GPOs not allowing coronavirus outbreak to eclipse supply chain operations

Feb. 24, 2020
Industry ‘air traffic controllers’ strive to stay ahead of tide

The outbreak of the coronavirus overseas and its emergence in the United States not only ignited clinical defenses but also engaged and continued to test the developing supply chain crisis/disaster response plans among healthcare providers and suppliers alike. As of February 14th, 2020, the coronavirus reportedly infected more than 65,000 persons in East Asia, and 15 in the U.S. mainland. The death toll exceeded 1,400. And the numbers keep rising.

To gauge how healthcare providers and suppliers are prepping their defenses with planned offenses, Healthcare Purchasing News Senior Editor Rick Dana Barlow reached out to six of the nation’s largest group purchasing organizations (GPOs), representing the majority of healthcare providers and annual purchasing volume. Four responded to HPN’s three pointed questions designed to add historical context to the current event and evaluate progress with this latest challenge. Executives from Intalere, PDM Healthcare, Premier and Vizient shared their impressions and insights on what’s happened and where the industry needs to go.

HPN: How is your organization working to calm/ease the supply chain fears of member healthcare facilities stemming from the coronavirus outbreak? What specifically are you doing in terms of recommended practices and operational strategies and tactics that reach beyond the C-suite and clinical realms deep into supply chain operations?

Steve Kiewiet, Chief Commercial Officer, Intalere: “Intalere is closely monitoring the coronavirus outbreak and potential impacts to the global healthcare supply chain. We use a robust platform to understand linkages and interdependencies across the healthcare supply chain and work with members and suppliers to understand how to mitigate potential impacts. While the majority of our clients are not currently experiencing disruptions, the outbreak at this time is rated as having a Potential Supply Chain Disruption score of MEDIUM, elevated from LOW at the start of the outbreak. While this outbreak has a potential impact on numerous industry sectors, there are companies in the healthcare supply chain that may be impacted.   

“This continues to be an evolving situation, and Intalere is working with its partners and Intermountain Healthcare to actively assess the situation. In an effort to facilitate communication between Intalere’s supplier community and Intalere’s members, we are posting supplier updates, information and informational resources on the Intalere Member Resources website and coordinating efforts as requested.”

Todd Larkin, Chief Operating Officer, Intalere: “The key issue is that we too often lack visibility to the multiple levels within an entire supply chain and fail to develop possible scenarios and then plans to mitigate potential impacts. Every single category plan should incorporate an action plan in the event of supply disruptions. In this way, we can proactively take action to address the first incident of potential disruption while at the same time review additional potential risks of another disruption – like the coronavirus in this instance. Intalere is working as part of an initiative with various stakeholders in the healthcare supply chain to drive improved visibility and accountability into the healthcare supply chain, as the products and services we rely on are critical for the care of our patients.”
Ash Chawla, R.Ph., Chairman & CEO, PDM Healthcare: “It seems that coronavirus took many in the U.S. by surprise, especially some smaller or rural areas that may have not expected to encounter this type or epidemic. However, it is important to remember that the ease and increase of global travel has made the world more connected, including in terms of disease spread. Therefore, it is paramount that all healthcare facilities and links in the supply chain be prepared to mount a response to coronavirus, or a similar situation, with little to no notice and no interruption to their regular operations.

“In terms of coronavirus, as there is no cure or vaccine to date. The best practices to ease fears beyond the C-suite include ensuring that all providers and staff, from the top down, are well-versed and trained in hygiene and infection control. Operationally, purchasing and materials management departments need to verify that supplies like masks, isolation rooms/areas, gloves, respiratory supplies, etc., are fully stocked. Administrators should look at staffing to determine that they will be able to handle an outbreak in terms of patient care needs, but also in case staff is affected by the illness. Hospitals and emergency departments may need to change triage procedures for patients presenting with respiratory symptoms, including asking about recent international travel and setting up isolation/quarantine areas for patients who have been to affected areas.

“Finally, a situation like this coronavirus outbreak can serve as an important teachable moment to patients and the community which providers can use to reinforce the importance overall good health practices such as flu vaccines, travel vaccines and precautions, proper hygiene, wellness, and preventive care.”

