May 5, 2021 – Matt Rowan, President and CEO of HIDA, hosted a panel discussion with the CEOs of major healthcare distributors and GPOs at HIDA’s Virtual Executive Conference in March 2021.
The panel, “COVID’s Lasting Impacts on Healthcare Market Dynamics: CEO Perspectives,” discussed wide-ranging topics from non-PPE vulnerabilities and virtual stockpiles to buying American and nearshore inventory. After the largest global pandemic in over 100 years, the three panelists think everyday Americans view the healthcare supply chain in an enhanced way.
- Susan DeVore, Former CEO, Advisor, Premier Inc.
- Stan Bergman, CEO, Henry Schein
- Charlie Mills, CEO, Medline Industries
Susan DeVore (Premier Inc.): I think consumers better understand and the supply chain and appreciate it more and that’s a good thing. And health systems, because of the pandemic, look at their GPOs and said, I want an end-to-end supply chain partner. That’s led to more discussions about domestic manufacturing and health systems wanting to partner with us to make greater investments in domestic manufacturing. As a result, relationships have advanced.
Stan Bergman (Henry Schein): But we were in competition with our own states. With a little more planning, that could’ve been dealt with differently. We need domestic manufacturing, developed in collaboration with other countries. But how do you make sure those factories survive? How do we create a methodology that works? We’ve done it for oil. We have spare oil. We need public/private partnerships with government, NGOs, private industry and the HIDAs of the world. It requires complex solutions, but we’ve done it in other areas.
Charlie Mills (Medline Industries): As an industry, we need more flexibility and partnerships with providers and government on either a large stockpile or idle production. Demand went up by 10 times, and it’s unprecedented to have that level of excess supply. Nobody builds a factory for 10 times normal demand. While we’ve adjusted for PPE right now, what if the next pandemic is something else like IV solutions and we need 10 times of the normal IV solutions? Are we going to build factories that sit idle? It’s tough. It requires some government involvement, and stockpiling is needed after this ends.
Bergman: No one company is big enough to solve this problem. We won’t rebound with enough strategic national stockpiles. We also don’t know what products to put in there.
DeVore: We’ve identified what we think are critical supplies in advance of another pandemic, epidemic or just disease management. It’s always going to be gloves, masks, face shields and sanitizers in addition to specialized things depending on the nature of the pandemic. We as a country probably should have seen this coming with our over reliance on Asia for certain products. Manufacturing doesn’t all need to be domestic, but it needs to be onshore, offshore or nearshore with enough suppliers to manage through.
It could be a virtual stockpile concept. We found out that we hadn’t invested in anything other than just-in-time inventory. Health systems, through this, have invested with Premier in Prestige Ameritech, providing a long-term commitment to N95 masks at a certain price point because they can’t afford to be in this situation again. It’s a shame, with the technology capabilities of this country, that we didn’t have the capability to flow the data in terms of inventory levels and hospital supply levels.
Bergman: It’s not good enough to have masks in the U.S. or the Northern Hemisphere because these viruses don’t carry passports. We must make sure that the world has enough of this stuff. There’s a moral obligation but also a defense obligation.
DeVore: Any region can be a hot spot. You must identify those critical products like PPE that are likely to be needed in almost any global medical emergency. We think you need at least one domestic supplier and three global suppliers to have diversification and multiple avenues to get products.
It took three decades to move production offshore and it’s going to take some time and investment to bring it back. We are advocating for tax incentives, low interest and zero interest loans – things to incentivize domestic manufacturing.
Mills: It’s if anyone is willing to pay for manufacturing that’s not needed, but it may be needed once in a generation or a century. That’s a big, tough question. We need free trade.
Bergman: If we don’t deal with idle capacity, we won’t fix the supply chain.
DeVore: People will remember this forever and we will change the ways we run supply chain in this country for healthcare. Our member healthcare systems are saying they’ll provide a five- to six-year commitment to volume at a certain price range, driving more manufacturing and keeping the suppliers domestic at a market base price. They don’t want to go back to the old way because it’s been challenging.
Bergman: The only challenge is memory.
DeVore: It’s a fundamental shift. We’ll see but just like we learned with oil, if you have a dependence, you don’t have the flexibility you need.
Bergman: We need a plan. Government can be disruptive when it wants to use a different method like through the states. Government has good ideas, but it needs to work with the industry on using our channels.
DeVore: There were many ways that government had to protect the conversations and the information. So many federal agencies involved allowed the public and private entities to work together. FEMA did a great job. The CDC, FDA and HHS – together with all the suppliers, hospitals and GPOs – managed a diversified U.S. healthcare delivery system.
It’s critical that the stockpile is public and private.
Bergman: FEMA are heroes. When we had our product stuck in the ports in China – first because of logistics – they got on the phone. When China wanted to check products leaving, the U.S. diplomats dealt with us. Those were important steps to bring the product through the channel.
To listen to the panel in its entirety, contact HIDA at HIDA@hida.org.
EV Clarke, founder and CEO of Health Products Xchange, did not participate in the panel but provided The Journal of Healthcare Contracting with his view on the matter as well.
“We don’t know what the product needs will be in the next pandemic and we can’t stockpile everything. The virtual safety net through an open marketplace model that maximizes potential source is a critical part of what we can do to transform the supply chain post-COVID to create the virtual stockpile,” Clarke said.
Health Products Xchange builds a virtual network by finding new trading partners to buy, sell, trade, share and donate through the HPXConnect-ed Supply Chain. The virtual network allows shared inventory visibility, secure access to products and a view of all supply sources.