Drugmakers rode out Hurricane Maria in Puerto Rico, but keeping plants running while the devastated island picks up the pieces is likely to be tougher.
Tax breaks and incentives made Puerto Rico the Caribbean’s economic powerhouse two decades ago, helping attract dozens of drug and device makers that built state-of-the-art manufacturing facilities.
The industry accounts for roughly a quarter of the island’s gross domestic product, with more than 70 medical device manufacturing operations and 49 U.S.-approved pharmaceutical plants, according to Smart Corp. Inc., an economic-development group for the island.
Scott Gottlieb, the head of the U.S. Food and Drug Administration, has said that the agency is monitoring the possibility of shortages of critical drugs and devices and that he has been in contact with industry executives.
“I’ve never seen something on this scale,” Gottlieb said at a Congressional hearing this week. “This is an existential risk we face as a nation.”
Gottlieb said at the hearing that the FDA is monitoring the production of about 40 drugs from 10 companies, including 13 that are made only in Puerto Rico. Those medications include treatments for conditions such as HIV and cancer, as well as complex biotechnology drugs.
Most healthcare companies said their properties made it through Maria with little harm but that damage to the island’s infrastructure, weakened by years of neglect amid a long fiscal crisis, has frustrated efforts to get back to work. Many are still trying to locate employees and find ways to move products and supplies around often-impassable roads.
Gottlieb said the biggest issues confronting the companies right now are “gasoline and basic sustenance so they can return to work.”
None of the companies with operations on the island have said they expect shortages as a result of Maria, having stocked up inventories ahead of the storm, though industry watchers are concerned that bottlenecks could develop as Maria’s effects linger.
“It takes time for the inventory to work its way through the system, and there’s a gap behind it,” said William McLaury, who worked in supply chain for Novartis AG for three decades and is now an assistant professor of professional practice at Rutgers Business School. “If power is going to be out, if roads are going to be impassable -- the longer that goes on, the bigger the impact.”
Forced to Adapt
Bernie Student, leader of pharma and life sciences operations at PwC, who advises pharmaceutical companies, said companies have been forced to adapt to the island’s destruction. Some have used corporate jets or leased aircraft to transport fuel and other resources to secondary airports in the San Juan area, while others have used helicopters to ferry supplies from airports to their facilities because of demolished roads, Student said.
Companies ranging from Eli Lilly & Co. to Medtronic Plc reported minimal structural damage to their facilities after Maria slammed into the island as a category 4 storm on Sept. 20 with 155 miles-per-hour winds, killing at least 34 people and wiping out power to the entire U.S. territory.
Boston Scientific Inc., with 1,000 employees on the island, says it has located about 70% of its workers and is sending small generators and provisions to those it can reach. It expects to resume operations at its Dorado manufacturing facility this week.
Johnson & Johnson, which operates seven facilities and employs 3,600 employees, has resumed some operations using generator power, said spokesman Ernie Knewitz. Abbott Laboratories said its manufacturing and other facilities are largely functional and the company is working to maintain the supply of its products.
Device maker Baxter International Inc. said it saw some damage to its manufacturing sites but had restarted limited production powered by diesel power generation.
An extended period of disruption could deepen the problems on the island and squeeze drugmakers, increasing the potential for shortages, according to McLaury, the Rutgers professor. Puerto Rico officials have said that fully restoring power and water services to the island could take months or years.
Companies could face problems importing and exporting materials, and will probably encounter infrastructure problems, such as limited access to roads, ports and air travel, McLaury said. While wholesalers likely have a few weeks of drugs ready to be transported, companies may discover things difficult in about a month or two, he said.
Gottlieb, who visited Puerto Rico last week, said that the FDA is also concerned that the companies won’t be able to rely on diesel-powered generators over the long term. He said some facilities have been reluctant to plug back into the island’s power grid, and that the FDA is working to help find longer-term solutions to supply electricity.
Longer term, companies may face an exodus of workers. Many of Puerto Rico’s 3.4 million residents, who are American citizens, are expected to leave the island for the U.S. Governor Ricardo Rossello said this week millions could leave as the island rebuilds.
Plants in Puerto Rico for the pharmaceutical industry are likely more dependent on human labor than facilities in other parts of the world with more automation since tax incentives were better the more people that companies hired, McLaury said.
Several companies sent help ahead of the bad weather. Medtronic gave its employees supplies, including generators, in advance of the storm. It has been using radio and other alternative means of communication to reach them since, said Fernando Vivanco, a Medtronic spokesman. There were backup generators, water and other supplies on hand at its four Puerto Rico facilities, where all of its divisions have manufacturing.
Executives at Medtronic hold daily briefings on the status of its Puerto Rico operations, starting with a roll call for the number of employees they have been able to reach.
“We are working with local and global resources, particularly related to communications channels, power and fuel supply, and logistics/transportation, to help ensure we are fully operational as quickly as possible,” said Vivanco.
Cardinal Health Inc., a pharmaceutical manufacturing and distribution company, shut down operations two days before the storm’s landfall. Rival AmerisourceBergen Corp. fortified its distribution center and used the undamaged facility as an improvised shelter for employees and their families, providing nonperishable food, pallets of water, wireless and internet access and refrigerated trailers to store temperature-sensitive products.
Fueled by two industrial-grade generators, Chesterbrook, Pennsylvania-based AmerisourceBergen said it was able to continue providing vital medical products to hospitals and patients across Puerto Rico. It also packaged and shipped emergency supplies for the local population, including ready to eat meals, batteries and Gatorade, said Amerisource spokeswoman Keri Mattox.
In general, the industry was well-prepared for Maria. Many facilities were constructed to withstand otherwise catastrophic natural disasters.
“These facilities were built to last,” said Dan Mendelson, president of Avalere Health, a consulting firm. “Pharmaceutical companies that built on the island were really aware of the potential for hurricanes and the like, and they have the resources to build good facilities.”
By Michelle Fay Cortez and Jared S. Hopkins