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For the medical supplies industry, the supply chain is back to business as usual

The medical supplies industry is returning to the supply chain strategies it used before COVID-19, despite current severe challenges, according to an expert in the field.

“The industry in general is back to exactly where it was before COVID,” says Michael Einhorn, president and CEO of Dealmed, a large independent distributor of medical supplies in New York, New Jersey, Connecticut and Pennsylvania. “There have been very few industry-wide changes. Much has been said about supplier diversity, nearshoring and friend-shoring. But the thing is, outside of those Band Aid supply fixes, there really hasn’t been much change in the healthcare industry. Everything is status quo. »

Einhorn has been a supporter of changes in supply chain management in the healthcare industry for years, and he sees the need as more pressing than ever.

“This industry still faces the greatest number of supply issues,” he said.

Fixes are hard to find though. Einhorn points to proposed legislation in Washington, DC, that would introduce a fast-track customs system where the appropriate government agencies would authorize the clearance of medical supplies before imports such as toys for faster entry. This, he says, is actually a sign that not much is changing in terms of sourcing and execution.

“If you think about it, a lot of products have to be made in China, or somewhere else overseas, so that doesn’t solve the proximity problem. A Fast Pass simply makes it easier for products to come from other countries. It is very revealing that it is as if nothing had happened. We just make it easy. It seems to me that the industry is operating with a just-in-time model, just like it was before COVID.

It’s not easy or quick to move production out of China, with a few exceptions. According to industry market research firm IBISWorld, there were 971 medical device manufacturing companies in the United States in January 2022, an increase of 1.9% from 2021.

He says much of the resistance to change is driven by the complications of manufacturing in the United States, including regulatory restrictions. Sometimes it’s legitimately easier to make items overseas, like nitrile gloves, because the raw material for them comes from Southeast Asia.

Overall, though, Einhorn says there aren’t currently compelling enough reasons for people to manufacture healthcare supplies in the United States. One reason is that many overseas manufacturers have long-term contracts with US-based Group Purchasing Organizations (GPOs), which are the de facto gateway for most medical supplies into the US, because they dominate the market. Another reason is that there are few financial incentives to do so.

“Everything is reimbursed. Medicaid doesn’t care. They’re just looking for the cheapest product, not necessarily the best product,” says Einhorn. “So what’s the point of buying something made in the USA or a premium product? There are very few incentives to change.

Einhorn continues to call for fundamental changes in the structure of health care delivery in the United States, with better manufactured products. He cites NATO’s Pandemic Response Trust Fund, which is responsible for maintaining an established stockpile of medical equipment and supplies to be able to provide immediate aid to Allies or partners in need. There, he said, the emphasis was more on the best than on the cheap. But overall, the challenges are daunting and require action from both the private and public sectors.

“It takes a bit of everything to make it work,” he says.

Joan J. Dean

The author Joan J. Dean