The U.S. Must Adopt a Policy To Diversify Manufacturing & Sourcing of Critical Medical Supplies

HIDA Government Affairs Update

Linda Rouse O’Neill
Vice President, Government Affairs, HIDA

Published in Repertoire Magazine

October 1, 2021

The COVID-19 pandemic has driven unprecedented worldwide need for virus-fighting medical supplies. This surge in demand has pushed the U.S. to reconsider its heavy reliance on global sources to produce necessary healthcare equipment such as PPE.

In the beginning of the pandemic, factories in China and Malaysia shut down due to worker illness caused by the virus. Concurrently, many employees were on holiday celebrating Lunar New Year. Overseas factories were slow to restart, but even as they began to ramp up again by manufacturing gloves, gowns, and masks, many U.S. healthcare providers and their trusted distributor partners had challenges in securing quality product. Countries around the globe clamored for the same supplies and raw materials while opportunistic brokers – both domestic and foreign – injected themselves into the supply chain, oftentimes pushing fraudulent goods.

Fast forward to summer 2021. COVID vaccines are available and overseas factories are buzzing with production. But the highly contagious Delta variant is spreading quickly and shipping challenges have clogged the world’s ports, including the busiest in the U.S. The trucking and rail industries are also challenged with worker shortages and container backlogs. These logistical challenges have led to higher costs and longer wait times for medical supplies. The bottom line is that U.S. reliance on global sources has impacted supply chain resilience. The pandemic highlighted the need for diversity in sources for pandemic medical supplies, including building domestic manufacturing capability in the U.S.

HIDA supports domestic and nearshored manufacturing to augment global sources

HIDA supports expansion of domestic and nearshored manufacturing capacity for critical products to augment global sources. Leveraging the strength of U.S., regional, and global manufacturing locations will lead to the highest level of supply chain resilience at the lowest overall cost. These policies should apply to all products important for pandemic response including personal protective equipment, testing supplies, needles and syringes, and infection prevention products.

Domestic production is often more expensive than global sources and can’t always be supported through normal market commerce. The U.S. government will need to support and fund a diversified sourcing strategy in partnership with the private sector.

HIDA recommends the following solutions:

Prioritize companies with experience in healthcare–Manufacturing medical grade products requires specialized expertise and capability. Companies selected to receive government support to onshore production must have an extensive track record of meeting FDA-quality standards for medical grade products.

Leverage the established public/private partnerships–The private sector is already actively ramping up investments in U.S. manufacturing. Government incentives and commercial market investments should complement and reinforce each other in a comprehensive plan that includes assessment of onshoring viability and meaningful incentives.

Establish a national sourcing strategy–Increasing U.S. manufacturing of critical medical supplies will help establish capacity to quickly ramp up medical supply production. A national strategy should enable U.S. surge manufacturing capabilities and prioritize transportation of PPE and other pandemic supplies across the nation. Supplies must be easily and readily accessible to the nation’s 500,000 provider sites.

Support the long-term commercial viability of domestic manufacturing–Payment and trade policies can be used to provide a consistent demand signal to the commercial market for long-term viability. Policies should include direct procurement, trade agreements, reimbursement, subsidies, an idle manufacturing strategy, and thoughtful federal government purchases that don’t disrupt the supply chain.

Fostering diversified sourcing is a key component of HIDA’s comprehensive framework for building a more robust pandemic response infrastructure.

This article also appears in Repertoire Magazine.