Rebuilding the U.S. domestic medical supply chain faces several significant challenges, three industry experts wrote in an article published May 26 in Harvard Business Review.
The authors were:
- Willy Shih, PhD, the Robert and Jane Cizik Professor of Management Practice in Business Administration at Harvard Business School
- Robert Huckman, PhD, the Albert J. Weatherhead III Professor of Business Administration at Harvard Business School
- James Wyner, CEO of Shawmut, a global supplier of soft materials
Three key challenges to rebuilding the domestic medical supply chain:
- Domestic manufacturing is expensive. Supply chains that rely on a diverse set of sources are more resilient, but they are also likely to be more expensive, the authors wrote. Group purchasing organizations have historically been unwilling to pay more for domestic sourcing, and until their customers instruct them to do otherwise, they will stay focused on delivering the lowest cost, which tends to come from overseas.
- Buyers favor suppliers with whom they already have a relationship. Suppliers may offer urgently needed supplies to buyers they already have a relationship with in exchange for committing to a long-term supply contract. This makes it hard for new domestic suppliers to break into the market. If the U.S. wants domestic capacity, it will have to find a way to make the business model of domestic production sustainable, the authors wrote. The U.S. government could make deals with manufacturers for both ongoing use and routine replenishment of the Strategic National Stockpile that could be targeted at domestic production to ensure stable demand for U.S. production, they argued.
- Getting regulatory approval for medical supplies takes a long time and can be expensive. Manufacturers must file a 501(k) premarket notification with the FDA at least 90 days in advance of marketing medical supplies. The submission process can take about six months and cost $100,00 or more to prepare, the authors wrote. Policymakers should consider how regulatory processes favor existing producers, many of which are located outside the U.S., the authors wrote.
"One can imagine that for urgently needed products, testing could be accelerated, as was the case for the FDA's rapid review and granting of emergency use authorization for three COVID-19 vaccines," they wrote.
The authors concluded that the hurdles created by buyers that rely on pursuing the lowest prices and regulators that are unwilling to expedite the regulatory process often prove to be too much for companies to overcome, and said that without government support, the manufacturers that pivoted to help make medical supplies during the COVID-19 pandemic may be less inclined to do so in future public health emergencies.
"We don't recommend that the United States or any country try to be self-sufficient in everything; there are too many benefits to be derived from global sourcing. But in preparing for the next crisis, it is worth understanding why a country as well-resourced as the United States was slow, and, in many cases, unable to respond to basic and critical needs," they wrote.
Read the full article here.