Providers push for onshoring PPE, pharmaceutical production
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June 27, 2020 01:00 AM

Providers push for onshoring PPE, pharmaceutical production

Alex Kacik
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    A woman sewing a surgical gown.
    Bon Secours Mercy Health

    Bon Secours Mercy Health partnered with an idled cheerleader uniform manufacturer in Ohio to produce reusable surgical gowns.

    Most surgical gowns, like much of healthcare’s medical supplies, are made in China. As the global pandemic took hold, health systems like Bon Secours Mercy Health were forced to turn to unlikely sources.

    The Cincinnati-based integrated health system helped transform an Ohio cheerleader uniform factory idled by COVID-19 into an isolation gown manufacturer.

    After securing a fabric supplier in South Carolina to round out its own supply chain, Bon Secours Mercy is now talking with other regional health systems to gauge their interest in a sustainable domestic source of PPE, said Steven Bodily, chief operating officer of supply chain at Bon Secours Mercy.

    “We are acknowledging that we would pay a premium to do it here. This situation has clarified that it is something we are willing to be at risk for,” he said. “By fabricating PPE in a partnership and weaning ourself off of disposable equipment, we are looking at how soon we can become independent from Chinese fabrication. Further out, we are seeing what we can do for others as well.”

    They manufactured reusable AAMI Level 2 isolation gowns—the second-least protective on a four-point scale—that allowed for up to 20 uses instead of one. But even with 200 sewing machines roaring 24 hours a day, they couldn’t keep up with demand, Bodily said.

    The health system has been able to source some face shields and surgical masks by directly contracting with manufacturers in Europe, Southeast Asia and South America, but demand for isolation gowns significantly outpaced the available supply.

    Bon Secours Mercy Health

    Bon Secours Mercy Health chose to manufacture isolation gowns that can be reused up to 20 times.

    “Gown production is the real Wild West,” said Bodily, adding that some health systems wired money to nontraditional suppliers and hoped PPE would pass customs. “A lot of them got burned, spending millions on wire transfers that turned to dust.”

    COVID-19 has further strained the fragile links of the healthcare supply chain. Most U.S. medical supplies and pharmaceuticals are sourced from Chinese producers that either halted exports or stopped manufacturing altogether, resulting in widespread shortages of essential equipment and medicine.

    While some domestic alternatives materialized prior to the crisis, many providers are hoping a renewed, broad push to onshore more production will translate into a more reliable and efficient supply of equipment and drugs. But some skeptics argue that the U.S. manufacturing infrastructure is not equipped to handle that transition, and the healthcare industry will ultimately revert to lower-cost foreign manufacturers.

    “We need a complete reevaluation of the supply chain in the coming months and years. There is no question we have to have more domestic production,” said Dr. Susan Bailey, an allergist and newly inaugurated president of the American Medical Association. “Relying on distant vendors or other state or federal government entities for PPE is not going to be enough anymore.”

    Coming up short

    When the pandemic first hit, Bailey’s medical office in Fort Worth, Texas, had plenty of alcohol and gloves, but only one box of N95 respirators left over from the swine flu scare.

    Her practice couldn’t get any more for weeks, partially due to the lagging federal response, Bailey said. “The federal government needs to develop a tracking system so we know who needs what first,” said Bailey, asking if a hospital needs a duplicate order when a private practice doesn’t have any PPE. “We have to make sure we are not competing with government entities over the same crate of masks.”

    U.S. Rep. Katie Porter (D-Calif.) harped on the Trump administration for not invoking the Defense Production Act sooner to facilitate domestic production as well as for mismanaging ventilators and PPE.

    Despite a public health emergency declaration by HHS Secretary Alex Azar on Jan. 31, President Donald Trump did not declare a national emergency until March 13 and didn’t issue his first order under the DPA until early April, Porter noted.

    Meanwhile, U.S. ventilator exports jumped 22.7% from January to February while mask exports to China were more than 1,000% higher than the 2019 monthly average, per the administration’s direction, Porter’s analysis revealed. Ventilator and mask imports fell by more than 10% from January to February.

    While healthcare companies and Americans suffered from the fragmented federal response, the pandemic illustrated the supply chain’s systemic vulnerabilities, experts said.

    One of the issues is redundancy. Commoditized medical supplies and generic drugs yield low margins, which drives out competitors and often leads to there being one or two suppliers. Charging more for generic drugs may help, the Food and Drug Administration suggested.

    “The last 20-year shift toward sourcing in Asia, specifically China, is clearly at its end because of the underappreciation of supply chain risk management when you have a single-source point of failure,” Paul Bingham, director of transportation consulting at IHS Markit, said during an April webinar hosted by the National Academies of Sciences, Engineering and Medicine.

    Hospitals have cut costs, in part, by ordering supplies when needed rather than stockpiling goods. Just-in-time inventory, sole-source contracting and clustering manufacturing and raw material sources have handcuffed the supply chain in times like these, said Brandi Greenberg, a vice president at the Advisory Board.

    “We have a supply chain that has been fundamentally designed for maximum efficiency; in doing that it loses resiliency,” Greenberg said during a May webinar, adding that a lack of transparency also hinders flexibility. “That is something that we as a national and global health community have to address.”

    Another issue is visibility. There isn’t readily accessible information on production sites, regardless of whether something is produced domestically or abroad, said Jody Hatcher, the former president of supply chain services for group purchasing organization Vizient.

