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Business Plan for a Pandemic?
Most Firms Haven't Prepared for Possibility Of a Global Outbreak

By David Brown
Washington Post Staff Writer
Tuesday, May 2, 2006

More than half of U.S. companies think there will be a global flu epidemic in the next two years. Two-thirds think it will seriously disrupt their operations as well as foment social unrest. But two-thirds also say they aren't prepared. One-third of executives surveyed say nobody in their organization has been appointed to plan for a pandemic; another one-quarter couldn't or wouldn't answer the question.

"Corporations are looking at this like deer at headlights," said Tommy G. Thompson, who spent much of his last two years as secretary of health and human services sounding the pandemic alarm and is now doing the same as a private consultant. "They are very skittish. They don't know which way to go. They are hoping the car is not going to hit them."

Pandemic influenza is the latest imponderable facing U.S. business, a form of unwanted globalization that threatens the life and health of even the smallest companies in the most literal way.

Several surveys show that a small but growing number of corporations is convinced -- as many epidemiologists have been for a while -- that a global flu outbreak is inevitable. The uncertainty about whether it will be the H5N1 strain of bird flu, which has spread from Asia into Europe, or some other strain is not stopping them from getting ready.

But how ready they are -- and the readiness of the business world as a whole -- is difficult to assess. The government does not require companies to have pandemic response plans, customers don't demand them, and many boards of directors doubt they are necessary.

Thompson, who heads the Deloitte Center for Health Solutions in Washington, estimates that only one in five U.S. companies "are in good position in terms of being able to react -- and even those are going to have to restructure and improve their plans."

In the past year, federal agencies, public health organizations and consulting firms have begun to provide guidance to businesses. One of the larger consultants is Singapore-based International SOS, which provides advice, clinical services and medical evacuations to about 1,000 large corporations and organizations.

In the past eight months, about 220 of its clients have sought help planning for a pandemic. For $5,000 a year, a company can get a 130-page guide, a weekly e-mail newsletter and a monthly Web-based seminar to provide updated epidemiological data and advice. At the high end, some corporations with unusual vulnerabilities, often because they have factories in Asia, are spending up to $40,000 a month for customized planning, said Tim Daniel, an International SOS executive.

"We are now seeing some organizations put together long-term budgets for pandemic planning -- line items for two or three years -- in seven figures per year," he said.

Current models, based on seasonal influenza and the three 20th-century flu pandemics, suggest that a new and highly contagious virus strain would spread across the United States in about five weeks. It would affect communities for six to eight weeks before receding. There would probably be at least two waves, separated by months.

At least a third of the population is likely to become ill in each wave, with peak absenteeism somewhat higher, about 40 percent of the workforce. Depending on the strain's virulence, 900,000 to 10 million people might be hospitalized, and 200,000 to 2 million might die.

Given this scenario, the consultants say, companies should expect that a pandemic will kill some employees, temporarily cripple workforces, sow confusion and fear, and force people to make harrowing decisions between allegiances to work or family. It would make communication difficult, threaten supply chains, and probably interrupt production of goods and delivery of services.

Manufacturing is especially vulnerable, said Michael T. Osterholm, an epidemiologist and former adviser to the Department of Health and Human Services. Factories increasingly rely on parts made in numerous places, which are then shipped, often from overseas, and assembled into finished products.

In February, the University of Minnesota's Center for Infectious Disease Research and Policy, which Osterholm heads, sponsored a pandemic-preparedness conference for businesses. More than 200 companies sent representatives. Osterholm goes into metaphor overdrive when describing what he told them.

"This is a global blizzard of potentially 12 to 18 months' duration," he said. "This is the grain of sand that is going to bring the huge gear of the just-in-time economy to a stop."

Chelsea C. White III, the chairman of industrial and systems engineering at the Georgia Institute of Technology, agreed, saying many companies have supply chains that are "fragile and subject to ungraceful degradations." One of his favorite examples is Toyota. In 1997, fire damaged a factory that made brake parts, stopping production. Within 12 hours, every one of Toyota's Japanese plants had to stop or slow the assembly of cars, White said.