Chaun Powell, Group Vice President, Strategic Supplier Engagement, Premier: “Experience shows that the slightest suggestion of a possible disruption leads to proactive hoarding of products, which then intensifies the suppliers’ burden to accurately predict demand. Part of Premier’s role is to work with both our suppliers and serve as an extra set of hands and legs for our members. We are cautioning against any overreactions or unnecessary exaggerations of the current situation, and through Premier’s Disaster Response team, we remain in constant contact with both members and suppliers to hear first of any potential product lapses. Our members have disaster and disruption plans in place, and we are there to assist in executing those plans and smooth over any hiccups they can’t resolve on their own. In our conversations with c-suite leaders and supply chain partners, we are helping to calm concerns and encouraging the judicious use of supplies.”
David Gillan, Senior Vice President, Sourcing Operations, Vizient Inc.: “Vizient is closely monitoring the situation and working with suppliers to understand any supply limitations for the critical products based on guidance from the World Health Organization (WHO). In particular, we have seen a dramatic increase in demand for personal protective equipment (PPE). Suppliers of these products have almost universally implemented protective allocations meant to slow the surge in anticipatory purchasing and to help maintain availability of supply. Some suppliers are reporting temporary backorders on key PPE items, such as N95 disposable masks. Suppliers whose manufacturing sites are located outside of the affected regions in China, will likely be able to ramp up to meet demand, but we do expect a lag time where product may be difficult to obtain in some instances. This year’s worse than average flu season had already placed some strain on the supply chain for many of these same products.”

Not unlike prior outbreaks, the current coronavirus challenge emerges against the backdrop or alongside of a major supplier’s product recall – in this case, kits and gowns – which can amplify and exacerbate problems in patient care delivery. In a way, situations like these represent a double-edged sword for supply chain operations – navigate through a problem that already experiences severe limitations on the products needed to manage and solve that problem. How can/should Supply Chain balance such a double-dose of crises?

KIEWIET: “It’s mainly about being as proactive, prepared and transparent as we can be across the supply chain. We work closely with our partners to always have a backup plan or viable alternatives in any time of disruption. We also need to continue to get better at end-to-end transparency across the supply chain, in terms of supplier capabilities and resiliency and clients’ true needs and expectations. Understanding that the supply chain is built around certain expectations and processes that can sometimes take some time to adjust, and that if one stakeholder along the way is impacted, we are all impacted, we must continue to be more collaborative and open, and be responsive without being too reactionary.”

CHAWLA: “Flexibility in purchasing and supplier choice is one of the best ways to combat product shortages. It is in the best interest of a healthcare organization to maintain purchasing agreements with at least two or more suppliers of certain products rather than providing exclusivity to a single manufacturer. This flexibility allows them to ‘ready’ solutions in place when a shortage of their preferred products does come up rather than having to urgently seek a new supplier and create a new contracting supply chain structure. Most importantly, healthcare facilities should time monitor their inventory and place timely re-orders, specifically for products with a history of shortages or where shortages are anticipated due to market conditions or population health issues.”

POWELL: “Research shows that poor demand planning accounts for roughly 68 percent of disruptions across all industries, and healthcare has its own set of nuances because in our industry, our commitments to suppliers do not guarantee demand over a given timeframe, which compounds the issue for manufacturers. On top of that, the medical device industry does not have industrywide protocols that prescribe how manufacturers should notify industry of a disruption; nor do we have measures for how healthcare providers should respond. These protocols exist for pharmaceuticals and are helpful in preventing hoarding, but are nonexistent in the device industry. 

“Ambiguity surrounding device disruptions in healthcare is one of the reasons that it’s imperative for providers, suppliers, and GPOs to work together. No two parties in isolation will solve the issue; proactivity by two of the three may lead to coverage for one patient population but put another at risk of not having product. GPOs have unique perspective on national ordering patterns and also gain insights into the patient needs of our members when these disruptions and disasters occur. As air traffic controllers of sorts, GPOs then have an opportunity to help mitigate against hoarding while guaranteeing that affected facilities are able to receive the products that they need to deliver uninterrupted patient care.

“Premier experienced this during the Ebola outbreak in which two states had confirmed cases but could not get ample product because other state-designated facilities had purchased their allocation, thereby reducing the available inventory. Through our GPO, Premier was able to identify where there was excess inventory and help get it to the specific providers that had confirmed needs, while assuring that the facilities that had excess would also be taken care of if their needs changed.  

GILLAN: “Hospitals are turning to conservation strategies in order to mitigate supply challenges. In the case of gowns, hospitals are also investigating practices at their facilities to ensure that the right level of gown is being used in the correct circumstance so that the Level 3 and 4 gowns aren’t being used when a Level 1 or 2 gown provides sufficient protection.”