    A national supply chain czar can fill that void, he said. “What’s needed is some sort of czar or prime vendor that coordinates supply chain efforts across hospitals, GPOs, manufacturers and state and federal government agencies to match demand and availability,” Hatcher said. “In absence of national coordination, fiefdoms will compete and undermine the collective interest of the country.”

    Quality issues, particularly for sterile products, continue to plague the supply chain. Healthcare wholesale distribution giant Cardinal Health recalled more than 9.1 million gowns in January, stemming from lax safety precautions at a Chinese production facility.

    Cardinal received a tip in late 2019, that one of its manufacturers, Siyang HolyMed in China, was using two unauthorized sites that lacked appropriate hand-washing stations, had open windows and food was kept in the manufacturing area.

    But quality issues hit the U.S. too. Pfizer’s McPherson, Kan., plant, where the organization makes a significant portion of the country’s injectable opioids and anesthetics, was a cause of the recent shortage of injectable opioids.

    The facility, which was acquired as part of the drug manufacturer’s acquisition of Hospira, has received multiple warning letters and citations since 2016. Regulators cited a lack of proper oversight that led to product contamination.

    Some of the most egregious and problematic shortages have occurred due to manufacturing problems and poor quality at U.S. factories, noted Erin Fox, a drug shortage expert and senior director of drug information and support services at University of Utah Health.

    “I’m worried that in the push to onshore, we’ll lose sight of the need to increase transparency and quality,” she said.

    The FDA’s task force on drug shortages recommended quality ratings last year, but nothing has been done to advance that proposal. Quality ratings are needed to give incentives for higher-quality production, Fox said.

    Adventist Health is one of 15 health systems partnering with group purchasing and consulting organization Premier to buy a minority stake in Prestige Ameritech, a domestic manufacturer of PPE that also sources its raw materials from the U.S. Premier is also partnering with domestic generic-drug manufacturers.

    When demand for PPE spiked, it revealed a tenuous relationship between Adventist’s distribution partners and their manufacturers, said Justin Freed, vice president of supply chain at Roseville, Calif.-based Adventist.

    “If our domestic suppliers can produce quality product and keep up with demand, obviously we want to rely more on them than foreign manufacturers, which we have been burned on,” said Freed, adding that the pandemic also spurred a real-time inventory tracking system across its hospitals. “We might have to pay a slight premium because of the cost of labor and raw material, but I think it is worth paying 10% to 20% more to make sure we have a secure supply.”

    Not all organizations will be willing to absorb that premium, said Scott Knoer, CEO of the American Pharmacists Association who recently left his post as chief pharmacy officer at Cleveland Clinic.

    “Pharmacists have too much pressure for cost-cutting,” he said, noting that a broad shift to a more expensive supply chain is unlikely without the right incentives.

    Jeff Rosner, executive director of pharmacy contracting and supply chain analytics at Cleveland Clinic, spoke with a local manufacturer of PPE that ramped up production during the SARS crisis. But when the crisis subsided, requests for support were unfulfilled, Rosner said.

    “Virtually everyone walked away because the Chinese product was significantly less expensive,” he said.

    Addressing dependency

    Only 28% of the manufacturers that make the ingredients for pharmaceuticals were in the U.S. as of August 2019, according to the FDA. About 60% come from Europe, India and China. As for finished drug product manufacturers, around half are based in the U.S.

    “Our dependency on other countries for our supply chain has made us consider what this looks like when this happens again and if we pivot,” said Dr. Allison Suttle, chief medical officer at Sanford Health, adding that the generic- drug manufacturing coalition CivicaRx has helped Sanford stem drug shortages. “It has definitely been eye-opening when you think about the base components of medications that are only made in a couple of countries.”

    Onshoring is one component, but not a silver bullet, Rosner cautioned. Providers should diversify their suppliers by geography. But that requires collaboration between the FDA and other agencies to ensure the quality and integrity of products, he said, adding that some areas could still be vulnerable to public health crises or natural disasters.

    Lengthy FDA regulatory approvals also stand in the way of new U.S. production sites, said Rosner, who backs granting tax breaks or supporting production models like continuous manufacturing to facilitate onshoring.

    “There will need to be a balance, but just-in-time inventory will continue,” he said. “We will enhance what we are doing from an emergency preparedness standpoint so we have more product available—less on the pharmaceutical side and more on the PPE and equipment side—but we don’t have the physical capacity to carry large amounts of products. And it would be unfair to other customers to stockpile.”

    In addition to the Defense Production Act, the Trump administration plans to ease or eliminate shortages of critical medicines for COVID-19 patients by increasing U.S. production of their active ingredients and the chemical compounds needed to make them. A new four-year agreement would pay $354 million to a team led by Phlow Corp., which will build a new Virginia facility. The agreement could be extended up to 10 years at a total cost of $812 million.

    But the plan was opposed by dozens of pharmaceutical industry groups and patient advocacy associations who wrote in a letter to Trump that “proposals to drive all manufacturing to the United States not only overestimate the potential feasibility and underestimate the time and effort it would take to make such changes, but also misunderstand that a diverse pharmaceutical supply chain is precisely what enables the industry to respond quickly and make adjustments in its supply chain sourcing during natural emergencies and global public health crises.”

    Ultimately, providers hope that the pandemic produces a more transparent and reliable supply chain. But they will be fighting against the urge to revert to business as usual, former Vizient CEO Hatcher said.

    “We are at an inflection point,” he said. “We need greater visibility in managing our supply chain in time of crisis.”

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