Challenges for the U.S.-China supply chain

THE WUHAN CORONAVIRUS threatens to hamper a healthcare supply chain that’s grown increasingly dependent on China for medical and pharmaceutical supplies.

“The integration of the supply chain is profound,” said Benjamin Shobert, senior associate of international health for the National Bureau of Asian Research, a nonpartisan think tank based in Washington, D.C.

“There’s already a very active conversation on Capitol Hill around whether or not the United States should have taken the dependencies that it has on Chinese-manufactured pharmaceuticals,” Shobert said. An estimated 80% of active ingredients used to make medications are imported from China, according to the Council on Foreign Relations.

China also is a major global supplier of disposable medical devices like syringes and gloves, as well as surgical equipment. Over the past decade the country has also exported higher-tech therapeutic and diagnostic products like joint implants and MRI machines.

Sales of Chinese orthopedic implantable devices grew by 189% to $555 million from 2011 to 2016, according to a 2018 analysis by the U.S. International Trade Commission. Over the same period, exports of diagnostic equipment increased by 37% to $1.4 billion.

According to the medical-device trade association AdvaMed, medical devices and diagnostic products imported from China make up just under 3% of the $170 billion medical technology market.

But Michael Alkire, president of healthcare supply chain and consulting company Premier, said it’s difficult to estimate how many of these goods come from China. “There are critical pieces of upstream supply chain information that are unknown, including raw material suppliers, third-party and contract manufacturers, sterilizers and more,” Alkire said.

David Gillan, senior vice president of sourcing operations for healthcare supply giant Vizient, said past infectious disease threats have caused suppliers to purchase products from other countries to avoid disruptions.

Gillan said Vizient is working with both suppliers and members to maintain adequate inventory levels.