In Israel's Race to Get Medical Gear, Suitcases Full of Cash Win the Day

After an initial period of confusion, the country now has a procurement war room, but the competition is intense

Shuki Sadeh
Shuki Sadeh
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Protective gear being unloaded at Ben Gurion international airport, April 13, 2020.
Protective gear being unloaded at Ben Gurion international airport, April 13, 2020.Credit: Defense Ministry / Spokesperson Unit
Shuki Sadeh
Shuki Sadeh

About a month ago, Israeli officials were waiting at Ben Gurion International Airport for a plane from Europe carrying thousands of surgical masks to help ease the shortage of protective gear. After a long while, it became clear that it was pointless for them to wait.

The order had reached the airport in Europe, but the masks were never loaded onto the plane. Representatives of a Gulf state had shown up with suitcases full of cash and offered to pay the exporter more than Israel would. The company went with the money.

Corona keeps Bibi in power and unmasks the Mossad

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>> Meet the man hunting down the gear Israel needs to fight the coronavirus

The source of this vignette is a top official at purchasing organization, one of many that have been working around the clock in Israel in recent weeks. It’s clear that the competition for medical gear is fierce.

“The medical equipment market after the coronavirus is entirely different,” says one businessman who imports from China. “There’s no longer anything like 30% down now and 70% later. If you want the merchandise, you have pay up front and only then can you get it. If you don’t pay in advance, someone else will nab the goods.

“For example, [last] week I contacted a manufacturer in China about N95 masks to ask whether my order could be sped up. He said that if I added 20 cents per mask he could arrange it faster. So I paid. Later I found out that someone in the United States lost this order. That’s how it works these days.”

Acquiring the right medical equipment is one of the most demanding challenges of the coronavirus crisis. Health care officials are worried that the ventilators, protective gear, masks, and reagents and swabs for testing will run out.

Israeli organizations compete with each other because the health maintenance organizations have their own procurement arms, as does the Hadassah Medical Organization. Procurement for government hospitals is done by the Health Ministry with the help of a company called Sarel. The Health Ministry has never undertaken such huge purchases in such a short time.

“It’s total pandemonium,” says a source at the Finance Ministry. “The Health Ministry can’t tell us how many ventilators there are at the hospitals, and it appears that the hospitals themselves don’t know. There have been cases where they ordered ventilators but they didn’t order the disposable gear that comes with them, or the electrical equipment to operate the machines.”

An early instance of the disarray occurred when the Mossad last month clandestinely brought to Israel 100,000 swabs needed to carry out coronavirus tests. But Prof. Itamar Grotto, the Health Ministry deputy director general, said after the swabs arrived that they weren’t the kind needed.

PM Benjamin Netanyahu visits the coronavirus ward at the Sheba Medical Center, February 19, 2020. Credit: Haim Katz / GPO

Still, a few days later the Mossad was put in charge of the procurement office established at Sheba Medical Center to coordinate the overseas acquisition efforts. Called the Sheba war room or the Sheba control center, it draws its staff from procurement professionals at the Health Ministry, the Mossad, Military Intelligence, the Sayeret Matkal special operations unit and the Defense Ministry.

Why the Mossad? “The Mossad has a track record for organizing procurement, in part because it does its own procurement,” says a source who was recruited to work in the war room. “That’s the advantage it has over the others. Beyond that, they simply know how to manage operations.”

According to a source in one of the HMOs, it was the same logic behind the recruiting of the Defense Ministry’s procurement branch. “But they also brought in go-betweens – the Mossad and Military Intelligence – maybe because of the tension between the defense and health ministries surrounding the issue,” he says.

“They’re good guys, reservists with ambition, terrific people who work around the clock. They really rescued the Health Ministry at the start of the crisis, when the ministry had suffered a total breakdown and had no idea how to manage such a complex operation. But that doesn’t negate the fact that the Mossad and Military Intelligence people don’t have any relative advantage regarding this issue.”

Mossad misfits

Business executives, some of them in the medical equipment field, also express astonishment at the Mossad’s and Military Intelligence’s role. “What advantage do these Mossad people have over me? I welcome any help, but help can also hinder,” one executive says.

“When you offer more money for merchandise, it causes a serious problem later. All of sudden, [vendors] discover that Israel has a lot more money than the tiny budgets of some other health systems .... After all, in ordinary times we ask for discounts and payment spread-outs. And now suppliers abroad are finding out that there’s loads of money in Israel.”

One of Israel’s major procurement efforts is for ventilators. A month ago the Health Ministry reported that there are 1,500 nationwide, a paltry number amid estimates that Israel could have several thousand people needing them at the same time. The number as of a week ago was about 1,900 after several hundred of the machines were purchased abroad. But the Health Ministry’s goal is 7,000 working devices.

Hasharon Hospital in Petah Tikva, which was converted to treat coronavirus patients, April 13, 2020Credit: Eyal Toueg

Israel aimed to significantly increase the number by ordering from Chinese, German and U.S. makers, but those companies quickly stopped taking foreign orders, and by Passover this month it was clear that importing was impossible. Efforts at developing a local product also flopped.

