By Katy Stech Ferek
WASHINGTON -- Add one more group to the long list of industries
working to block new tariffs on Chinese imports: medical-supply
companies.
Trade officials have left the pharmaceutical industry and other
pockets within the health-care sector out of the trade conflict,
but dozens of medical supplies -- tongue depressors, exam gloves,
surgical gowns and the like -- used in everyday patient encounters
are among the $300 billion in Chinese imports facing 25% tariffs
under the Trump administration's latest proposal.
Tariffs on these goods would raise costs substantially to
health-care providers, putting further pressure on struggling
hospitals and nursing homes, said Matthew Rowan, president of the
Health Industry Distributors Association, which speaks for
wholesalers that deliver to 210,000 physician offices, 6,500
hospitals and 44,000 nursing homes.
"Health-care products are essential to the nation's pandemic-
and emergency-readiness capabilities," Mr. Rowan said. "The risks
to health care and public health from tariffs outweigh any benefit
to trade or economics."
Mr. Rowan was among more than 300 people who testified on the
proposed new tariffs during seven days of public hearings conducted
by the U.S. Trade Representative's Office, which ended Tuesday.
Companies and individuals have until July 2 to submit written
comments, and the plan could be derailed if President Trump agrees
to hold off on new tariffs during his scheduled meeting with
Chinese President Xi Jinping on the sidelines of the Group of 20
meeting in Osaka, Japan, this weekend.
The Trump administration asserts that the tariffs are needed to
convince Beijing to end practices that harm U.S. companies. At the
hearings, North Carolina-based Parkdale Mills, a 103-year-old
textile company that operates 28 yarn-spinning and manufacturing
facilities in eight states, applauded the Trump administration for
"finally addressing China's massive illegal trade activity in the
textile sector."
Imposing tariffs "could help direct new investment, production
and employment through the U.S.-Western Hemisphere textile and
apparel production chain," said Daniel Nation, the company's
director of government relations, during the hearings. The company
employs about 5,200 people.
Most industries, however, have asked for exemptions from
tariffs.
The medical-supply industry relies on surgical gloves, drapes
and underpads from China. While these goods are "relatively
inexpensive compared with other health-care costs, they are used in
large volumes and will result in a significant cost increase," said
the American Health Care Association, which represents more than
13,500 nursing homes and other skilled-care facilities.
The proposed tariffs would increase costs by millions of dollars
a year for Astria Health, a Sunnyside, Wash., operator of three
hospitals and dozens of outpatient clinics that filed for
bankruptcy in May after bill-collection trouble.
As eastern Washington's largest nonprofit health-care system
with annual revenue of about $240 million, Astria Health treats
more than 340,000 people every year.
"The increase in costs resulting from these tariffs will result
in higher insurance premiums for patients, higher out-of-pocket
costs, and ultimately higher taxes to cover increases in Medicare
and Medicaid costs," Chief Executive John Gallagher said.
The proposed tariffs could increase the cost of medical supplies
at a time when some health-care providers face financial trouble,
including from lower reimbursement payments from government
insurers Medicare and Medicaid that no longer cover what patient
care actually costs.
The level of health-care distress has increased faster than the
overall rate of distress recorded across U.S. industries, according
to the Polsinelli-TrBK Distress Indices report that began tracking
chapter 11 case filings in the fourth quarter of 2010.
"The health-care industry, from where I sit, faces a lot of
pressure," said California bankruptcy attorney Samuel Maizel at
Dentons US LLP law firm.
Medline Industries Inc., which records more than $12 billion in
revenue with its sales of more than 200,000 types of medical-supply
products, imports more than four billion exam gloves and more than
130 million isolation gowns a year. The proposed tariffs on gowns,
surgical drapes and exam gloves alone would increase costs by
nearly $60 million a year, it said.
The Northfield, Ill., company employs more than 15,000 people
and makes some products at 22 U.S. sites. But Group President Jim
Pigott told The Wall Street Journal that labor costs, the lack of
outfitted domestic facilities and U.S. Food and Drug Administration
oversight of new facilities make the idea of starting to produce
supplies here unrealistic.
The cost increases will be tough for his clients, Mr. Pigott
said.
"Hospitals operate on very thin margins," he said. "For nursing
homes, the margins are even more thin."
All of the disposable gloves that California's Shen Wei USA
sells to first responders, labs and the pharmaceutical industry are
made in China. Company officials have looked into moving production
to Malaysia and Thailand, but factories there couldn't replicate
their technology, said Chief Commercial Officer Robert Gaither.
Advanced Medical Technology Association, which represents more
than 400 manufacturers of orthopedic implants, diagnostic equipment
and other medical devices, said that health-care products have
historically been left out of trade developments under the
rationale that "patients should have access to basic human
necessities."
Proposed tariffs on components used to make medical technology,
which would apply to motor parts, circuit boards and other parts,
"should be exempted ... for humanitarian reasons alone," the group
said in a submitted statement.
"These tariffs are not helping our industry compete in China and
are likely to be imposing costs on U.S. health care," the group
said.
--Josh Zumbrun contributed to this article.
Write to Katy Stech Ferek at katherine.stech@wsj.com
(END) Dow Jones Newswires
June 26, 2019 09:23 ET (13:23 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.