Before the COVID pandemic, Americans lived their lives blissfully inattentive to and uninformed about what we now know is essential infrastructure: the supply chain. Toilet paper — suddenly scarce at the start of COVID — taught us that the global supply chain can be a capricious, untrustworthy, and sometimes cruel partner.
Today we apprehensively wonder what precious commodity or vital staple will be next. Recently it has been fertilizers and weed killer, fresh on the heels of tampons, which followed baby formula. Energy companies across the country now warn of possible extended power outages going into peak heat and hurricane season as supply constraints have delayed maintenance and renewable-energy projects and could hamper repairs during outages.
The pandemic was the catalyst for the cascade of supply disruptions that revealed and continue to remind the public that globalization and the evolution of business practices has resulted in a supply chain ecosystem that has many flaws.
Lean production practices — just enough staff, just enough inventory just in time — reduces costs but leaves no wiggle room. We rely on fewer suppliers of raw materials and fewer producers of finished product as well as component parts, so losing one manufacturer or region due to weather or world events can severely cut supply. Most manufacturing has moved overseas where labor is cheap, worker protections are minimal, and regulations scant. Plus, it is tough to keep production stateside when some foreign governments heavily subsidize and support their home businesses to establish the country’s dominance in critical global industries — like China has with medical supplies and semiconductors.
Manufacturers in China and East Asia produce 75% of the world’s semiconductors. Continued intermittent COVID shutdowns at China’s factories mean the waits persist for new cars, appliances, gadgets, and anything that turns on. Russia’s war in Ukraine might further strain chip production. Ukraine makes 60% of neon gas, which is used in chip manufacturing, although it is reported some manufacturers have significant stockpiles. Intel CEO Pat Gelsinger now predicts that the shortage will likely persist into 2024.
Computer chips are also used in ventilators, continuous positive airway pressure (CPAP) machines, and many other medical devices. Medical device manufacturers do not have the market clout to be first in line to receive freshly minted chips when competing against auto and consumer electronics industries that spend about seven and 26 times more per year respectively than they do.
Tragic loss is a harsh teacher
Unfortunately, when medical supplies and equipment are unavailable, lives can be put at risk. We learned this hard lesson through tragedy during the first frightening months of the Covid pandemic.
By 2020, almost all personal protective equipment (PPE) was made in other countries and China made half of the world’s surgical masks. When the coronavirus emerged in Wuhan, China rapidly expanded mask production nearly 12-fold. But for months, China hoarded its entire supply, even keeping masks produced by U.S. manufacturers in U.S.-owned factories located in China. Many Healthcare Heroes in the U.S. — we will never know now many — lost their lives because this country did not have and could not make or procure enough PPE. And it was only later that we learned that the reason the Centers for Disease Control and Prevention told the American public that it was not necessary to wear masks during those early months was to reserve supply for healthcare workers and first responders. The public should, indeed, have been wearing masks all along. But there were none to be had.
Consequential medical supply disruptions continue. Most recently in June when a global shortage of contrast media, used in radiology procedures, prompted the American College of Radiology to issue guidelines on alternative methods and case prioritization. The shortage occurred because GE Healthcare was forced to abruptly shutter its contrast media plant in Shanghai due to COVID lockdowns, disrupting 80% of its production.
Recent challenges are daunting. But the reality is, scrambling to find supplies is nothing new for people who work in healthcare. Hospital shortages of life-critical products and drugs have been occurring for decades. There are currently more than 100 drugs listed on the Food and Drug Administration’s (FDA’s) “drug shortage” list. To delve deeper into reasons for and implications of drug shortages, let us consider simple saline.
A mixture of salt and water
Saline, or sodium bicarbonate solution, is essentially a sterile form of baking soda, so you would think we would have plenty. Hospitals use saline thousands of times a day to rehydrate patients, flush wounds, compound drugs, deliver intravenous medications, stabilize patients during surgery, and the list goes on. Early this year, hospitals were busy with the omicron surge when they were confronted with a shortage of saline— solution, vials, syringes and bags— that lasted for several weeks. COVID’s hand was prominent in prompting this particular disruption, not only because of omicron, but because Pfizer Inc., one of the few and largest saline suppliers, needed to shift use of small vials from saline to hold the COVID vaccine.
Surprisingly, this was not the first major shortage for this widely used, indispensable drug.
In October 2017, Hurricane Maria damaged saline manufacturing facilities in Puerto Rico owned by Baxter International, the largest saline producer at the time. All of Baxter’s manufacturing facilities were on the island so there was no back-up and the only other U.S. producer, Pfizer, could not fill the gap. Hospital staff scrambled for weeks to find saline while being forced to devise workarounds and curtail medical procedures. That shortage was prompted by a natural disaster. Incredibly, just five months prior in May 2017, Pfizer experienced a manufacturing issue that sparked a similar shortage.
Saline and other generic, sterile, injectable drugs are among several run-of-the-mill, commonly used medications prone to shortages because they are expensive to produce and store and, as with other generic medications, companies often stop making them to shift to higher-margin items leaving few manufacturers producing each drug. Some manufacturers have used monopoly status to increase prices shamefully (Martin Shkreli).
Amid coping with intense hospital day-to-day challenges, to deal with drug shortages staff must devote time and energy to finding the scarce drug or alternatives, conserving, preparing, or compounding it, sometimes delaying elective care or altering care as a result. Credit healthcare workers for deftly managing supply crises repeatedly for years as the reason why the public has been blissfully unaware of the deficiencies of the healthcare supply chain, at least until now.
Pressing for Action to Address Challenges
This column touches on problems with a limited number of manufacturers, manufacturing sites and suppliers, reliance on overseas producers, and too much focus on cost with not enough on risk. Other supply chain challenges include quality control, regulatory structure and performance, and a fragmented data environment. With so many issues to address, it is important to prioritize.
One critical objective is to increase redundancy: in sourcing of raw materials, production of component parts and finished product, manufacturing locations, and transport routes and modalities. A second priority is to improve transparency. Currently, every player involved in supply chain has its own data system and nobody shares with anyone else. Data is the missing element. It is crucial that all players standardize data and provide other stakeholders with comprehensive access to real-time data to enable supply chain mapping, risk scoring, and more visibility into the flow of goods. Data will enable us to predict, prevent and mitigate shortages of life-critical supplies.
Travis Heider is president and CEO, Pandion Optimization Alliance
Pandion Optimization Alliance has been a group purchasing organization (GPO) since 1946, providing hospitals, health systems, long-term care, behavioral health, and primary care practices with business solutions to help them improve health in their communities. They are equity partners with Premier Inc., one of the nation’s largest GPOs that worked with the previous administration when COVID first disrupted the supply chain and currently participates on the current administration’s Joint Supply Chain Resilience Working Group.
Pandion and Premier will continue to actively advocate for policy changes to improve resiliency in life-critical supply chains and across all markets.n