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Illuminating Supply Chain Risks in Isolation Gowns for Healthcare

October 8, 2024

Case Study

Executive Summary

Exiger Government Solutions (“Exiger”) was tasked by a U.S. government client with assessing the isolation gown industry and its associated risks, particularly relating to isolation gown manufacturers’ and distributors’ compliance with The Make Personal Protective Equipment (PPE) in America Act.
Exiger identified elevated risk among many of the assessed entities, mainly driven by foreign ownership and influence concerns. Concentration risk — particularly with major reliance on suppliers in China and Indonesia — also emerged as a factor that threatened the client’s compliance with The Make PPE in America Act.

Key Findings

Three leading providers of isolation gowns to the U.S. market may only operate foreign manufacturing sites, indicating that their isolation gowns are not compliant with the Make PPE in America Act.

U.S.- or Canada-based companies appear to source domestically

companies have received international shipments of isolation gowns or related raw materials

China-origin isolation gowns and related raw materials are present in the U.S. isolation gown market and may have been procured by Exiger’s client.

Two companies were flagged as high-risk for connections to forced labor and state-owned enterprises (SOEs), raising concerns about potential inclusion of their materials in the client’s supply chain.

DDIQ

Exiger’s DDIQ platform flagged that a Chinese entity that exported isolation gowns to a U.S. supplier has been accused of links to Uyghur forced labor.

The U.S. Department of Labor cites cotton as a good produced by forced labor in China, and designated it a “high priority for enforcement” for the Uyghur Forced Labor Prevention Act.

Approximately

20%

of the world’s cotton comes from China, of which 84% is from Xinjiang, a region linked to Uyghur forced labor camps.

Overview of The Make PPE in America Act

On November 15, 2021, the Infrastructure Investment and Jobs Act (Pub. L. 117-58), also known as the Bipartisan Infrastructure Law (BIL), was signed into law.
The Make PPE in America Act, Subtitle C of title IX of Division G of the BIL, requires the Department of Homeland Security (DHS), the Department of Health and Human Services (HHS), and the Department of Veterans Affairs (VA) to take certain actions to ensure the sustainment and expansion of manufacturing of PPE in the United States.
The law defines PPE as surgical masks, respirator masks, powered air purifying respirators and required filters, face shields and protective eyewear, gloves, disposable and reusable surgical and isolation gowns, head and foot coverings, and other gear or clothing used to protect an individual from the transmission of disease.

Objectives & Methodology

Exiger utilized a combination of open-source research, international commerce data, and client-provided contract data to identify isolation gown companies and their suppliers.
Exiger highlighted the following areas for investigation:
- Risk associated with client-related isolation gown suppliers and additional isolation gown suppliers.
- Supply chain risk associated with isolation gown material suppliers.
Exiger investigated 398 companies in proprietary risk-based software engine DDIQ and conducted an automated and adjudicated risk assessment via proprietary methodology and tools. Exiger augmented these DDIQ findings with open-source research.

Detailed Findings

total risk-assessed companies have only a slightly elevated average overall risk, primarily driven by Foreign Ownership Control or Influence (FOCI) risk. Foreign locations, including in China, contributed to high overall risk ratings.

isolation gown manufacturers in the cohort also have only a slightly elevated average overall risk, also elevated by average FOCI risk.

22 U.S.- AND 4 CANADA-BASED

consignees received shipments of isolation gowns or relevant raw materials originating in China.
China may be a source of both finished isolation gowns and raw materials, as 23 consignees were manufacturers and three were distributors.

of isolation gown manufacturers based in the U.S. or Canada generate less than USD 10 million in annual sales revenue, indicating potentially limited domestic manufacturing capabilities.

of all international shipments identified originated from Indonesia and China, suggesting a potential reliance on these countries by certain consignees for isolation gown materials. These shipments were concentrated among a few consignees, including one U.S.-based manufacturer.

Leading isolation gown manufacturers in the U.S. market operate foreign manufacturing locations, potentially causing their products to not comply with the Make PPE in America Act. This includes three India-headquartered companies.

Isolation gowns and relevant raw materials sourced from a Chinese SOE and a China-based manufacturer that possibly uses forced labor are present in the U.S. isolation gown market.

Five of the 28 identified Exiger client awardees, via contracts data, received elevated risk ratings due to regulatory violations and a bankruptcy.

Exiger’s client procured isolation gowns from a U.S.-based company that was found to operate a manufacturing site in China, thus potentially causing this company’s isolation gowns to not comply with the Make PPE in America Act.

Recommendations

Exiger identified potential next steps to mitigate risks in the isolation gown market, including:

Determine if procuring from U.S.- or Canada-based manufacturers and distributors that do not have foreign subsidiaries and do not source from China can meet the client’s demand.
Explore the viability of purchasing isolation gowns from small- and mediumsized manufacturers based solely in the U.S.
Work with past suppliers of Exiger’s client that have foreign locations to identify if their gowns are compliant with the Make PPE in America Act.
Avoid sourcing from suppliers that are known to procure isolation gowns or raw materials from risky entities.

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