Is America's Healthcare Supply Chain Stable? Natural Disaster,...

Is America's Healthcare Supply Chain Stable? Natural Disaster, Demand Surges, and Product Quality

By Todd E. Griner, DNP, RN, NEA-BC

Todd E. Griner, DNP, RN, NEA-BC

Over the past four years, current events demonstrate that supply chain stability is one of the most pressing matters facing the healthcare industry. During the past decade, America has experienced product quality gaps and shortages driven by natural disasters, consolidation, and demand for isolation supplies in the face of Ebola, H1N1, and now COVID-19. Globalized consolidation of the supply chain continues to be a driving force. Our system’s fragility requires us to act locally on behalf of our patients and communities to ensure the availability of care to minimize exposure.  

The healthcare system is vulnerable. Hurricane Maria made landfall on the island of Puerto Rico on September 20, 2017. Nine weeks later, in November, the FDA commissioner released a statement on efforts to address the impact of intravenous (IV) fluid shortages, revealing that the medical products industry had significant production presence in Puerto Rico and relied on generator power as the grid rebuild progressed (Gottlieb, 2017). Hospitals, emergency medical services, and manufacturers were forced into allocating rations to ensure the supply of IV fluids was distributed.

Patel et al. (2017) reported on learnings from Ebola in 2014 and H1N1 in 2009. During both public health outbreaks, the demand pressured our supply of personal protective equipment to its limits. The authors asserted that, like most supplies in the United States, healthcare supply-demand drives the production of those supplies. During both events, cost rose as production could not keep up with demand. The recommendations are maintaining reserves, a national rationing process, training staff on multiple forms of equipment, and avoiding single vendor/single manufacturer. The healthcare system can expect disproportionate price increases during scarcity, as seen during H1N1 in 2009 and Ebola in 2014.

"Technology and automation will be facilitators of local supply sourcing, with the advancement of three-dimensional printing and capital investments seeking to colonize space, driving improvements in onsite manufacturing out of necessity"

The supply chain is also local, with many facilities relying on just-in-time delivery models. Local shortage can occur due to warehouse fire, warehouses becoming inaccessible, or a natural disaster. While disruptive, local supply chain breakdown can be more quickly resolved than regional and global disturbances.

Another aspect of the supply chain risk is product quality. In October 2016, the Centers for Disease Control and Prevention warned that 60% of the 250,000 annual open-heart surgery patients might have been exposed to an infectious bacteria, which may not produce symptoms until five years of exposure. Hospitals were asked to individually notify patients exposed to the supply and provide information on actions’ symptoms and advice. A mass tort emerged against the manufacturer after determining the contamination likely occurred during production from a contaminated water source in a factory in Germany (Humman, 2017).

Seventy-six people died following a 2012 nationwide outbreak of meningitis after being exposed to tainted drugs. The pharmacist was tried and acquitted of murder but was convicted of racketeering, conspiracy, and mail fraud (Durkin Richer, 2017). At least 700 additional people were infected (Jolicoeur, 2017), and 13,534 people were potentially exposed (Smith et al., 2013). A $200 million settlement set up a fund to support those who died or became ill (“$200 Million Settlement,” 2015).

Mitigating Shortage and Quality Risk

Bringing end-to-end visibility from supplier to patients is necessary for three purposes: anticipating risk, reacting quickly, and minimizing impact. These are the primary risk mitigation goals. In anticipation of demand surge and shortage, risk mitigation options include forecasting appropriate days-on-hand inventory and sourcing to avoid disruptions. Maintain awareness of where suppliers are located and if they are exposed to disturbances. Ensure that supply chain vendor contracts require monitoring and timely notification of a threat to the availability of patient care supplies, ensure significant suppliers have a disaster recovery plan in place and avoid reliance on a single supplier for essential products. When feasible, it is wise to source from two suppliers located in different geographical regions. To prevent price gouging during scarcity, it is preferable to review contracts with suppliers to ensure price stability clauses. In partnership with your supply chain vendor (likely a multinational vendor), establish disruption drills testing resiliency during a simulated supply chain logistic breakdown in three areas: supplier failure, peak demand, and transportation failure.

An example of regulatory support for supply chain safety and stability is captured by the spirit of the Drug Supply Chain Security Act. This legislation was passed in 2013 after the 2012 meningitis outbreak. The act formalizes that hospitals have an obligation to their patients in pharmaceutical sourcing and requires purchasing from approved manufacturers (Pew Charitable Trusts, 2014; U.S. Food and Drug Administration, 2017). 

2020 and Beyond

The continued risk and uncertainty with the supply chain must be accepted. A pandemic, regional or global conflict or transportation network breakdown would affect all healthcare providers, and we would all be facing similar challenges. Most recent commentators on the state of supply chain risk are convinced supply chains will continue to globalize, and competition will force companies to a single source, threatening sustainability and expanding the risk of any quality failure.

Globalization of the supply chain will likely continue until such time of unacceptable risk or, more likely catastrophic failure. I hope that the supply chain will follow a trend similar to the “eat local” phenomena and that supplies will be produced closer to where those supplies are used.

Technology and automation will be facilitators of local supply sourcing, with the advancement of three-dimensional printing and capital investments seeking to colonize space, driving improvements in onsite manufacturing out of necessity.

Weekly Brief

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