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China's Covid wave threatens another US medical supply chain rumble

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The United States is already struggling with unexpected shortages children’s medicines, including painkillers and antibiotics.

US officials and medical providers have said in interviews that They were monitoring the situation in China closely and had yet to see any shortages directly related to the latest wave of infections there. Biden administration officials said they coordinated among federal agencies to monitor the supply chain and did not anticipate significant shortages, unlike at the start of the pandemic, due to government efforts. to bolster US inventories and steps taken by companies to reduce their dependence on China. . .

“We are looking for a lot of potential early warning signs in the medical supply chain for any kind of disruptions,” an administration official said. “At this stage, we have not detected any current or likely disruptions, at least in the flow of drugs or devices or PPE (personal protective equipment) supplies to the United States, given what is happening in China.”

But healthcare executives and supply chain analysts are warning of the impact of the latest The wave of Covid could take months to work its way through the supply chain and much will depend on the trajectory of the pandemic in the coming weeks, which US officials have limited insight into given the lack of data. from China.

“One of the main concerns throughout the pandemic has been that due to China’s zero Covid policy, the shutdowns have drastically reduced manufacturing capacity in China. It’s obviously that type of activity on the steroids,” said Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. “This is by far the worst supply chain challenge we’ve seen so far in the pandemics from China.”

Potential shortages could range from generic drugs, such as antibiotics and blood thinners, to electronic components used in advanced medical devices. Despite efforts over the past two years by the Biden administration to strengthen the nation’s domestic medical supply chain, the complexity, costs and regulations involved in manufacturing healthcare products have limited companies’ ability to move production.

Employees make face masks on a production line at a glove factory, which began producing face masks as overseas mask orders hit a record high amid the coronavirus outbreak, the May 16, 2020 in Shenyang, Liaoning Province of China.
Employees make face masks on a production line at a glove factory in Shenyang, China’s Liaoning province, May 16, 2020.Yu Haiyang/China News Service via Getty Images File

“When you have specific intellectual property tied to a specific manufacturer or you have very expensive factory production, which is typical in pharmaceutical and mission-critical components like integrated circuits, these are not reverse movements, there are a lot to do in there,” he said. said Douglas Kent, executive vice president of corporate and strategic alliances at the Association for Supply Chain Management.

The United States imported $3.2 billion worth of drugs and active pharmaceutical ingredients directly from China in 2020, including antibiotics, antidepressants, birth control pills and chemotherapy drugs, according to a news outlet. 2021 supply. analysis by the White House.

More than a quarter of the facilities manufacturing the active ingredients of anticoagulants for the United States and almost 20% of those manufacturing a type of anesthetic are based in China. Medicines imported into the United States from other countries, such as India and those in Europe, also get the vast majority of their ingredients from China, according to the report.

The US healthcare system has already grappled with a series of shortages over the past year due to China’s Covid policies that have caused factories to shut down and disrupted the flow of goods across the country. Last spring, doctors had to limit medical tests after a GE factory made an imaging agent used in the procedure shutdown for weeks.

The Association of Healthcare Industry Distributors found that medical product shipment delays have persisted over the past year, in part due to bottlenecks created by China’s turnover. Covid disruptions. The group found as many as 10,000 medical containers were delayed an average of 25 days in October.

“Although the situation has improved compared to the early stages of Covid in 2020, manufacturers and distributors are still facing shortages, long lead times and supply risks, combined with increased operational costs” , said Vijay Mohan, Vice President of o9 Solutions. ., which provides supply chain management technology to healthcare companies. “The new wave of Covid that has started to reappear will further amplify the challenges.”

There are some early signs of a slowdown in China’s largest ports and in the completion of manufacturing orders, according to CNBC data. Other shipping data shows that ocean crossings have continued to decline. But industry analysts say it will take several more weeks to determine how much of that is from the virus and how much is driven by lower U.S. consumer demand caused by other economic drivers.

The lack of data from China on the number and location of infections, the fatality rate and the variants has made it particularly difficult for companies to assess where they might encounter disruptions. Logistics officials said they have rely on their network of Chinese contacts and their analytical data, which so far have not revealed any major problems.

“We have this colossal and unprecedented and very rapidly evolving pandemic that is going to reach several peaks in several different geographies with different times, and we are a little blind to the data that would start to give us a more precise insight into what happens . said Stephen Morrison, director of the Global Health Policy Center at the Center for Strategic and International Studies.

Still, Morrison doesn’t expect the disruption to be prolonged or widespread, as healthcare companies have already moved operations out of China.

“There have been a lot of adjustments going on by the industry, which has already started to calculate that in terms of strategic interests, it needs to reduce its exposure in China and diversify. So it’s a different reality now,” Morrison said. “If it had happened at the start of the pandemic, the impacts would have been greater, but we had three years of recalibration.”

Companies could also face the risk that China diversifies medicines and medical supplies to meet the needs of its own population and moves away from exporting these products to other countries.

“If you build things that are necessary to keep your people healthy and there isn’t enough to go around, you’re going to go back to domestic satisfaction. I think that would be a natural response,” said said Douglas Kent, executive vice president of corporate and strategic alliances at the Association for Supply Chain Management.

Chinese media reports indicate that the country is short of fever-reducing items, such as ibuprofen and acetaminophen, with Chinese companies adjusting production to meet these demands. But US officials have said they do not expect a significant shortage of these drugs in the United States. Johnson & Johnson, which makes Tylenol and Motrin, said it did not obtain any of the drugs’ active ingredients from China.

Health officials say they hope the United States is better positioned to weather any Chinese shocks. After hospitals experienced shortages of gloves, gowns and masks early in the pandemic, many decided to keep larger stocks on hand. Hospitals have also increasingly sought to diversify the countries from which their critical supplies originate.

“We’ve seen great success across the supply chain while ensuring inventory is where it needs to be,” said Kyle MacKinnon, senior director of operational excellence at Premier, which helps healthcare providers to manage their supply chains. “I feel like there is room to absorb some potential impacts of this. Now how much harder is it to get your thumbs up due to the potentially very high level of Covid cases.

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