Almost $1 Billion Later, the US Still Can’t Manufacture Medical Gloves

0:00The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. Get the news you need in just 15 minutes. Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager.

0:39And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business, and foreign relations. Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen. Bill, why is my eye twitching? Does this mean I'm in perimenopause? Where's my phone? Juliana, maybe we can ask an actual human. Yes, because I have questions and I bet you do too. Like, is it normal to sleep in separate bedrooms?

1:13We do that. And I still need to know why my poop's been green. We've got actual people answering these exact questions. Listen to Bill and Juliana. The podcast. On the iHeartRadio app, Apple Podcasts, or wherever you listen to your podcasts.

1:40Nitrile medical gloves are supposed to be abundant and identical. They're all made out of the same material and engineered the same way, so that medical professionals can use and remove them over and over throughout the day without skipping a beat. These gloves are the ones you see in every exam room when you go to the doctor or the hospital. That's Anna Edney. She reports on the healthcare industry. They're disposable. There are billions of these. There's about 120 billion that are used in the U.S. annually. 120 billion used every year in the U.S., not only in the medical field, but in industries like food service, auto repair, and pharmaceutical production.

2:23The U.S. government alone buys around 2 billion of these gloves annually for federal workers like healthcare professionals and airport security. But only about 1 % of these nitrile gloves are actually made in the U.S. They are made in Malaysia and the companies in Malaysia get the main ingredient for those gloves from China. That's where they get the petroleum product, nitrile butadine rubber. So essentially, we are reliant on China for the medical gloves. And in addition to kind of the tensions with China, there's also the war with Iran. The war has disrupted ship traffic through the Strait of Hormuz, which has made it harder and more expensive to transport petroleum products.

3:15Essentially, we're in this spot, which we sort of were in when COVID for different reasons, where the glove supply is kind of on thin ice and the hospitals are trying to make sure that they can get enough. When nitrile gloves were in short supply during the 2020 COVID-19 pandemic, the federal government came up with a plan to wean the U.S. off of imported medical gloves and make more of them domestically. Since then, six American companies have been granted almost a billion dollars in government contracts to bolster the U.S.'s manufacturing capacity and build more factories to produce NBR. Now, the U.S.

3:58is staring down the possibility of another medical glove shortage. But Anna says the country still isn't prepared. The companies are not making gloves and they're not making the rubber.

4:17I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, why the U.S. couldn't stand up its own nitrile medical gloves industry in the years since COVID, and what the failed push to make medical gloves says about broader efforts to reshore American manufacturing.

4:37So Anna, you've been looking into the U.S.'s effort to ramp up domestic manufacturing of an extremely important product that often gets taken for granted, nitrile gloves. Why are they so challenging to make in the U.S.? There's a really important key ingredient that's needed to make these. It's nitrile butadine rubber, NBR. That mostly is coming from China. We do not make any of that NBR here. We used to make it here decades ago. It's just cheaper and easier with environmental regulations and things to do this in other countries. So that was the status quo for a long time, right? The U.S. would buy billions of these nitrile gloves a year, largely from other countries.

5:26But during the pandemic, the supply of medical gloves emerged as a real issue in the U.S. The U.S. government had a plan for ramping up domestic supply. What was that plan? Yeah, so we all learned, you know, that COVID was airborne. We wanted to protect ourselves. Certainly, you know, the medical professionals wanted to protect themselves. So the demand for medical gloves just skyrocketed and, you know, hospitals weren't able to get them. What happened was the Trump administration, during the first Trump administration during COVID, was going to give out contracts to companies that were willing to set up glove factories or factories that could make the main ingredient in these gloves, nitrilebutadine rubber.

6:16And then it was the Biden administration that actually gave out the contracts. So they gave out about$850 million to six companies to get that started. And how did that plan work out? You know, some of them got started. They quickly folded. They shut down their glove operations. They weren't able to sell those essentially because they cost a lot more than the gloves made in Malaysia, where we get most of our gloves from. You sort of need more infrastructure than just the buildings and just the manufacturing. And during this time, you know, when the companies were trying to get up and running, they quickly found out that already our attention span had kind of switched in the U.S.

