By Eric Brand, PhD
As we discussed in a previous blog, the emergence of COVID-19 has had a tremendous impact on the Chinese herbal supply chain. Over the past several weeks, the situation has continued to evolve, and we seem to be entering a surreal “new normal.”
Many of the national shortages of certain herbs have largely been resolved, though a few individual herbs and formulas remain in a situation of high demand and low supply. Overall, the surges from panic buying are leveling off, and many practitioners have scaled back their practices in favor of telemedicine. Consequently, things are gradually calming down at the herbal companies and we can all take stock of the strange new world that surrounds us.
Several weeks ago, Chinese herb suppliers experienced an unprecedented surge. Several individual herbs essentially sold out on a national scale; the vast demand for Chinese herbs in America even became a feature story in Asian newspapers. Based on our own sales volume, sales of herbs such as Huang Qin nearly tripled in March and April compared to the same time last year, while sales of Ban Xia and Chen Pi doubled. However, herbs such as Tu Si Zi decreased by about 40% during the same period when compared to last year, reflecting a difference in the clinical focus of practitioners. Similarly, formulas such as Si Wu Tang were down nearly 50% in March and April compared to last year, while Yu Ping Feng San sales were at least 700% higher (and probably would have been even higher if it didn’t keep selling out).
These irregularities in relative volume easily disrupt the supply chain. Under normal circumstances, formulas like Pu Ji Xiao Du Yin and single herbs like Chuan Xin Lian sell very slowly, but in March and April they were flying off the shelves. Jin Yin Hua and Lian Qiao became the new toilet paper. At Legendary, we were hit particularly hard because we have a strong price advantage on several of these items, and maintaining stock was extremely difficult at first.
Just getting orders out the door and keeping up with email was a challenge for many companies in March and early April, but most vendors are now catching up with their backlogs. No one is sure whether the coming months will yield another surge, and the long-term impact of the virus on acupuncture clinics remains uncertain. This temporary calm after the storm allows us to regroup and come together as a community, but everyone remains nervous that new waves will continue to impact our lives in unpredictable ways.
Premium Hua Ju Hong (photo credit: Eric Brand)
A Perfect Storm
Unfortunately, the recent crisis in the Chinese herbal supply chain was dramatically compounded by Trump’s trade war with China. Just prior to Chinese New Year, a 15% added tariff that had been in place for most Chinese herbs in 2019 was finally reduced to “only” an additional 7.5%. Consequently, many herbal companies hesitated to order large quantities in 2019 due to the high tariffs and waited to ship until 2020 to minimize price increases. This caused the American stock of Chinese herbs to be much lower than normal just prior to the hammer strike of the virus.
Since the crisis first hit China before blowing up on a major scale in the US, supply chains were disrupted by the virus. Many smaller herbal factories were closed, while our supplier was commissioned to make a stockpile of herbs for Chinese hospitals and was unable to handle new outside orders. When things reopened, it took time to return to normal. Ships were fewer, ports were backed up, and express shipments remain much more expensive than usual due to a severe reduction in air traffic between China and the US. While many of the delays and shortages are now slowly improving, practitioners around the country may be hit by both the tariffs and the higher costs of rush shipping for herbs that are still prone to shortages.
Fang Feng from the 18th century collection of Sir Hans Sloane, stored in the Natural History Museum in London (photo credit: Eric Brand)
Which herbs are most prone to shortages?
At Legendary, we are fortunate to have a fresh batch of herbs that just arrived a few weeks ago, so most normal herbs are now abundant without inventory shortages. At the peak, many companies ran out of herbs such as Huang Qin, Lian Qiao, Jin Yin Hua, Zi Wan, Kuan Dong Hua, Pei Lan, Huo Xiang, Fang Feng, and She Gan, and formulas such as Yin Qiao San and Yu Ping Feng San were sold out from many suppliers. In particular, most of the shortages have centered on heat-clearing, exterior-resolving, and aromatic damp-transforming herbs, as well as herbs used to transform phlegm and relieve cough.
Now that most companies have been able to replenish their core inventory, high volume herbs such as Huang Qin have better supply, but the uncommon herbs remain difficult to maintain in stock. In particular, ingredients in formulas that received a lot of visibility in the media remain prone to shortages, such as the ingredients in Qing Fei Pai Du Tang, which was a formula recommended by China’s National Health Commission and the National Administration of TCM.
The main herbs that are still in limited supply are generally herbs that are not frequently used outside of specific contexts, such as Kuan Dong Hua and Zi Wan. These ingredients had a run because they are in the formula Qing Fei Pai Du Tang. Since this formula was generally not available pre-made prior to the crisis, everyone built it from singles, and the demand for herbs like Kuan Dong Hua, Zi Wan, and Shi Gao exploded. Shi Gao doubled in its sales volume, while Huo Xiang went up threefold. Few companies know how much the demand for Zi Wan and Kuan Dong Hua might have truly increased, because no one could maintain enough stock to find out.
Along with Qing Fei Pai Du Tang, another formula created by the Hubei University of Chinese Medicine (often called “Wuhan #2”) experienced a similar surge. The Wuhan #2 formula was widely circulated in the Chinese medicine community, and was extensively used by medical workers in Hubei province during February and March. This formula is a modified Yu Ping Feng San formula. Due to its popularity, Yu Ping Feng San itself sold out from many suppliers in pre-made form by early April. Next, even the common ingredients in Yu Ping Feng San (Fang Feng, Huang Qi, and Bai Zhu) sold out from many suppliers. In addition to these ingredients, the Wuhan #2 formula also contains Jin Yin Hua, Pei Lan, Guan Zhong,and Chen Pi, all of which had vast surges in demand. The demand for Pei Lan was at least 30 times more than normal, and it quickly sold out from most suppliers.
At Legendary, we’ve largely managed to keep all these ingredients in stock, but our supply of Kuan Dong Hua, Zi Wan, Pei Lan, Guan Zhong, She Gan, and Huo Xiang remains below our target. Our supplier Tianjiang Pharmaceutical produced a large batch of the Wuhan #2 formula and donated more than 40,000 doses to medical personnel in Wuhan and Italy in February and March. We now have the #2 formula in a pre-made form, which reduces the pressure on the single herbs Pei Lan and Guan Zhong; however, they remain in short supply as single herbs from us and most other suppliers.
Now that things have calmed down, it is anticipated that most of the herbal shortages will resolve. The current prices of some herbs in China have already risen due to the crisis, such as Jin Yin Hua and Ban Lan Gen. At Legendary Herbs, we have relatively stable and solid pricing on granules due to long-term contracts and good relationships, and we will maintain very good prices despite the impact of the tariffs and some increased raw material costs. However, the raw herb market will more quickly reflect the volatility in prices, and practitioners should expect certain herbs to increase in price over the coming year, especially in raw form (decoction pieces).
Most importantly, this crisis represents an opportunity for us to stick together as a community, to support each other and emerge on the other side. At Legendary, we are maintaining social distancing, donating masks to medical workers, and trying our best to keep our workers healthy and our customers’ clinics stocked with premium herbs. Many of our colleagues with herbal supply companies are focused on maintaining adequate stock despite the trade disruptions and added tariffs, and we greatly appreciate all the clinicians and frontline responders that are working hard to help humanity during this unprecedented time. Stay safe out there!