More recently, Israeli defense companies were brought onboard. Elbit Systems announced that after Passover its IMI Systems would begin to produce 300 ventilators a week, based on a model developed by an Israeli startup. Israel Aerospace Industries has the ability to produce 500 devices a week. But even if they meet their targets, there is still the issue of the disposables that go with the devices as well as training the teams to operate them.

Another significant task is obtaining the materials needed for identifying coronavirus patients. The moment Israel can conduct enough tests, it will be in a much safer position to begin an exit from the lockdown.

This is mainly a matter of swabs and reagents, chemical raw materials used in a test. After the Mossad’s misstep, it appears the Sheba war room is buying swabs at a satisfactory pace and is nearing the Health Ministry’s goal of 4 million. But a continued shortage of reagents is slowing the pace of the tests.

In addition to the swabs and reagents, there are questions about contracting companies to carry out the tests. Thus, for example, the proposal by the Israeli company MyHeritage to carry out 100,000 tests never came to fruition. The Health Ministry preferred to hire the Chinese company BGI to conducts the tests at Israeli HMO facilities and set up a separate laboratory in cooperation with BGI.

However, the BGI contract has stirred criticism because it means providing the DNA data of Israelis to a Chinese company. According to a number of reports in China, in the past, one of the company’s DNA databases for research on pregnant women was leaked.

Masks always a must

The Health Ministry order to wear masks in public spaces went into effect last week and revived demand for masks after the initial surge began to dwindle. At the start of the crisis the Health Ministry told Sion Medical, the largest producer of masks in Israel, that it could now only produce them for use in hospitals.

The masks that had been delivered to stores before the order quickly sold out, in part because of speculators who purchased large quantities to sell later at higher prices.

A Health worker wearing protective gear, Bnei Brak, Israel, April 13, 2020.Credit: Ofer Vaknin

A buyer for a supermarket chain recalls the chaos of those first crisis days. “I spoke with our supplier with whom I had agreed that we would buy a million masks,” he says. “He phoned me, and from the way the conversation went I got the feeling that there was a chance we wouldn’t get the order at all or we’d only get part of it. I asked him where he was and I said, ‘Wait a minute, I’m coming to you.’

“That was at 9:30 at night. He was opposite the Bilu Junction shopping center in an open area. Next to the big buildings stood some semitrailer trucks that had come with masks and were simply unloading them onto other trucks. I came to make sure that everything I had ordered would really be delivered to us. There were 5 or 10 million masks there, and from what I saw he was closing deals on the masks with whoever paid the most.”

The Super-Pharm pharmacy chain anticipated the demand for masks and alcogel and decided to fly in its own supply. “We’re in a period of uncertainty about whether an order will be filled,” says Alex Korzh, the chain’s marketing director.

“A lot of contracts have been delayed, canceled or fall into other people’s hands. So the chain began to charter cargo planes and deal with shipments so we have more control over the supply chain and can be more certain that the goods will reach us.”

The Health Ministry order to wear a mask in public is expected to keep demand strong. Businesses that want to import masks have their eyes on China.

“You don’t understand what’s happening in China,” one businessman says. “Toy factories and many other factories have started producing masks. I know a company that was manufacturing small computers and today they have a production line for N95 masks. They have 46 machines and they can produce 7 million masks a day, and of good quality.”

The mask is also the most popular product for outsiders approaching the Sheba war room or Health Ministry to help procure equipment. Some hope to make a profit and others do it as a public service.

In some cases, celebrities and other public figures have been recruited as intermediaries. Former soccer player Eyal Berkovic asked Grotto a month ago if a friend of his could talk to Grotto about supplying masks. Former lawmaker Oren Hazan says he also came with an offer. “If there’s a need to help the people of Israel, I’m the first to report for duty,” he said.

Serving ministers and Knesset members have also weighed in. Environmental Protection Minister Zeev Elkin made a connection with a researcher from Russia who claimed he had a medication for pneumonia that might be able to treat complications of the coronavirus. But the Health Ministry quickly decided it was unsuitable.

“It has become a real phenomenon,” says a source involved in the work of the Sheba war room. “Every Israeli who knows someone is bombarding us with approaches. At Sheba, we’re getting hundreds a day. The Defense Ministry is acting correctly in trying to rely on known suppliers. An organization we work with in ordinary times gets preference.”

Still, for example, Israel Chemicals helped bring in 50 million shekels ($14.1 million) worth of equipment on 11 planes. Of that, ICL donated 1 million shekels to the effort. ICL is a maker of chemicals, but the state used the company’s connections with businesspeople in China to finesse the orders and fly them to Israel.

Other businesspeople say the procurement system is too tough with people who genuinely want to help. “I offered merchandise – masks and protective equipment for medical teams – but the Sheba war room people refused,” says one who asked not to be identified.

“After that, I found out that in the end they bought the same goods through a third party who bought from me. How does that make sense?”

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