Medtronic, other med-tech firms fear parts shortage if Trump invokes wartime production law

As President Donald Trump considers forcing companies to build ventilators for American hospitals, the 70-year-old law that gives him such power could unravel the global supply chains that produce the lifesaving machines.

Trump is under pressure to use the Defense Production Act to compel manufacturers of ventilators and other medical equipment to direct their products to the U.S.

So far he has used the 1950 law sparingly. The push for him to do more is one example of a resurgent economic nationalism brought on by the coronavirus pandemic. Around the world, government leaders are vying for scarce resources that could save the lives of their citizens.

Medical-device firms such as Fridley-based Medtronic, which make their products with parts made in many countries, oppose expansive use of the law, arguing it could break their supply chains.

"If we do something to marginalize the rest of the world," said Rob Clark, a Medtronic spokesman, "that's going to create a problem."

Medtronic's operational headquarters are in Minnesota. But its main ventilator, the PB980, is assembled in Ireland. The machine, which sells for as much as $50,000, contains 1,700 parts from 100 suppliers in 14 countries.

If the firm's new ventilators can go only to the U.S., Clark said other countries that supply parts for the machines — and may need the final product just as much — could retaliate.

Such concerns are not far-fetched. Romanian authorities in recent weeks halted a shipment of ventilator hoses owned by Switzerland's Hamilton Medical AG, on grounds they were important medical equipment, the company's CEO, Andreas Wieland, told Reuters.

The growing conflict of national interests shows in a recent study of trade barriers by the University of St. Gallen in Switzerland. The study found that countries have announced 46 export curbs since Jan. 1, 33 of them in the past month.

Hoarding or retaliation in the battle for the world's inadequate supply of ventilators "is obviously a big concern," said Robert Kudrle, an international trade specialist at the University of Minnesota. "I think there is a big danger of everybody being worse off than they were before. This is a three-way collision of economic nationalism, global trade and technology."

In the U.S., the Defense Production Act, based on laws used to ramp up production during World War II, was enacted during the Korean War. At the time, most U.S. companies received parts and supplies from other U.S. companies.

"Clearly when the Act was promulgated in 1950, multinational corporations were not necessarily on everybody's mind," said Oren Gross, a law professor at the University of Minnesota. "The gaze was inward rather than outward-looking."

Still, the law is written broadly enough that a legal case could be made for forcing a foreign company with an American presence to make products specifically for the U.S., Gross said.

"The main idea of the law is to give priority to the government over other private sector clients, but I would think that based on the broad language of the law you can extrapolate from that and the government can say, 'We need it and you can't sell it outside,' " Gross said.

Whether such a move is politically feasible, or truly serves the purpose of bringing more ventilators to the U.S., is another question.

Scott Whitaker, the CEO of AdvaMed, the medical-device industry's trade group in Washington, said he has seen no indication the White House will make that move, despite the pressure, because someone in the administration understands the supply-chain risks.

"They have not done it, and I think it's because they do understand," Whitaker said. "There's not any need for it."

Ventilator manufacturers — about a dozen of which are represented by AdvaMed — have already quadrupled their production since last year, Whitaker said, from around 700 ventilators a week to close to 3,000 per week.

"The goal is to be 10 times or 15 times what we are in a normal year, scaling to 10,000 or 15,000 a week," Whitaker said. "Right now, you can't have any supply-chain disruption."

If the availability of parts for ventilators becomes restricted, which is possible if other nations retaliate against U.S. use of the Defense Production Act, production will stall and targets won't be met, said Karthik Natarajan, a professor of supply chains and operations at the University of Minnesota's Carlson School of Management.

Supply chains for medical devices are especially complex and took years to build. They would take similar amounts of time to recreate in the U.S., Natarajan said.

"It is not feasible in the short term to nationalize the supply chain" for products as sophisticated as ventilators, Natarajan said.

That, Kudrle explained, sums up the dilemma of global companies facing economic nationalism.

"People's natural inclination is first to their families," he said, "then their state and then international cooperation."

Jim Spencer • 202-662-7432

Adam Belz • 612-673-4405