Growth Prospect: Blood Supply

Posted on June 13, 2011


Healthcare treatment can get pretty complicated given the technology, engineering and skill required to treat some patients. Yet, some of the most simple aspects can pose the greatest threats to a system.

Case in point:  when I first heard of an American Red Cross blood shortage years ago, I struggled to comprehend. Then I realized there are not many organized suppliers of blood. In fact, most hospitals rely on the benevolence of public donors to provide the majority of blood required for operations and other medical needs. Yes, that’s right:  the supply chain for blood, the most essential of all healthcare “tools”, is reliant on charity.

Hospitals should be worried because charity is hard to predict and control. If I were a hospital still reliant on goodwill like this, I would be scrambling to figure out a reliable source of blood like a home builder looks for a reliable source of 2x4s.  Then I would find a backup supplier.  Then I would find a second backup, just in case.

The dearth of blood caught my attention several years ago, so I went looking for companies that were doing something about it. Haemonetics is a company which assists in blood bank automation, i.e. the collection, storage,  processing and distribution of blood from donors and to users.  Perhaps more ambitious and innovative, Northfield Labs, which went bankrupt in 2009, spent the better part of 20 years developing a synthetic blood product (for FDA approval) which would perform just as blood would and could be manufactured, instead of collected from people.  Ultimately, they could not convince the FDA.

Blood suppliers do exist. Private blood banks sell blood to hospitals, and it is not cheap. Then again, can a price really be put on blood?  In fact, a consolidation of sorts happened in Florida fairly recently when three blood suppliers became one ‘system’. A published report about the Florida blood market noted blood prices in the $185-$200 per pint price range. I wonder whether blood banks collect from donors for free, or whether they pay donors. If true, collecting something like blood for free and then selling it makes such an enterprise a little ethically questionable in my mind. Interestingly, I knew several people in college who sold blood, and other bodily fluids in addition to blood, to make a buck.

I have little in-depth knowledge about the blood supply network, and the economic stability of its prices given the potentially vulnerable supply and potentially erratic demand. Is blood ever traded like barrels of raw crude, like a commodity? Is there an exchange, or worse, a black market for it?

What I do know is if I needed blood like a jeweler needs gold, I would do whatever it took, even consider owning my own supply chain, to ensure an affordable and regular supply of raw materials. For hospitals and surgery centers, blood supply is a huge risk and largely not discussed, but also a huge opportunity and competitive advantage for those facilities who figure out how to improve their position in relation to blood supply and their operations.

Posted in: Growth Prospect