COVID-19 Response

In December 2019 and January 2020, a novel coronavirus spreading through Wuhan, China began to make global headlines.

In February, Helena began to receive warnings from Members including Justin Lewis-Weber and Daniel Schmachtenberger, who drew attention to the disease’s potential for exponential spread. Early analysis indicated that the risk was under-appreciated, particularly as statistics from the Diamond Princess and Northern Italy outbreaks suggested that the coronavirus’ case fatality rate could hit 1-2% with a functioning hospital system, and get as high as 8-10% during an ICU-overwhelm scenario.

In early March, Helena Members began reaching out asking for assistance with getting medical supplies to hospitals. As the pandemic began to spread, global demand for PPE rocketed upwards, and hospitals were caught off guard.

In response, Helena began searching for stockpiles of PPE or distributors with close manufacturer relationships. Within 24 hours, we had located more than enough supplies to fill the demand we’d been contacted about – and proceeded to connect the two parties — hospital purchasing departments and PPE suppliers — directly.

Unfortunately, hours and days went by. While supplies of PPE at the hospitals continued to run desperately short, no transactions were executed. Hospitals were moving too slowly – committed to outdated best practices for purchasing that made sense in the normal world, but not in a crisis. For every box of masks or gloves, suppliers suddenly had dozens, even hundreds of buyers. Insisting on examining samples, paying after receiving delivery (as opposed to before), and other precautionary steps meant getting shut out of the market. Worst of all, hospitals were often being outbid by profiteers ready to pay cash immediately, hold masks or gowns in a warehouse for a few days or weeks, and then flip for a profit as prices continued to rise.

Frustrated by this lack of action, Helena decided to use some of its own operating funds to buy 500,000 gloves from a depot in Virginia, and ship them to a group of hospitals on the East Coast. We promised to take the risk of fraudulent supplies and get paid back only after the hospitals had taken delivery.

In other words, Helena was offering emergency, philanthropic bridge financing – to close the gap between supplier and buyer, and get goods flowing to the front line as quickly as possible.

Meanwhile, as COVID numbers climbed, hospitals were tearing through their supplies of PPE at record pace. And since hospitals like to minimize costs, they do not keep large, potentially superfluous caches of PPE on hand.

For hospital procurement departments without global sourcing networks, or the capacity to conduct due diligence on new companies claiming to have legitimate supplies, restocking had become extraordinarily difficult.

Prices on basic staples like surgical masks, once available for pennies, had skyrocketed above $1. More protective N95 masks were climbing in price by the day, from $1.20 to $4.15 to $8.90 to $12, with huge price spreads and minimal market transparency. Supplies would often be available for mere hours, snapped up by foreign governments or profiteers – or being oversold to multiple parties. Fraud abounded.

Sadly, the US Government’s Strategic National Stockpile – designed and held to meet crises like this one – was woefully insufficient.

On March 4th, 2020, the Department of Health and Human Services stated that the Strategic National Stockpile had just 12 million medical-grade N95 respirator masks – roughly 1% of what would likely be needed. And without a system to measure real-time PPE need at the care facility level, even this small stockpile couldn’t be allocated efficiently to areas of greatest need.

Internationally, other countries’ governments began aggressively buying PPE from the main manufacturers in South-East Asia, often paying up front to guarantee 100% of a facility’s supply for weeks or months. In addition to further bidding up prices, this made authentic products harder and harder to come by.

And, as manufacturers rushed to expand capacity, the shortages shifted up the supply chain to raw materials like rubber from Malaysia and Thailand for nitrile gloves, to the melt-blown fabric used as a filter in medical masks.

Indeed, even some legitimate mask makers began being sold (or deliberately using) polypropylene instead of melt-blown fabric. Indistinguishable to the end consumer, this inferior material radically reduces the filtering efficacy of masks – meaning hospitals had to worry about buying product that looked and felt legitimate (sometimes even from legitimate manufacturers), but would fail their nurses and doctors in the field.

Amidst this chaos, front-line medical workers from Northern Italy to Manhattan continued to place themselves in harm’s way. Caring for a single COVID patient burns through X/day [let’s get the figures here and explain why – I remember the numbers of masks, gloves required being extremely high due to continual removal and re-application from checking on patients multiple time. As PPE supplies ran out, some hospital workers resorted to extreme measures, like reusing dirty masks, or wearing make-shift cloth coverings – which offer little to no real protection in environments with high viral load.

Observing this, Helena spotted an opportunity.

We were better positioned than most hospitals to find sources of medical supplies, conduct diligence on them, and compare prices to find the cheapest, closest, and most reliable options. Most importantly, we were not bound by rules around standard practices, net-30 procurement requirements. Just like the profiteers, we could move quickly, racing them to snap up stores of supplies and get goods moving to hospitals in need. We also had a higher risk tolerance; we were willing to take losses on some percentage of bad orders in order to execute on good ones more quickly.

As word spread that we were a reliable source of supplies, more and more front-line medical workers, hospital executives, and medical procurement officers started reaching out through warm introductions or by cold-emailing through our website. We were being inundated with millions of units of demand for critical PPE, and we had the supply to fill it. We’d completed a test order, and knew we could buy up gloves, get them to hospitals at zero markup, recycle the funds and do it again. But we were facing a multi-billion dollar wave of need with thousands of dollars in funding – we needed to scale up.

