Not sure if it was the penultimate episode of “Game of Thrones” or recent press coverage of Ambrosia LLC, which was marketing, and subsequently reprimanded by the FDA, “longevity” blood plasma transfusions for $8,000 that caused me to look more closely at the blood supply industry. And what a strange set of dynamics at work – a product with a relatively short shelf life, largely dependent on donors, and one that appears to have terrific gross margins. With advances in technology and business model innovation, the amount of blood required to meet current needs has dropped dramatically but unfortunately for an increasing number of individuals, their precise blood type has likely become very hard to find.
First, some context. Over 13.6 million units of whole blood are collected every year in the U.S. for the 4.5 million Americans who will require a transfusion which is nearly 40,000 units every day. In order to satisfy that demand, an estimated 6.8 million people donate blood each year, which means that of the 37% of the U.S. population eligible to donate, only 10% will do so. According to the World Health Organization, 112.5 million units were collected in 2017 (equivalent to over 21 Olympic-size pools). Blood, for which there is not a synthetic substitute, has a shelf life of no more than 42 days (platelets are only 5 days) which complicates the supply chain. Blood accounts for roughly 7% of one’s body weight.
The blood collection and bank industry has struggled in recent years. Analysts estimate that revenues were in excess of $5 billion in 2008 and are now well below $1.5 billion, in part due to advances in surgical techniques which simply require less blood per procedure, better electronic medical record capabilities, and the introduction of more “at-risk” economic models causing providers to look harder at blood usage. Blood is one of the most expensive items ordered solely at the doctor’s discretion.
While every hospital has blood bank and transfusion capabilities, the American Red Cross accounts for approximately 45% of all donations, with the balance largely collected by the America’s Blood Center, a national network of 600 non-profit collection centers. There are a number of commercial entities, such as CSL Pharma, which provide blood collection and screening services and will pay for blood donations.
This is where it starts to get tricky. While initial “starter” payments for a unit of blood may be as high as $50, typical payments run closer to $30. Power donors can give twice a week which means people can make over $3,000 per year – which is likely to appeal to the most desperate of us. Analysts estimate that plasma companies, once that unit of blood is processed, sell wholesale immunoglobulin for $300 per unit. Academic research from Case Western Reserve suggests that commercial plasma collection centers are disproportionately located in poor communities, an observation disputed by the Plasma Protein Therapeutics Association (PPTA). The PPTA represents over 750 commercial collection centers.
This is a big business. Globally, there were $32.9 billion of blood products sold in 2017 and Global Market Insights projects that to increase to $42.6 billion by 2021. Worldwide, $7.5 billion of blood products are exported annually so much of what is collected is consumed locally. The U.S. is the second largest blood exporter with $1.1 billion or 15% of the total; Ireland is the clear export leader with $2.7 billion or 36% of all export volume. There is an obvious correlation to beer consumed.
Over the last century tragic events such as world wars drove blood collection innovation. While the first transfusion in recorded medical history was attempted in 1628 shortly after the English doctor William Harvey determined that blood circulates. It wasn’t until 1665 – 37 years later – that the first successful transfusion occurred when another English doctor (Richard Lower) transfused blood between dogs. The first U.S. blood bank was established in 1937 at Cook County Hospital in Chicago.
As many of us learn, and quickly forget in high school biology, there are eight blood types (A, B, AB and O, with positive and negative for each) and over 360 types of antigens according to the International Society of Blood Transfusion, making it a universal yet supremely complex fluid. Type O negative can be given to anyone, while only 3% of people in the U.S. have AB positive blood. Dramatic advances in screening and testing over the last 75 years have nearly eliminated risk of disease transmission via transfusions. The risk of getting Hepatitis C, a viral infection of the liver, is now 1.2 per 100k transfusions per PubMed data.
While advances in blood screening have increased the availability of blood, differences among ethnicities have complicated supply chain issues and caused some heated public debate about the “ethnicity of blood.” Industry analysts point to globalization as having increased the complexity of managing the blood supply. According to researchers at the National Center for Blood Group Genomics, geographic differences due to historic exposure to certain diseases and pathogens undoubtedly led to evolutionary differences in blood types which has been conflated with the role of ethnicity and blood types.
The blood supply chain is further complicated by regional differences in surgical practices. The number of surgeries per 100k of a population tends to correlate to country GDP. According to most recent data from IndexMundi, Ethiopia registered a mere 43 surgeries per 100k (2011) while astonishingly, Australia had over 28,900 surgeries per 100k (2015).
Unfortunately, a significant “driver” of blood needs are traffic accidents. It is not unusual for one victim of a car crash to need up to 100 units of blood. One of the great promises of autonomous vehicles is the expected dramatic drop in traffic fatalities. Perversely, such a development will dramatically reduce the number of life-saving organs available for transplant. The National Safety Council estimates that 380 people are likely to have died on U.S. roads this Memorial Day holiday period. Very sobering.