The healthcare supply chain before and in the midst of COVID-19

Sept. 11, 2020

Mike Schiller, senior director of supply chains for the Association for Health Care Resource and Materials Management (AHRMM), discussed the past, present and future state of the healthcare supply chain during the COVID-19 pandemic in a post on the American Hospital Association (AHA) blog. 

Months into the COVID-19 pandemic, the healthcare supply chain remains strained due to the high demand for personal protective equipment (PPE) domestically and abroad. While sourcing PPE remains a challenge for many healthcare supply chain professionals, coordination within the healthcare field has greatly improved, resulting in strategic partnerships to improve access to needed supplies while adding clarity to the vendor-vetting process. 

Question: Political leaders often brings up the need to end our reliance on foreign manufacturers for variety of goods, but particularly for PPE. Have you noticed a trend of providers reevaluating their supply chains from foreign to domestic suppliers? And if so, do you think this is really a realistic endeavor? 

Mike: Yes, I have heard this from conversations with colleagues and peers. Hospitals are absolutely looking to diversify their vendor portfolios and are considering a number of different avenues to do so. One noteworthy option that supply chain professionals are considering is moving to multi-source contracts as opposed to single-source contracts. 

Based on conversations I've had with some of the GPOs (group purchasing organizations), this is an opportunity to reevaluate the contracting process. Domestic manufacturing brings with it the potential for increased supply costs down the road, but their currently seems to be an appetite for this versus the existing environment. 

Question: Along those lines, are you noticing that there are more “bad actors” in the space offering products that are either lower quality or nonexistent altogether? 

Mike: Yes. Beginning in March there was a significant increase of emails from what I’ll call nontraditional, or gray, manufacturers and suppliers with each of these manufacturers and suppliers claiming to have access to quality PPE. 

The reality is that there are poor quality products that have come into the U.S. healthcare supply chain. Providers needed PPE, and the FDA to action to provide access to PPE through the issuance of emergency use authorizations (EUAs) granting temporary use of non-FDA approved products. Unfortunately, there are some bad actors in this space who either never shipped their products or sent defective/poor quality products.

Question: Has AHRMM taken any steps to help supply chain professionals sift through these gray manufacturers and suppliers? 

Mike: At AHRMM, we started to act as the clearinghouse for the hospital supply chain professional. We worked with a third-party partner, Vendormate, who offered to collaborate with us allowing us access to their vendor-vetting program. As we received the email solicitations from these gray manufacturers and suppliers; we could provide an initial high-level vetting – called a FACIS Level 1M review. Those vendors who we deemed were acceptable, based on the vetting report, would then be listed on the AHRMM COVID-19 Resource website. To date, we have vetted over 800 of these vendors and have over 300 that are approved and listed on our website. 

We then began working with other players in the vendor-vetting space like Project N95, the National Governors Association (NGA), and Healthcare Ready. Within the AHA, we are supporting the 100 Million Mask campaign with our solution provider and the HealthEquip app (a marketplace that matches individuals and organizations donating PPE with local hospitals based on need). There's now been a convergence of us all through the NGA to create an online repository of vetted vendors from across all participating organizations that comprise both traditional and nontraditional manufacturing and suppliers. It's not a traditional e-commerce site where you’re able to transact, but a website that provides access to all the vendors who are available and to view their products and inventory availability. 

It's really taken a big turn to try and bring some clarity and visibility to a very murky environment. This vetting process is our way of sharing those that have passed an initial vetting process out in front of the healthcare supply chain professionals. Of course, we encourage hospitals to follow their own vendor-vetting and approval practices, but at least this provides an element of confidence knowing that the vendors on this list have passed the initial background review. 

Question: Do you envision that these vetting processes will be permanent beyond the pandemic, if and when it ends? Do you think this vendor-vetting platform is going to be here for good or do you think that the industry will revert back to where it was pre-COVID? 

Mike: We are starting to see the volume of gray manufacturers decline. We're only vetting about 18 vendors a week right now, or three to four a day. Back in March and April, we were vetting 20 to 40 a day, so that number has dropped significantly. 

I think you’re going to see the industry-wide cooperation remain, however the volume of work should slow down. The work that's taken place to create this repository will remain, but I do not anticipate we’re going to see the volume of gray market manufacturers and suppliers being introduced into this repository. I expect that number will eventually stabilize and become static. 

The other variable at play here is the duration of the FDA’s EUAs. Once the EUAs are terminated, any gray market manufacturer that does not have an FDA approved product will no longer have access to sell within the U.S. healthcare space. 

Question: Do you think many of these gray manufacturers and suppliers will be around in six to 12 months? 

Mike: A lot of these newer companies came into this space rather quickly, often retooling their facilities to make PPE products. When the economy begins to pick back up, there is the likelihood that they move back to their original production environment. Others may pursue FDA 510K approval to sell their products in the US. I do see the repository remaining as a means to share any new suppliers and manufacturers for as long as the FDA’s EUAs remain active. 

Question: Are there any strategic partnerships that have formed as a result of the pandemic that you're particularly encouraged about? 

Mike: At a high-level, I’m very encouraged that we've come together as a field. There’s the mantra of “Hey, we are all in this together.” We’ve seen GPOs, AHA, and other associations move beyond their typical membership walls and share information more widely across the entire health care field. At AHRMM, we’ve worked very closely with a number of other associations and organizations as well. We’re cross-pollinating each other's websites with COVID information and resources while promoting it all to our audiences so that collectively, we are covering the health care field. 

A key GPOs stake in a domestic PPE manufacturing company shows the strategic thinking and approach the current COVID environment is fostering. 

Another great example at the local level is how Kaas Tailored in Washington refocused its expertise from textiles to make products like masks and gowns. They initially worked with Providence to create PPE for the 100 Million Mask campaign, and are now pursuing formal FDA approval for their product to be sold in the U.S. health care market. 

Lastly, the vetting process collaboration between AHRMM and Vendormate, and the repository initiative led by NGA have really been positive moves for the field. 

Question: Do you think the pandemic will lead to better forecasting and stockpiling of supplies for future pandemics? Or do you think it will be just as difficult to predict what will happen months in advance? 

Mike: We know what to do, the bigger challenge is how we hardwire the lessons learned during this pandemic. We have to avoid slipping back into our comfort zones and operational practices. We also need to reevaluate current stockpiling practices; 5,500 hospitals building their own individual surge inventories is impractical and places an increased and unnecessary demand on the already fragile health care supply chain. 

Another concept that needs review is the current just-in-time methodology which has taken hold within the healthcare supply chain. This idea of “lean and mean” works great until we encounter a pandemic, at which point the cracks in the methodology start to appear. Inventory manufacturing is based on demand with lead time levels built into the equation. If providers are running lean and mean, that means everybody in the supply chain from the distributors to the manufacturer is also running lean and mean. Building up our inventories across the health care supply continuum will take time and increased costs. In our current economic environment, the question is how we address both. 

In closing, let me add that there needs to be a much more coordinated and strategic effort at the regional, state and national level to prepare for future pandemics. There’s a lot that has to be considered when we evaluate the proper responses coming out of this crisis including hardwiring the lessons learned, building an appropriate response from an inventory perspective at the hospital, distributor, manufacturer, state and national levels. We need to move away from individual conversations and refocus to higher-level conversations that bring all the stakeholders into the mix ensuring that the knowledge gained during this pandemic is amplified and addressed collective throughout the health care field. 

AHA has the post

More COVID-19 coverage HERE.