Providers and Distributors Can Support Domestic Manufacturing


October 2022 – The Journal of Healthcare Contracting

Elizabeth Hilla
By Elizabeth Hilla

The COVID-19 pandemic taught us a clear lesson: The United States is overly dependent on certain countries and certain parts of the world for the vast majority of medical supplies. That must change. If we want domestic manufacturing, we need to support it.

Challenges surrounding global manufacturing aren’t going away. A variety of social, economic, and political factors have created a new set of emerging issues in global sourcing. In Malaysia, concerns have been raised about the living conditions of migrant labor working in the manufacture of medical gloves. In China, the treatment of the Uyghur minority has raised concerns about products (including medical products) manufactured in Xinajing Province. Congress recently passed the Uyghur Forced Labor Prevention Act. The new law empowers Customs officials to seize imported goods suspected of being made with forced labor. 

To be better prepared for future pandemics, we need a better mix of global, nearshore and domestic manufacturing.

  • Global: Global manufacturers have certain advantages, such as affordability and availability. Experienced distributors have long-standing relationships working with reputable manufacturers in Asia. These distributors can vet products and manage changing criteria around sourcing requirements.
  • Nearshore: Nearshore production in Mexico and Central America creates shorter supply chains that are less vulnerable to disruption. The United States has long-standing free trade agreements with much of the Western Hemisphere, which further facilitates production and distribution.
  • Onshore: The United States must be prepared to ramp up domestic production and improve global sourcing. Federal purchases and multi-year contracts would enhance the long-term commercial viability of domestic manufacturing. This keeps production lines warm, so manufacturers don’t go idle and provider shelves don’t go empty.

The federal government is taking steps to incentivize domestic manufacturing. The Centers for Medicare and Medicaid Services (CMS) are considering a regulation to increase Medicare payment adjustments for hospitals that purchase domestically manufactured surgical N95 respirators. This is an important step in creating commercial market support to sustain domestic production.

Manufacturing is like any other business – if you want it to be there when you need it, you have to patronize it. That means making domestic sources an ongoing part of your purchasing. Stockpiling a bunch of product from overseas isn’t a long-term answer. In fact, such stockpiles can be counterproductive – large one-time bulk buys can reduce regular ongoing purchases and thus make it harder for domestic manufacturers to stay in business. Stockpiled product may expire before it’s needed. And if the stockpile includes unfamiliar brands, they may not suit clinician’s needs.

For providers, diversified sourcing is critical for future preparedness and supply chain resiliency. The good news is that providers don’t have to be in the product business if they don’t want to. Your distributor partner can help you evaluate your current product mix and achieve your sourcing goals.