The world's supply of cotton is grown primarily in three countries: China, India and the U.S. While often associated with clothing, cotton is also a necessary input for health care. The softness, loft and breathability of cotton make it ideal for wound care in the form of bandages, often treated with a anti-infection product, and gauze. Cotton's absorbency also makes it useful for sponges in surgical settings. Of course, it is also used to clean injection and incision sites to limit chance of infection; tops the swab for COVID testing; and many more uses.
The price of cotton has been surging since early summer and recently has gone vertical. Cost increases have appeared in both the total import value and unit import value of "Other Wadding Gauze and Similar Items" and in unit import value of "Laparotomy Sponges." In other words, there is both higher demand for cotton used in health care setting as well as higher unit costs.
Unlike labor costs, supplies are a very small part of health care's overall operating expenses. The low tech nature of supplies makes them ideal candidates for off-shoring. With commodity prices spiking, supplies will join labor as another inflation headache in an industry that sets prices once a year. Of course, as we pointed out in last week's 4Q Idea Hunt, there is more than one way to skin the inflation.
Call with questions.
Emily Evans
Managing Director – Health Policy
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