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.