7:02as it does, especially with pandemics and kind of public health emergencies. And the hospitals, even the federal government, were not buying what they were trying to make. The hard part about bringing an entire industry back to the United States or boosting it here is just that it costs more. And that's why manufacturing in a lot of instances has moved offshore. and to bring it back, you know, you sort of need more infrastructure than just the buildings and just the manufacturing. You almost need government subsidies to make it worth anyone's while to buy the products to make sure they're there when the emergency happens.

7:48After the break, what reshoring more nitrile glove manufacturing would really take?

7:56The United States is about to mark its 250th anniversary. And so on the Global Story podcast from the BBC, we're telling surprising tales of American influence on the world stage and in ordinary people's lives all across the globe. We have this ability to export our story, and a lot of people have bought it. I feel like the American dream is alive, but not well. From the BBC, it's the United States at 250. Listen wherever you get your podcasts or find us on YouTube. Bill, why is my eye twitching? Does this mean I'm in perimenopause? Maybe I have adult ADHD. I need to look this up. Where's my phone?

8:34Juliana, your phone is hot to the touch. I think it's asking you for a break. You know what? Maybe I should just ask ChatGPT. Or maybe we can ask an actual human. Yes, like a couple sex therapist. Whoa, that escalated quickly, but okay. Because I have questions. We have questions. And I bet everyone has questions. Like, is it normal to sleep in separate bedrooms? We do that. How about this one? Is bribing your kids bad parenting or just negotiating? Oh, and I still do need to know, why was my poop green that one time? Hypothetically, right? Okay, well, instead of letting the internet guess, we've got actual people answering these exact questions.

9:11And laughing with us has got to be better than spending three hours down a rabbit hole online. Listen to Bill and Juliana. The podcast. On the iHeartRadio app, Apple Podcasts, or wherever you listen to your podcasts.

9:48went to a company called Blue Star NBR, which got$123 million in financing to help it build a huge NBR factory in Southern Virginia. But the company's CEO, Scott Meyer, told Bloomberg's healthcare reporter, Anna Edney, that by now, he's running out of money. And the business still hasn't gotten off the ground. The challenge that happened specifically for them in this case during COVID, was that the price of construction went up. And I think we all were sort of familiar with that and people trying to do projects at their houses or anything. The same applied to this factory. And so when they were in the middle of it, they had said to the federal government, we're not going to have enough money to basically plug it in and get it going.

10:41And it kind of sat in this limbo for a long time. And the government has not wanted to fund it anymore to help them reach the end point. The other issue is just if there weren't really companies making gloves in the country, then there's no one who's going to buy their NBR. They sort of didn't have that ability to have a revenue or anything to try to get going. I'm wondering, what does the Trump administration say about why the program didn't pan out? Well, I was able to talk to a source who is familiar with the government thinking with this Trump administration's thinking. And essentially, they said that the administration felt that the Biden administration had made these bets on companies that didn't fulfill the promises of these contracts.

11:33and they didn't want to keep putting money into that, which is why they told me they were stopping funding this. They weren't going to give any more money to try to get these companies up and running. And I did speak to Timothy Manning, who was with the Biden administration during this time. And he said, actually, contrary to what that person had said, was that those companies that they did fund, Those six that they gave, about$850 million, were sort of already picked out during the Trump administration and the Biden administration was just, you know, continuing that program. Based on your reporting, what is your understanding of the biggest things that went wrong, the biggest failures in this program?

12:19The biggest failures for the program were that there wasn't anything set up to make sure that these companies would be supported beyond just building the infrastructure to make gloves or to make NBR. What can happen, too, is they weren't all saying we definitely need more government money. They were saying we could get private capital, but no one wants to fund us because even the government won't buy our product. And so the biggest issue is sort of that a lot of industries in this way are heavily subsidized to get off the ground so that it makes it worthwhile for the American hospital system, the medical system, to purchase these gloves.

13:04Right. And the$850 million in contracts were meant to kickstart manufacturing, not actually purchase any of those gloves for government agencies. You also wrote about some of the U.S.-based companies that make these gloves using imported materials. How are those faring? American companies that are making gloves with imported ingredients, with imported NBR, they usually cost about double, sometimes even more, than the gloves coming from Malaysia. These are interesting companies. They also got started around COVID. There's about two or three. It depends on how you look at it. So they are starting to make headway in telling the government over and over, you know, some of them told me, we are in D.C.