On March 21, 2020, Helena CEO Henry Elkus sent the entire Helena Membership an urgent email detailing Helena’s experience over the past weeks and detailing the plans for a major Helena Project to direct PPE across the country.

The email yielded hundreds of responses, leading to the first instance in Helena’s history in which nearly every Member aided the operations of a single effort.

Helena raised nearly $20m in capital in the ensuing days, working with dozens of members representing fields as diverse as manufacturing, capital markets, storytelling, military logistics, film and television, international non-governmental organizations, intelligence community leaders and public officials.

On March 23rd, 2020, we began operating our bridge financing fund. Armed with this new capital, we had a simple mandate: put critical medical supplies in the hands of the front line workers that needed it most.

However, the flood of inbound supply and demand was starting to exceed our team’s capacity to effectively diligence and triage it. While continually sourcing new supply was proving easy, confirming its legitimacy was not. Similarly, we faced a flood of hospitals in need, but a shortage of team-members that could perform “customer success work” – communicating with the hospitals to give constant updates on what was available, how quickly it could get to them, the state of our due diligence on the source, where existing orders were in the shipment/customs pipeline, coordinating delivery, inspection, payment, and more.

We faced a choice – slow our work to a crawl, or specialize in one part of the procurement chain, and partner with other organizations who could handle the rest. We chose the latter, quickly forming relationships with organizations like Decisive Point (whose team of special-forces veterans were able to liaise with City and State government officials in New York – including by driving vans to warehouses of allegedly legitimate supplies we’d located in Brooklyn, and ferrying them to officials at City Hall in Manhattan for testing), Operation Masks (a non-profit whose Silicon Valley team had built a sourcing network on the ground in China, with on-site representatives to visit manufacturing facilities and negotiate purchase agreements), Solve Together (an NJ-based distributor skilled at identifying “on the ground” depots of goods already imported to the US or neighboring country), and more.

Helena’s role was to help connect these partners with hospitals in need, and supply the critical “bridge” financing necessary to get goods moving. We took on financing risk so that hospitals didn’t have to, and surveyed a wide landscape of options to balance price, speed, and risk. Along the way, we also met and partnered with inspiring groups like Apiary Medical, 100% owned and operated by service-disabled veterans. Sometimes, as with Apiary, these groups would have their own customer and supplier relationships, and Helena would act only as financier.

Sometimes this role was essential to help get supplies to government customers, which were forced in their bylaws to only pay for goods after they’d arrived. Intended to prevent fraud, these “net-15” or “net-30” payment term mandates meant groups like the Department of Veterans Affairs (VA) struggled to obtain supplies in a market where “50% upfront, 50% on delivery” was the norm. Indeed, when Helena financed an Apiary-led order for the VA in April, we were tragically told we were the first group to successfully get a meaningful number of surgical masks to VA hospitals.

As of February 2021, Helena has been responsible for financing the delivery of over 11 million surgical masks, >4.5 million N95s and KN95 masks, >21 million gloves, 1000 ventilators, 5000 face shields, and 3000 bottles of hand sanitizer, for a total of over 37 million units of medical supplies.

Deliveries have gone directly to hospitals and care facilities across the US – from Stockton to Morristown – as well as to State and local governments, including New York City Hall, the State of California and the State of Illinois.

The project has also had failures. One of our biggest occurred in May of 2020. In late April, Helena funded a purchase for ~1.6 million KN95 masks from China for a government entity in the US. While the masks were on the boat to North America, the CDC released their whitelist of approved manufacturers in China. This list contained the names of products/manufacturers the CDC and FDA had approved – it was non-exhaustive and began regularly updated, but the manufacturer our partner had ordered from did not appear on its first draft. This didn’t mean the goods were necessarily deficient – just that they hadn’t been explicitly whitelisted. Understandably, the end buyer cancelled the order, and the price of the masks in question collapsed, leaving our partner holding enormous levels of inventory and our fund a big loss.

Far more meaningfully, Helena was unable to help address one of the other systemic failures of the medical supply crisis – the “long tail” of need. As the PPE industry erupted into chaos, suppliers quickly began to favor large buyers – selling out bulk orders or even whole factory capacity to a single hospital, government, or private distributor. For large buyers, like big city hospitals or government agencies, this was no problem; they were able to meet large “minimum order quantities”, which require purchasers to buy a minimum of hundreds of thousands or millions of units in order to receive any at all.

Sadly, this left smaller hospitals, care facilities, and treatment centers – particularly in sparsely populated, impoverished communities, especially communities of color and Native American reservations – unable to secure supplies. The solution was obvious – pooling the demand from dozens or hundreds of these facilities into a single order, batching the delivery into smaller chunks, and then distributing it among a large group of participants. While we worked to encourage others (especially large companies famous for their distribution prowess) to step in and play this role, we felt unable to play it ourselves – our team was too thinly spread, without logistics expertise or capacity.

As a result, this “long tail” of the smallest, poorest care facilities in the country still struggles to obtain the supplies they need.

Happily, our PPE bridge financing fund has become less important with each passing day.

Over time, a degree of normalcy has returned to the PPE market – traditional distributors have managed to re-establish supply chains, government purchasing and distribution has grown enormously, and new manufacturing firms have sprung up to increase global supply. Hospitals and government agencies alike have adapted procurement methods, and built relationships with new suppliers. As of early 2021, prices have fallen steeply in certain categories like masks. However, they have risen where shortages still exist, particularly in certain products like gloves, syringes, and disinfectant wipes.