Opinion: Wayne Woodard, CEO Argonaut Manufacturing Services
In early September 2020, I wrote an opinion piece titled “Bring Manufacturing Back to the USA” that generated quite a bit of controversy. At the time, I advocated that manufacturing for diagnostics and pharmaceuticals were core competencies that we should not let slip away from our country. The leading arguments against manufacturing in the U.S. were:
- It was too expensive.
- Government bureaucracy was inhibiting establishing and operating manufacturing operations here in the USA.
After three turbulent years of COVID-19, I believe now is an important time to revisit the reasons to establish and keep diagnostics manufacturing in the United States. I will draw on the experiences over these years at Argonaut Manufacturing Services to explain why molecular diagnostic manufacturing in the United States makes sense.
Costs Are Not Always What They Seem
I often hear the comment, “Why do you have a contract manufacturing facility in California?” It is a fair question, of course; it definitely isn’t easy to have a business in California, but I have always felt it is critical to be as close to the innovators as is affordable. Being close to the innovators at this stage in the development of the molecular diagnostic industry is essential as we collectively grow together. Skipping this step in my view is a mistake. In the 1980s and ’90s when I was in the electronics industry in the Bay Area, three of the major contract manufacturing companies were within the same area code as us. They were growing up alongside us, which allowed shared experiences and quick transfer of learnings.
Many people overlook the true landed costs of their product offering. While Argonaut has been pounding the drum on the “Go Ambient” message since 2018, molecular diagnostic shipments around the world still require cold chain logistics that are both expensive and complicated. We talk with clients about this all the time. The true landed costs must factor the total logistics costs including cold chain for all components in a molecular reaction. Removing the true landed cost will eventually catch up with you as your cost structures will be misaligned. To put it simply, being close to the innovation centers in America is a landed cost advantage.
Local Response Is a Faster and Better Response
Advances in video conferencing (Zoom, Teams, etc.) are good, but this doesn’t replace the ability for teams to work together in person — particularly during problem solving. Local business ecosystems facilitate flexibility/problem solving and can shift or share resources far faster than overseas teams.
Changing Governmental Regulations
Regardless of whether you think the U.S. government has become more or less responsive during the pandemic, there is no doubt that there has been an expansion in the amount of governmental grants/money flowing into the Life Science space. Many people have heard me say before, “Life Sciences is the next big thing” and our government is acknowledging the vulnerability that the Pandemic exposed. These two factors are converging and changing the landscape of the manufacturing environment for the better.
Supply Chain Maturity
During the COVID-19 crisis, if we have learned anything, it is that Life Sciences industry supply chains are extremely fragile. We are still incredibly unprepared to support future pandemics, or the explosive growth we anticipate in the coming decade, for that matter. The response by so many companies in Life Sciences to overcome the myriad of obstacles during the pandemic was inspiring to say the least — and was, in fact, heroic! This is worthy of celebrating but let’s learn from this as well.
For far too many years we have become accustomed to “off the shelf reagents and consumables,” a tendency that was born from our beginnings in support of research and development. In that model, if your preferred distributor didn’t have it on the shelf, you went somewhere else to buy it. Moving forward, this model will not be ideal for diagnostic companies or Life Science contract manufacturers. Our supply chains need to focus more on predictability over instant availability.
For us to succeed with this renaissance of manufacturing here in the United States, we need the ecosystem suppliers to improve their capabilities:
- Component purity: We need to know analytically exactly what is being delivered. Molecular diagnostics are technically advanced and regulated. Lot-to-lot variability within the published tolerances of most specs is too wide for performance needs today, and the problem will only get more difficult as we push the envelopes of multiplexing and sensitivity.
- Research Use Only (RUO) or the adage of “molecular grade,” as the name implies, isn’t always good enough to deliver validated assays to a regulated market.
- Logistics: We need predictability in our supply chains. We can forecast our needs and place orders in a timely fashion, but we expect in return to get what we ordered and in a predetermined and agreed lead time. Within the ecosystem, the limits are bound by the weakest members’ forecast or delivery time.
- Accountability: In an OEM business, or a business like ours here at Argonaut, we are fine with a 30- to 45-day lead time but we need to be able to count on the lead time being realistic for every purchase order! Agreeing to supply materials for diagnostics or therapeutics and missing a deadline has a far different impact than missing a deadline for material that is being used in a research grant.
In summary, I believe the pandemic has, more than ever, stressed the need for a strong Life Sciences manufacturing sector in the United States. From supply chain continuity to the current governmental support, the time is now to establish molecular diagnostic manufacturing operations in America. This is a golden opportunity that we should not let slip away with the same excuses we’ve all heard over the years.