply chain, Chairman Chuck Grassley said.
“We cannot allow our medical supply chain to be so heavily dependent on other countries,” Grassley said, adding that he would like to work with both Republicans and Democrats to diversify the nation’s supply chain by increasing manufacturing within the U.S.
The hearing raised the question of why the U.S. and the world are experiencing a breakdown in the medical supply chain and how the government would go after fraudsters.
Grassley expressed concern over the medical supply chain in the opening phases of the pandemic in a letter sent to Vice President Mike Pence. One example was how the shortage of PPE in the U.S. allowed bad actors to take advantage of hospitals looking for supplies.
Prior to COVID-19, health care providers could avoid “counterfeit” medical equipment by using traditional means of obtaining supplies, Grassley explained. But with the onset of the pandemic, hospitals and health care providers were forced to try to obtain PPE supplies from wherever they could — unaccredited dealers, ecommerce and others outside the supply chain. In some cases, these providers have inadvertently purchased “fake, faulty or even illicit medical supplies,” Grassley said.
Grassley said China is the number one producer of Personal Protective Equipment in the world, and to date nearly 40% of all PPE is manufactured there. Grassley expressed the view that China has many quality control issues.
At the beginning of the pandemic, China did the “unthinkable,” Grassley said, by turning off the “taps” of PPE manufacturing, and the Chinese government heavily restricted the export of PPE products. Local and state governments were directed to source more supplies from the international market — at the same time the Chinese government was downplaying the true impact of the coronavirus and directing “vast amounts” of PPE to its own country. China has since reversed course on these actions, but the U.S. is struggling to meet demands for PPE, as our supply chain is heavily dependent on China and Mexico, he added.
Many of the senators who spoke during the hearing spoke of their states’ issues in obtaining COVID-19 supplies and PPE or of tests being fake, faulty or decertified. Sen. Debbie Stabenow of Michigan described how a fined telephone scammer created a company “Fillakit,” which was awarded a FEMA sole-source contract for producing test kits. It was later discovered the tests consisted of repurposed soda bottles — which upon investigation were shoveled into plastic bins, sprayed with a salene in the open air, were not appropriate size for lab equipment, and did not provide dependable results. As a result, the state was unable to perform over 320,000 tests.
In the world of ICE Homeland Security Investigations, individuals and criminal organizations worldwide have taken advantage of the pandemic for illicit financial gain, and the schemes they create compromise legitimate trade systems and threaten the safety of the public, said Steve Francis, director of the National Intellectual Property Rights Coordination Center.
HSI’s “Operation Stolen Promise” commenced in April to investigate illicit and counterfeit goods entering the U.S. The initiative combines HSI operations in global trade, integration operations, cybercrime, financial fraud and criminal analysis. Stolen Promise operations look into importation of prohibited pharmaceuticals, websites used to commit fraud and other opportunities for compromising legitimate trade or financial systems or endangering the public.
Since April, HSI opened over 500 criminal investigations and seized around 900 shipments consisting of test kits, pills, PPE and “purported treatments,” at ports of entry. HSI also reported more than $7 million worth of illicit proceeds have been seized. HSI special agents have arrested 53 individuals, including a New York City pharmacist on suspicion of violating the Defense Production Act by hoarding and gouging prices on N95 masks.
The organization reported that it has seized 911 shipments ranging from test kits to “counterfeit” substandard medical equipment and supplies and purported coronavirus treatments. The group recorded nearly $18 million in disrupted transactions and recovered fund. Working with CBP, HSI has seized over 900 shipments of unauthorized COVID test kits, treatment kits, homeopathic remedies, anti-viral products and PPE.
For U.S. Custom Border Protection, Overacker said that on the “front line” supporting the nation’s response with COVID, CBP is regulating travel and trade and mitigating risk. Currently, CBP is expediting the important of legitimate supplies and PPE into the country, and personnel are researching substandard or unapproved COVID products.
In 2019, CBP processed 35.5 million entries valued at over $2.7 trillion, but over the last six months directly relating to COVID-19, there has been a 12% decline in the overall volume and 13% decline in the value of imports, Thomas Overacker, Executive Director for Cargo and Conveyance Security for CBP, said. These declines reached a peak in May, almost 30% lower than May 2019.
Despite decline in overall imports, PPE imports have skyrocketed, increasing by over 227% in April alone, he said. In addition, the number of new actors in the imports has increased as well. The number of sellers of surgical and medical gloves has increased by 128%. Medical masks have increased by 160%.
To facilitate legitimate products, the CBP Pharmaceuticals Center of Expertise created a COVID-19 Cargo Resolution Team, which created an online portal for up-to-date information on supplies and to date the portal has had over 21,000 views and the team has fielded 2,500 inquiries about cargo holds and expedited release of critical supplies.
CBP helped facilitate over 400 flights at 17 ports around the globe to facilitate the bringing in of over 1.3 billion pieces of PPE, and supporting Operation Warp Speed that the import of critical supplies is not delayed, he added. On the flip side, the CBP collaborates with FEMA on enforcement actions to examine export shipments and provide information for review on exports. The project has facilitated the return 3.6 million protective masks and nearly 150,000 sets of gloves to the U.S. market.
In total, CBP-related combat efforts have led to interdiction of more than 120,00 non-FDA test kits, seizures of above 10 million counterfeit masks and 3,000 EPA-prohibited “anti-virus lanyards” and intercepting over 120,00 tablets of medicines not approved for use in the country.