Lori Lee spends a lot of time trying to keep Connecticut’s largest health system stocked with medical supplies from IV lines to gauze bandages. It’s a job that’s gotten increasingly harder as unprecedented snarls have tied the supply chain in knots.
“There are probably hundreds of outages of items that we order that do not come in,” says Lee, senior vice president of clinical operations at Yale New Haven Health, which has annual revenue of $5.6 billion and hospitals in Bridgeport and Greenwich. She says the list of shortages includes basics such as IV tubing and catheters, which are used constantly in hospitals.
With just-in-time ordering, the health system relies on distributors to deliver supplies quickly rather than hospitals keeping them in stock. “Many of those things on a daily basis don’t show up,” Lee says. She’s resorted to having her team of doctors and nurses search for substitutes, which requires training nurses in the slight differences in how they might operate. “This is not really like Coke and Pepsi,” Lee says. “It’s a massive, massive effort every day that we’re really struggling with.”
The U.S. healthcare system is facing supply shortages that dwarf the problems experienced in the early days of the Covid-19 pandemic, when needed personal protective equipment, like masks and gowns, was nearly impossible to come by. Back then, shortages might have been more urgent, but today’s problems include a much wider array of equipment. They can be traced to component scarcities, backlogged ports, transportation glitches and lockdowns in China to combat the spread of Covid-19. Much of the attention on the supply-chain crisis has focused on automakers and electronics companies dealing with factory closures in manufacturing hubs such as Shenzhen and Shanghai, but the effects of hard-to-find supplies of medical devices and supplies are severe, too, and impact doctors’ offices and operating rooms across the U.S.
The list of scarce items is long. It includes latex and vinyl examination gloves, surgical gowns, laboratory reagents, specimen-collection testing supplies, saline-flush syringes and dialysis-related products, according to the U.S. Food and Drug Administration.
In this photo illustration, the Owens & Minor Healthcare logo is seen displayed on a smartphone.
Owens & Minor, a healthcare logistics firm with $8.5 billion in annual revenue, says that 45% of the items it handles are in some way supply-constrained. They include hypodermic needles and flush syringes, blood-collection tubes, surgical tape, surgical gloves, suction canisters, IV solutions, dialysis concentrates, a variety of wound-care products, sharps containers, catheters and adult and pediatric nutritional products.
“It’s huge,” says Jeff Jochims, Owens & Minor’s chief operating officer of products and healthcare services.
Medline, another large medical supply company, says that hospitals, surgery centers, nursing homes and healthcare providers are all feeling the crunch. “Due to industry-wide supply disruptions, stockpiling has become essential for healthcare resilience,” Medline executive vice president Jim Boyle, said by email. To strengthen its own supply chains, the company opened five new distribution centers with two more slated for completion this year, including one in Richmond Hill, Georgia, near the port of Savannah.
Some shortages are directly related to the pandemic. Efforts at mass vaccination, for example, strained inventories of syringes and needles. Others are due to the closures in China. Those shutdowns have yet to fully work their way through the supply chain for medical products and supplies, meaning that constrained supplies could get worse this summer, especially if the lockdowns drag on.
“We’ve got the wrong products in the wrong location with the wrong shipping,” says Abe Eshkenazi, chief executive of the Association for Supply Chain Management. “It’s not one disruption, it’s a series of disruptions.”
For the often-used, stocked items required to treat patients, the industry as a whole used to have fill rates of 96% to 98%, meaning that just a very small percentage of orders remained unfilled. Today, Jochims says, the industry’s fill rate for these items is in the high 80s. “It used to be that hospitals would deal with 50 to 100 back-ordered items per day,” he says. “There are many institutions that now are dealing with 800 to 1,000 back orders per day.”
It’s not just medical supplies. There are similar longstanding problems with pharmaceuticals, many of which rely on key ingredients from Asia. Anesthesia medications, antibiotics, pain medications, nutrition and electrolyte products and chemotherapy agents are frequently in shortage, according to research by the Mayo Foundation for Medical Education and Research. The burgeoning number of electronic devices in healthcare has left items including defibrillators and imaging machines vulnerable to the same supply shocks as consumer electronic devices.
Even for items manufactured in the U.S., global supply chains have caused havoc as components are tough to get from Asia and elsewhere. Owens & Minor’s Jochims says that for inbound items, he sometimes sees fill rates of 50% or below, though that has recovered a bit. “We deal with the same things as our customers,” he says.
“It’s a massive, massive effort every day that we’re really struggling with.”
Manufacturing N95 masks, for example, requires small metal clips to mold over the bridge of the wearer’s nose. Churning out syringes requires both plastic resin (which has been in short supply, with rising prices) to mold the body of the syringe, and needle tips for the injection. “If you can’t get the plastic resin to mold a syringe body, then you’ve got a shortage,” Jochims says. “If you can’t get the needle tips, then you’ve got no use for your syringe even if you can get the plastic. It’s a very complex spectrum of challenges that we’re seeing now.”
China’s shutdowns have a lag time of 45 to 90 days before their effects show up in the U.S., so Jochims figures that supply-chain challenges will continue well into 2023. Meanwhile, costs go up for components, for transportation and even for warehouses, where traditional suppliers now face competition from Amazon and other ecommerce players, which could lead to inflation over the long term.
While for decades manufacturers of medical devices and supplies searched for the cheapest location for their factories to keep costs down, that calculus is starting to change. “There’s been this insane pressure to see the risks beyond the costs,” says Aidan Madigan-Curtis, a partner at Eclipse Ventures.
Mexico, which is already a significant maker of medical devices and pharmaceuticals, has seen increased demand from companies looking for production there, says Omar Troncoso, a Mexico City-based partner at management consulting firm Kearney. “We have suppliers with 50 requests for proposals waiting for an answer,” he says. “I would imagine 48 aren’t going to be answered.”
What’s the solution? In 2020, the National Academies of Sciences, Engineering and Medicine looked at the causes of medical-product shortages and ways to improve medical supply chains, both in normal times and in public health emergencies. Its 364-page report, Building Resilience into the Nation’s Medical Product Supply Chains, which came out earlier this year, called for the FDA to publicly track sourcing, quality, volume and capacity information and to establish a public database; for health systems to include failure-to-supply penalties in contracts; and for the federal government to optimize inventory stockpiling to respond to medical-product shortages, among other things.
But none of these fixes is going to happen in the short term, and in the meantime hospitals and health systems are trying to cope. “This is a national problem,” says Yale New Haven Health’s Lee. When shortages of PPE were resolved, “everyone was happy, including us. What people don’t realize is that now it has moved to all these other categories and that’s almost harder to deal with. You can’t stockpile everything.”