LyrArc Article Gist
In a factory the size of 5 football fields located in Gurnee, Illinois, Abbott Labs makes its BinaxNow Covid-19 home tests. Abbott turned out 1 billion tests in 2021 and at one point had 80% of the market. Along with Pfizer vaccine, BinaxNow Home covid-19 tests are a dominant product during the pandemic. Abbott generated a fifth of its $43 billion in revenue from these home tests.
Abbott faced several hurdles along the way. It gained when the US government authorized it to make the test. Yet after vaccination took off by mid 2021 the demand for tests declined and Abbott nearly idled its giant factory in Gurnee. Delta and Omicron variants led to a sudden reversal and surge in demand. Abbott developed its test based on an existing design it used in the US for flu tests, by a company it inherited by acquisition called Binax. To do that test one sends a swab up the nose, add that sample and a liquid mixture to a rectangular paper card, and close the card shut. The liquid then travels up the paper strip, revealing one or two pink lines, one for negative, two for positive. This is done in 15 minutes and the simple design described as a lollipop shape, put Abbott far ahead of competitors. The US FDA authorized Becton Dickinson and Quidel to make the tests before it authorized Abbott, but these rival companies had a poor and complex design.
The Trump administration gave Abbott a $760 million contract to buy 150 million tests for distribution to health departments, long termcare facilities, nursing homes, and schools. And by October 2020 Abbott was already making 50 million tests a month. When it comes to distribution Abbott tapped into its pharmacy connections for baby products such as Similac baby formula. This gave it an advantage over Quidel and others who also lacked the manufacturing knowhow for large scale ramp up. The BinaxNow in pharmacies was sold at $24 for a box of two tests, while government paid $5 for one test. Abbott says it makes $ 7 per single consumer test.
Yet there was one problem waiting to hit Abbott in 2021- demand dried up as the vaccination campaign took off. In fact the plant manager, Mr. Rodriguez, planned to move to another job inside Abbott as production declined. Then came the Delta variant and he was asked to ramp up production again. With Omicron demand soared. The Biden administration committed $3 billion to help boost test production and asked Kroger and Walmart to sell over the counter tests at cost for 3 months. Abbott had to lure workers from Amazon at $25 an hour for the Gurnee plant expansion.
What was learned by the government and Abbott from this experience? The US government now looks for ideas in meeting demand volatility, supply challenges and production needs,. Sustaining production capacity is important for future virus flareups- a new government-industry partnership is required for maintaining test making infrastructure. With government help Abbott plans now to keep the facility at Gurnee operating indefinitely.
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