From SARS to MERS to Ebola to coronavirus, from terrorist attacks to tornadoes, hurricanes and earthquakes, from gloves to masks and respirators to IV solutions to kits and gowns, healthcare organizations – and certainly Supply Chain – has weathered a lot of crises and disasters since the late 1980s. What have we really learned from these disruptive patterns during the last few decades that should make preparations and responses more natural/second nature instead of panicked and rushed as they seem to be still?

KIEWIET: “Again, I do believe we have learned and gotten better at being more proactive and collaborative, rather than reactive and siloed. You can never prepare for every eventuality and there will always be some level of disruption, fear and misunderstanding when situations arise. But by being proactive, collaborative, transparent and realistic about real needs and expectations, without buying into the hype, we can mitigate difficulties and make sure that our customers have what they need, when they need it in order to better serve the healthcare needs of their communities.”

LARKIN: “The healthcare supply chain is extremely complex, and over the last several decades, [it has] become global and introduced even more complexity. The challenge has been that historically the visibility to that complexity and corresponding interdependencies was not widely available or really sought. While other industries invested in these areas, healthcare lagged behind. I recall the Fukushima nuclear reactor disaster in 2011. At that time, many large supply chain organizations had visibility to which of their direct suppliers were impacted, but only a few had visibility to the tier 2, tier 3, and even tier 4 suppliers that were part of the upstream supply chain. The companies with that level of visibility were able to assist their supplier partners in finding alternative sources or even work with that tier 4 supplier to assist them in bringing their operations back online. The healthcare industry needs to make similar investments and drive to that level of visibility.”

CHAWLA: “Advances in technology, from increasing ease of purchasing and product select, to transportation and even being able to more quickly identify disease causes, have made it easier in the past decades to deal with emergencies. A cause of the rush panic and rush to deal with emergencies may be that facilities on the first line of defense, especially public health facilities, may not have funding and supplies year round to be immediately prepared when disaster strikes. Ensuring that funding is available for these entities as well as a supply chain protocol to access needed products should work to provide a more seamless response to both natural disasters and disease outbreaks.”

POWELL: “You’ve hit the nail on the head. The more we weather natural disasters, tariffs, economic policies, quality issues, viruses and other crises, the more it becomes apparent that the industry is in need of meaningful solutions that are proactive, long-term and sustainable. As it stands today, the U.S. healthcare supply chain is unable to confirm critical pieces of the upstream portion of the supply chain including raw material suppliers, third-party and contract manufacturers, sterilizers, and more. Suppliers are not obligated to share this information today and they will not be inclined to provide that information, unless and until it becomes an industry-wide expectation and best practice.

“The industry needs more transparency into where the individual components of products or pharmaceuticals are sourced. Absent true visibility into our suppliers, packagers and sterilization locations, we cannot predict or proactively address disruptions. This is why we have been advocating for this type of visibility, as well as working with manufacturers to broaden their sources into new and emerging markets.

“Luckily, we don’t need to reinvent the wheel. We have an existing model that works – the drug shortage methodology – and can borrow from it heavily. When pharmaceuticals face a potential disruption, the industry and providers are notified and plan proactively because the FDA has formal regulation in place.

“As the industry makes progress toward similar regulations for medical devices, partnerships will be key. I believe the industry will be much happier to adopt a solution for product disruptions if it’s created in collaboration with multiple stakeholders including suppliers, manufacturers, distributors, group purchasing organizations and associations. Under the leadership of the Health Industry Distributors Association, Premier has partnered with other GPOs, manufacturers and distributors to create a universal disruption notification template that went live this week (February 3). We are advocating for this tea plate to become standard industry process and adopted by all manufacturers and distributors.”

GILLAN: “All hospitals have resiliency plans in place that are regularly stress tested by actual events – like outbreaks of SARS, MERS annual flu season – and through drills. They have learned to pre-qualify alternate suppliers and products commonly required in these situations through their value analysis processes. This enables them to quickly pivot to other suppliers in the event of a crisis or disruption in the supply chain. 

“Hospitals also rely heavily on their GPOs and distribution partnerships, as well as on protective contractual terms, to help ensure continuity of supply. They have learned to change clinical practice and implement conservation strategies when necessary. 

“Suppliers have also begun to further diversify manufacturing locations so that when disaster strikes, they have redundant capacity in order to be able to continue to meet demand. However, changing manufacturing site and modifying the required logistics takes time. When multiple crises overlap, the situation shifts from the foreseeable and manageable to the unforeseen and difficult to control.”

More COVID-19 coverage HERE.

About the Author

Rick Dana Barlow | Senior Editor

Rick Dana Barlow is Senior Editor for Healthcare Purchasing News, an Endeavor Business Media publication. He can be reached at [email protected].