WSJ.com - Just-in-Time Inventories Make U.S. Vulnerable in a Pandemic

WSJ.com - Just-in-Time Inventories Make U.S. Vulnerable in a Pandemic: "Like many big hospitals, the University of Utah Hospital carries a 30-day supply of drugs, in part because it would be too costly or wasteful to stockpile more. Some of its hepatitis vaccine supply has been diverted to the hurricane-ravaged Gulf, leaving it vulnerable should an outbreak occur closer to home. About 77 other drugs are in short supply because of manufacturing and other glitches, such as a drug maker shutting down a factory.

'The supply chain is horribly thin,' says Erin Fox, a drug-information specialist at the Salt Lake City hospital.

In the event of a pandemic flu outbreak, that chain is almost certain to break. Thousands of drug-company workers in the U.S. and elsewhere could be sickened, prompting factories to close. Truck routes could be blocked and borders may be closed, particularly perilous at a time when 80% of raw materials for U.S. drugs come from abroad. The likely result: shortages of important medicines -- such as insulin, blood products or the anesthetics used in surgery -- quite apart from any shortages of medicine to treat the flu itself.

The very rules of capitalism that make the U.S. an ultra-efficient marketplace also make it exceptionally vulnerable in a pandemic. Near-empty warehouses are a sign of strong inventory management. Production of drugs takes place offshore because that's cheaper. The federal government doesn't intervene as a guaranteed buyer of flu drugs, as it does with weapons. Investors and tax rules conspire to eliminate redundancy and reserves. Antitrust rules prevent private companies from collaborating to speed development of new drugs."