13:57several times a month. People I talked to in the government said, we are surprised how often we are talking about gloves at this level because they're there constantly telling them, please buy our gloves so that if you want this industry to be built up, like this is what you have to do. And the government does seem to be recognizing that. The Office of Management and Budget told me that they were now going to start requiring that federal agencies purchase gloves from these companies that operate on U.S. soil. The OMB spokesperson also told Anna that the Department of Homeland Security has started coordinating purchasing.

14:39Instead of having individual agencies each make their own orders. Another thing they are doing is there, it's a proposal, it's not yet finalized, but they are looking into Medicare giving higher reimbursements to private hospitals, other hospitals that aren't, you know, obviously government agencies, but that buy a certain percentage of gloves from these American companies. And the reason for that is because these gloves are more expensive to buy. And so if the government gets in this market, supports these domestic manufacturers, that will make it easier for them to break even? It will make it easier for them and it will be a sign to the market, to those private investors that they might need still for certain things that there will be support there for them.

15:29The government's supposed to do this anyway. They're supposed to be prioritizing buying things made in the United States, to be perfectly honest. And Anna, there's new reason for urgency around this issue right now, right? Yeah, I think the interesting question on this for me and one of the reasons I wanted to write it now, because the war is, you know, making it difficult for anything that's a petroleum-based product. And as we talked about that, the NBR is petroleum-based. So the price of the Budadine rose substantially throughout the war. A lot of the glove makers have fixed contracts with hospitals.

16:11So the hospitals aren't necessarily paying more right off the bat for these gloves when the ingredients cost more. The companies, the glove makers, are the ones who get hit really hard. and there was a threat that they could close down that even led to a lot of the hospitals being on what's called allocation. They were limited by how many gloves they could buy because they didn't want people panic buying. So, you know, the idea was if we had just gone ahead and done a better job and successfully been able to boost the glove industry and finished this NBR plant in Virginia, we might have been in a very different position.

16:51And in the end, none of the companies the government financed ended up being successful. You wrote that they, quote, either never got going or ceased operations and laid off workers when they couldn't find buyers. As for Scott Meyer in Virginia, does he see any hope or relief coming down the line? I think he is pretty dejected at this point in the sense that the government has said we will purchase from companies that are operating on American soil, but they did not say they would get these companies that weren't able to make it over the finish line. So Scott told me that he is contemplating selling the factory essentially for parts.

17:35It will likely go somewhere in China because that's who's making NBR. The building itself, the land where it's at, it was actually given to them, granted by the county government, because it was supposed to bring a lot of jobs. And I think, you know, he feels terrible that the jobs aren't there, that this didn't bring the infrastructure that he had hoped. And, you know, I think his contract that he did have is up at the end of July, so he doesn't really have that long. And the government has said, you know, this is it. Like, we aren't giving you more money. This was a great example of how difficult it can be to reshore manufacturing.

18:15There are a lot of things to contemplate when we're trying to do that. And it's not just that, oh, we threw up a factory and we're able to start making. It's how can we actually support this industry down the road? How can, you know, we make sure that there's a way for it to be affordable, which can be very difficult and is one of the reasons that the offshoring happened in the first place.

19:02offer. If you liked this episode, make sure to follow and review The Big Take wherever you listen to podcasts. It helps people find the show. Thanks for listening. We'll be back tomorrow.

19:22Bill, why is my eye twitching? Does this mean I'm in perimenopause? Where's my phone? Juliana, maybe we can ask an actual human. Yes, because I have questions, and I bet you do too. Like, is it normal to sleep in separate bedrooms? We do that, and I still need to know why my poop's been green. We've got actual people answering these exact questions. Listen to Bill and Juliana. The podcast. On the iHeartRadio app, Apple Podcasts, or wherever you listen to your podcasts.

19:52This week on Leaders with me, Francine Lacqua. I speak to tennis legend Rafa Nadal about how he stayed competitive despite injury. I was able to enjoy the victories probably more than if I will not have this issue. One iconic match. In my mind was, I am almost dead. And whether he misses playing. I don't miss tennis because there was nothing else to offer. Listen and watch Leaders with me, Francine Lacqua, on Bloomberg Television or wherever you get your podcasts.