There may be lessons from history that today's companies find useful. But the teacher isn't the 1918 Spanish flu, which killed an estimated 50 million. It's SARS.

Severe acute respiratory syndrome emerged in China in November 2002. By the following July it had spread to at least 28 countries, infected 8,437 people and killed 813, including nearly 350 in China and 300 in Hong Kong.

Canada had only about 40 SARS deaths. But the outbreak caused a 14-week emergency in Toronto, where 30,000 people were quarantined at home or in hospitals. The city lost nine conventions and 12,000 jobs, and the economy lost $1 billion and took two years to fully recover. Yet in public health terms, the city's response was a nearly unqualified success, and globally SARS was a bullet dodged.

A year ago, the CDC Foundation in Atlanta held a two-day meeting with two dozen Toronto business leaders to talk about SARS. To encourage candor, the meeting was not recorded. But the 13-page report that came out of it, while stripped of company-specific anecdotes, is full of observations about work during a time of plague:

Business becomes a co-leader with government in the public health response to an epidemic. Fear is worse than disease, so communication is key. Password-protected Web sites are a good way to communicate with employees. Companies are better than government or medical institutions at rotating fresh people onto crisis-management teams. Fear of lost wages is the single biggest concern when workers are asked to home-quarantine, so companies should have clear policies in advance.

Thinking about operational decisions -- not buying drugs and equipment -- is the most important thing, the experts said.

Who can work at home? Who needs IT upgrades in advance to make that possible? Who needs to come in? What lines of production or service can be shut down without jeopardizing the entire enterprise? Who are the fourth and fifth understudies, not just the first and second, for key positions?

Nevertheless, some firms are laying in supplies, too. Roche, the pharmaceutical company, reports that more than 50 firms have contacted it about building stockpiles of its antiviral drug Tamiflu (oseltamivir).

"About two dozen have placed orders ranging from a few hundred to hundreds of thousands of treatment courses," said Terence J. Hurley, a Roche spokesman.

Some companies hold dry runs.

The international research and engineering firm SAIC Inc., which has 16,000 employees in the Washington area, periodically "surges the system" to simulate pandemic conditions, said Bowman Olds, the company's emergency operations center manager.

On a Saturday two months ago, SAIC tested its telecommuting capability with a unit that operates in Northern Virginia, Hawaii and several foreign countries to see whether everyone could work outside the office with all necessary functions, programs and communications. Several software problems arose.

"Now we have to go through those and find out how to make them work," Olds said.

Eric Grant, a spokesman for The Washington Post, said the company "is prepared to continue production of the newspaper under various emergency conditions" and "is reviewing its plans regarding how they would apply in the event of a flu outbreak."

The companies that feel most vulnerable are those with large "footprints" in Asia, and they are the most likely to have started planning for a pandemic.

Shure Inc., a privately held firm with factories in Illinois and Mexico that make microphones, earphones and other audio equipment, opened a plant with 150 workers outside Shanghai last July. In September, it began planning for a pandemic.

Its plant managers are learning about flu and how to limit its spread. Each factory now has a five-week supply of protective gloves and masks. Company executives are identifying the product mix they feel must be kept on the market at all cost. The Chinese division has formed a relationship with two private hospitals.

"We are pretty much guaranteed access for our people even if it is a very, very serious situation," said Richard S. Burgess, Shure's vice president for human resources.

Corning Inc. is also deep into flu planning.

The venerable glassmaker from upstate New York makes its money primarily from display technology -- basically glass screens -- made in Asia. Its response to SARS was "organized confusion," recalled James Schuppert, a physician and the company's medical director. "We responded the best way we could. But it was not around a strategy that we could refer to and that already had buy-in from senior management."

Corning's pandemic plan is now long and detailed. It requires plant managers to meet face to face at least once a year with a local public health official. This is especially important in Asia, Schuppert believes, and the company recently audited work sites to make sure it was being done.

"Taking the health officer out to lunch -- that wasn't a practice we used to engage in," he said with a laugh.

Staff writer Susan Levine contributed to this report.

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