Supply chain passes first test

But industry awaits next H1N1 wave

It ain’t over till it’s over, of course. And the swine flu ain’t over. But just how bad it will get is anybody’s guess. And guessing is precisely what the supply chain will be doing in the months ahead.

So far so good, relatively speaking. At press time, the Centers for Disease Control and Prevention reported that at least 1 million people in the United States probably had contracted swine flu at some point, though the number of confirmed cases (28,000) was far smaller. About 3,000 people had been hospitalized and 127 had died due to the flu, whose formal name is A(H1N1), or “novel H1N1 influenza.” And all eyes were on the Southern Hemisphere, to watch how H1N1 was progressing during the winter flu season.

From a supply chain point of view, caregivers in the United States weathered the first bout of H1N1 – which began in April 2009 – with few product shortfalls. Hoarding and panic buying were minimal, according to suppliers with whom JHC spoke. The one exception were NIOSH-approved N95 particulate respirators, for which distributors were reportedly put on allocation until early summer. (3M Health Care and Kimberly-Clark Healthcare are two of the biggest producers of these respirators, which are designed to block at least 95 percent of very small particles, such as the influenza virus, which may be transmitted by coughs, sneezes or certain medical procedures.)

How the supply chain will react in the months ahead is anyone’s guess. That’s because the flu itself is hard to predict. (World Health Organization Director-General Dr. Margaret Chan has been quoted as saying that further spread “is inevitable.”) No doubt infection control products, including masks, gloves, hand hygiene products, etc., will continue to be in demand. Much harder to predict is the demand for – and supply of – an H1N1 vaccine, which at press time was still under development.

Steady as she goes
Distributors and manufacturers with whom JHC spoke reported that demand for most infection-control products stayed on an even keel throughout the spring. That could be because since the 1980s, when AIDS came onto the scene, providers have been practicing Universal Precautions and bloodborne-pathogens procedures. Dealing with swine flu was no big deal.

Indeed, the CDC’s recommendations for the prevention of H1N1 among healthcare workers differ very little from infection-control procedures that were already on the books (though isolation is recommended for patients suspected of having H1N1.) It was telling that, in a report issued in June, the CDC reported that none of the 12 healthcare personnel known to have been infected with H1N1 by ill patients reported fully adhering to CDC’s recommendations on infection control. (A total of 26 healthcare workers were confirmed as having H1N1.)

“The demand by hospitals and IDNs for gloves didn’t change that much,” says Marc Montalto, director, acute care business unit, Sempermed USA. In some cases, IDNs pulled in a few extra days’ worth of supply, but nothing that Sempermed or the supply chain couldn’t handle.

Montalto credits good communication among providers, manufacturers and distributors for the relatively stress-free turn of events. “[Acute-care distributors] did a good job of preaching as much as they could, ‘If we all buy appropriately, product will be there should the situation continue to get worse; but if we buy in a panic fashion, we can create shortages.’” For its part, Sempermed was proactive in stressing to key customers as well as distributors the importance of using caution and avoiding panic buying, in order to ensure an adequate supply of gloves for all.

“We run with a very healthy amount of inventory,” adds Montalto. “Up to this point, we haven’t felt like we need to add to that. However, our normal inventory planning process could suggest that demand could change in a rapid time frame, so we will continuously evaluate it and make the proper stocking decisions. Currently, we have no plans in place to have an inventory build in anticipation of the flu season.”

With the exception of N95 respirators, MMS – A Medical Supply Company, had no problems keeping its customers supplied with product, including surgeons masks, gloves, and hand hygiene products, says Kevin McDonnell, vice president of operations, MMS East, New Rochelle, N.Y. “We didn’t see any huge ramp-ups.”

That said, the N95 situation did test the nerves of the distributor and its customers. “When we got allocated, we had to put our customers on allocation,” he says. “They weren’t thrilled.” The best that MMS – and other distributors – could do was to explain the situation and urge providers not to hoard or stockpile. In some cases, providers sought respirators from sources other than their prime distributor. “Once that happened, we put flags on to restrict them, so nothing went out without review.”

Gowns in demand
Despite an “uptick in orders” from its distributors and end users, Neenah, Wis.-based TIDI Products had no trouble keeping up with the demand for its isolation gowns, according to Jeff Murphy, vice president of marketing. Admittedly, TIDI is a small player in the gown business, “so it’s easier for us to keep up with that type of demand,” he says. Still, the company did take steps to make sure product flowed.

As news of H1N1 hit the streets, TIDI’s sales group called major end users to gauge their reaction and probable supply-chain-related moves. “Most of the feedback we got was, ‘We’re talking about it,’” says Murphy. Based on that, TIDI erred on the side of caution and built up inventory. In some cases, the company acted as a conduit for information between end users and distributors. “With our good distribution partners, we had a collaborative conversation – the end user on one line, the distributor on the other,” he says. “It sounds like a cliché, but it’s all about communication up and down the supply chain. It’s as simple or as complicated as that.”

Sultan Healthcare, which makes a variety of infection-control-related products, including cleaning solutions, surface disinfectants, hand care products and personal protective equipment, did indeed see a spike in demand in April and May, says Paul Girouard, medical sales manager. The outbreak of H1N1 “reinforced the need for and importance of personal hygiene,” he says. With most of its production facilities located in the United States, however, the company had little problem meeting demand. Even so, “we’re in daily contact with all our production facilities about their capacity, where they’re at, and where we need to be for fall.”

Vaccine being developed
If there is a supply chain wild card for the coming months, it might be the still-being-developed vaccine for H1N1. As of press time, Health and Human Services Secretary Kathleen Sebelius had directed approximately $1 billion in existing funds for use for clinical studies to take place over summer, and for commercial-scale production of two potential vaccine ingredients for an H1N1 vaccine. (Typical seasonal flu vaccines for Types A and B are not effective in preventing H1N1.)

