The medical supplies industry is reverting to the supply chain strategies they used before COVID-19, despite severe ongoing challenges, according to an expert in the field.
“The industry in general has been falling back to exactly where they were before COVID,” says Michael Einhorn, president and CEO of Dealmed, a large independent medical supply distributor in New York, New Jersey, Connecticut and Pennsylvania. “There have been very few changes industry wide. There was a lot of talk about supplier diversity, nearshoring and friend-shoring. But the fact of the matter is that outside of these Band Aid supply fixes, there’s really not been a lot of change in the healthcare industry. Everything is status quo.”
Einhorn has been a proponent of changes to supply chain management in healthcare for years, and he sees the need as more pressing than ever.
“This industry still faces the largest amount of supply challenges,” he said.
Fixes are hard to come by, however. Einhorn points to legislation being proposed in Washington, D.C. that would introduce a Customs Fast Pass system where appropriate government agencies would allow medical supplies to be cleared ahead of imports such as toys for a faster entry. That, he says, is actually a sign that nothing much is changing in terms of sourcing and fulfillment.
“If you think that through, a lot of product has to be made in China, or elsewhere overseas, so it doesn’t solve the proximity issue. A Fast Pass just makes it easier for product to come from other countries. It’s very telling that it’s business as usual. We’re just making it easier. It seems to me that the industry is operating with a just-in-time model, just like they were before COVID.”
It’s not easy or fast to move production away from China, albeit with some exceptions. According to industry market research firm IBISWorld, there are 971 medical device manufacturing businesses in the U.S. as of 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 U.S., including regulatory restrictions. Sometimes, it’s legitimately easier to manufacture items overseas, such as nitrile gloves, because the raw material for those comes from Southeast Asia.
Overall, though, Einhorn says there are not currently sufficiently compelling reasons for people to manufacture healthcare supplies in the U.S. One reason is that many overseas manufacturers have long-term contracts with U.S.-based group purchasing organizations (GPOs), who are the de facto gateway for most medical supplies in the U.S., because they dominate the market. Another reason is that there’s little financial incentive to do so.
“It all gets reimbursed. Medicaid doesn’t care. They’re just looking for the cheapest product, not necessarily the best product,” Einhorn says. “So what’s the point of buying something U.S.-made, or a superior product? There’s very little incentive to change.”
Einhorn continues to call for fundamental changes to the structure of delivery of healthcare in the U.S., with better-made products. He cites the NATO Pandemic Response Trust Fund, charged with maintaining an established stockpile of medical equipment and supplies to be able to provide immediate relief to Allies or partners in need. There, he said, there has been more focus on better vs cheap. But the challenges overall are daunting, requiring both private and public sector measures.
“It has to be a little bit of everything to make it work,” he says.