Previous OM in the News posts have looked at the IV bag shortage in the medical supply chain, and many other shortages of medications and supplies. The causes of the shortages are many, including quality issues at production facilities, and Hurricane Maria’s damage to production facilities on Puerto Rico.
Shortages in this particular supply chain can have deadly consequences, and the risks need to be addressed.
Over the years, the supply chain for medical products and medicines has become very lean, and many items are manufactured off-shore. The last penicillin production in the US was in 2004. Only 10% of the generic drugs used in the U.S. are made onshore, and eighty percent of the active ingredients in medications are produced overseas, mainly India and China.
Considering the length of the supply chain, combined with ongoing shortages, does a lean medical supply chain present a threat to national security?
This post is based on the Wired article, Medicine’s Long, Thin Supply Chain, by Maryn McKenna, March 5, 2018. Image source: Douglas Sacha/Getty Images.
1. Should the United States Government develop policies to insure that critical medial products and medicine are produced in the United States?
Guidance: One viewpoint would be that production should go to the best location regardless of country. However, it is scary to think that critical medicines could be in short supply, especially if disruptions were to occur worldwide. Further, with possible trade wars looming, how could this impact the medical supply chain? Policy makers are also considering this problem. For more information, take a look at the list of drug shortates reported to the FDA.
2. What has led to this long, lean medical supply chain?
Guidance: It appears that cost reduction has been the primary driver of the medical supply chain. As a result the medical supply chain has become very lean to reduce cost, but also to protect proprietary processes. It has also off-shored production to reduce cost.
However, consider the consequences of shortage in an automotive supply chain, vs. a medical supply chain where lives are at stake. The supply chain risk has been overlooked. To a certain extent, the medical supply chain risk is placed on society, rather than the companies. In many cases, acceptable replacements are not readily available because of proprietary processes. Shortages lead to higher prices, because customers often can’t go elsewhere, as they can with many consumer goods.