Since 2004, Health and Human Services has contracted with manufacturers that currently hold U.S. licenses for flu vaccine as part of the National Strategy for Pandemic Influenza. That strategy has now been called into play. Plans call for most of the vaccine ingredients to be stored in bulk, and a small amount to be prepared as vaccine for use in clinical studies to evaluate vaccine safety and the dosage required for a protective effect. Order for bulk supply have been placed with:

  • Novartis ($289 million).
  • GlaxoSmithKline ($182 million).
  • Sanofi Pasteur ($191 million).
  • CSL Biotherapies ($180 million).
  • MedImmune ($90 million).

At least one other manufacturer, Deerfield, Ill.-based Baxter International, had received an A(H1N1) strain from the Centers for Disease Control and Prevention and was working on a vaccine of its own. As of press time, the company had received European Medicines Agency approval for a mock-up pandemic vaccine called CELVAPAN, the brand name for the company’s pandemic vaccine. It was in discussions with the U.S. Food and Drug Administration to determine the appropriate pathway for licensure of its H1N1 vaccine in this country, according to a spokesman.

Information on the government’s vaccine strategy can be found at the following link: http://www.pandemicflu.gov/vaccine/vacresearch.html.

At this point, no rapid tests to diagnose A(H1N1) have been developed. In April, the FDA authorized the issuance on an emergency basis of a swine flu diagnostic test (the rPT-PCR panel) to public health and other qualified laboratories. The test analyzes viral genetic material from a nasal or nasopharyngeal swab. A positive result indicates the patient is presumptively infected with H1N1, but it does not indicate the stage of infection, according to FDA. A negative result does not, by itself, exclude the possibility of H1N1 infection.

That same month, the FDA authorized – again, on an emergency basis – broader applications for the antiviral drugs Relenza (zanamivir) from GlaxoSmithKline, and Tamiflu (oseltamivir phosphate) from Roche Laboratories. Specifically, the agency authorized Tamiflu for treatment and prevention of influenza in children under one year of age. (Prior to April, the drug had been approved for use on children over the age of one.) According to CDC, the use of antiviral drugs should be initiated as soon as possible after the onset of symptoms. Recommended treatment is five days. The drugs may also be used as a prophylactic for persons with known exposure to H1N1 influenza.

Upon onset of the swine flu outbreak, McKesson Corp. “immediately implemented our business continuity plan and worked in concert with government agencies, our customers and our supplier partners to ensure we had ample supply of antiviral medications for all customers, including hospitals,” says a spokeswoman for the San Francisco, Calif.-based wholesaler. “McKesson is confident that we have the supply to meet our customers’ demands for antiviral medications, such as Tamiflu or Relenza. We continue to work closely with manufacturers to help forecast the potential demand.”

What lies ahead
As MMS came off allocations for N95 respirators, the company carefully began building inventory. “Carefully” is the key word. “We don’t want to get overwhelmed,” says McDonnell, recalling how the company ended up with several containers of gloves from Asia following its decision to stock up in anticipation of factory closures associated with the 2008 Summer Olympics in Beijing.

Sempermed is anticipating a relatively normal flu season in terms of the demand for exam gloves, says Montalto. Because of Universal Precautions, caregivers are already using gloves when working with patients, so the demand shouldn’t spike. The company is also counting on cool heads prevailing in the months ahead. “Having open and honest communications with our distributor partners and end-user customers throughout the process is the big lesson learned. If everyone is communicating, and the messages are consistent, we can ensure that the supply chain still works properly. When communication breaks down, that’s when the problems start.”

TIDI has a fallback position should demand for its isolation gowns exceed supply. In a pinch, the company can extrude its own polyethylene film – an essential component of its film-based gowns – and contract with others to manufacture them. But collaboration between suppliers and buyers is more critical, says Murphy. “What would really help is, as soon as [a provider] has made a decision [regarding inventory buildup], they communicate that back up the food chain, right to the manufacturer, so we’re equipped to respond as quickly as possible.”

Public health issues aside, there are important economic issues that all parties in the supply chain have to consider, says Girouard. Excess inventory costs money. “For distributors, it’s dollars sitting in their warehouse that might be sold for a possible pandemic. At the end of the day, people don’t want to bring in inventory on a hunch.

“People need to understand the distribution pipeline,” continues Girouard. Everybody in that pipeline – from manufacturers to distributors to healthcare professionals – have a certain responsibility. “There needs to be a certain level of preparedness on everybody’s part.”

And although Sultan produces the bulk of its products in the United States, other manufacturers do not. Without careful planning and communication, the pipeline can get clogged quickly, and then drained just as quickly, says Girouard. “When there are spikes in demand, products are shipped overnight, but then the cupboard is bare. Then the supplier has to go back to Asia, and it’s another 60-plus days before the pipeline is filled again.” It’s a fact of the supply chain’s life, which all parties must recognize.

And although the government wields a heavy hand in times of emergency, government officials don’t always have a firm handle on how the medical products supply chain works, he says. They don’t always appreciate the economic and logistical difficulty that large amounts of inventory can present to suppliers.

Holding onto relationships, even in stressful times, should preserve the integrity and effectiveness of the supply chain, concludes Girouard. “I’m sure every manufacturer fields bunches of calls from people they’ve never heard of, who want product the next day because they have an opportunity to resell them to someone in their backyard. But that’s not how our supply chain works. Everybody wants that business, yes. But we all need to take a little bit longer view of how to deal with what our world is becoming.”

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