Top priority

In April 2020, as the planet closed down and the death toll began to soar, the US government made a remarkable announcement. Fearful that demand for crucial medical supplies would outstrip supply – and that Covid would completely overwhelm the country’s creaking health system – the authorities applied the Defense Production Act (DPA). Originally passed in the context of the Cold War, the legislation was then enacted to spur American medical device manufacturers into action. Among other things, the act forced factories to produce particular items, even if that meant delaying orders from other customers. That’s shadowed by federal interventions elsewhere. President Trump, for instance, barred the export of critical medical equipment overseas.

All things considered, the legislators seem to have achieved their aims. With companies as varied as Ford and General Electric all rushing to support, the US pumped out an estimated one billion N95 masks in 2021 alone. Yet, as the immediate emergency of the pandemic has slipped into history, the supply chain challenges facing medical device manufacturing haven’t disappeared. The causes here are multifaceted, with transportation, labour, geopolitics and even weather all acting as contributing factors. The sector itself is assuredly feeling the strain, with 26% of respondents in a recent survey predicting that sourcing medical equipment will become harder in future. The same poll, conducted by Supplyframe, also found that a third believe domestic device manufacturing will need to increase.

It goes without saying, meanwhile, that the consequences here are far from rhetorical. As the pandemic terrifyingly revealed, a lack of medical devices can quickly have health consequences in the real-world – a fact that’s still apparent now. Even something as simple as saline solution for IV drips continues to be rationed across American hospitals, while a lack of semiconductors is sparking shortages everywhere from ventilators to pacemakers. All the same, as the success of the DPA vividly implies, there’s plenty that the powers-thatbe can do to bolster the situation. Strengthening public-private partnerships; stimulating domestic investment; partnering with foreign allies. These are but three of the options available to policy makers – and are encouraged by industry bodies – even while the growing threat of rivals like China makes decisive action more urgent than ever.

The chips are down

Few people are as well-placed as Scott Whitaker to reflect on the supply chain problems stalking medical device development. As the president and CEO at AdvaMed, an organisation representing 80% of US medical device firms, and the biggest such association on earth, he’d had plenty of opportunities to understand just how challenging the manufacturing climate is currently. As Whitaker emphasises, recent years have seen the sector “strained” in a number of key areas. Semiconductor chips are probably the most famous example here, but Whitaker emphasises that resins and medical-grade packaging have proved increasingly hard to find as well.

If the impact of shortages is multifaceted, the causes are too. The chaos of the pandemic hasn’t helped – a situation exacerbated by the relatively small size of the medical manufacturing industry. Think about it like this: in a world where 70% of semiconductor market growth is dominated by just three sectors (automotive, data storage and wireless), it can be hard for medical manufacturers to get a look in. Beyond these overarching issues, moreover, disruption comes in many forms. One, argues Abby Pratt, senior vice-president at AdvaMed, involves transport. “There were a lot of delays in the delivery and transport [of] cargo,” she says, adding that severe weather events and labour stresses have hardly improved things.

Fair enough: floods near Beijing are ravaging supply chains as we speak, while skilled manufacturing technicians are typically demanding $2–3 more per hour than they did pre-pandemic. Combine this with ballooning geopolitical tensions – the war in Ukraine and looming conflict in the Pacific, which among other things has led the US to slap trade sanctions on Chinese chips – and no wonder Whitaker is so concerned. “First and foremost,” he says, “the major consequence of these supply chain issues is the potential disruption in the delivery of patient care. If medtech companies are unable to manufacture and deliver these life-saving devices to hospitals and clinics, patients will lose access to the care they need.”

Given the scale of the quandary, though, it’s equally unsurprising that the authorities should have stepped in. On President Biden’s side of the Atlantic, probably the most significant example is the so-called CHIPS Act. Earmarking $280bn for domestic semiconductor research and manufacturing, the bill also provides 25% tax credits for relevant equipment. Not to be outdone, the Europeans started down a parallel path, passing a $47bn package modelled on the CHIPS Act. Although not the only motivation for these legislative instruments, one of the reasons cited for the creation of both was to ensure a reliable source of semiconductors for medical devices.

In good supply

AdvaMed, for its part, has been actively involved in the discussion around policies like this that aim to strengthen medical supply chains. A case in point is a new white paper, advancing six ‘priority areas’ to help build resilience into American medical device manufacturing. The suggestions here are varied; one idea involves formalising a ‘green lane’ at airports and ports, ensuring that equipment can enter the country quickly; another centres on diversifying supply chains, doubtless wise when US regulations helped shutter almost 10,000 Chinese chip manufacturers in 2021–22 alone.

Yet if each of these proposals makes sense in isolation, Pratt does see a unifying theme: fomenting cooperation between the public and private sectors. “Companies have learned a great deal, and have enhanced their internal processes and procedures,” she says. “But our job as a trade association is to speak to external stakeholders, like the government and other partners in the healthcare supply chain.”

In the first instance, this certainly seems reasonable considering the successes of the DPA. More to the point, you can easily trace this spirit of collaboration if you examine the AdvaMed white paper in detail. Consider, by way of example, those queue-busting green lanes. To thrive, the authorities inevitably need to cut red tape, even as they trust shipping manifests to match imports. It’s a similar story around another AdvaMed recommendation: the ‘long-term prioritisation’ of medtech needs.

Without a top-down understanding of what doctors and patients require, after all, it’ll obviously be tough for individual factories to react. Enforcement of the DPA is clearly one option here. “A lesser tool,” Pratt continues, “could be that the government reaches out to suppliers, to urge them to prioritise the medical device industry or certain medical device companies.” As Pratt notes, a wellplaced letter from the White House can do much to prod stakeholders in the right direction.

If the awesome power of the state can be coercive, however, it can equally provide a break to struggling private sector managers. If, for instance, a particular component is proving difficult to source, Pratt says that bodies like the FDA may want to intervene – by working with manufacturers to expedite approvals or validations necessary to adapt to an upstream supply disruption. One example, she says, is if a company “needs to identify an alternative supplier or reconfigure their device to utilise inputs that are available.” In fact, there’s evidence that such flexibility can prove useful in the real world. At the height of the pandemic, the FDA stated that hospitals could repurpose machines as ventilators and that manufacturing blueprints could be tweaked if necessary. In practice, the FDA saw batteries as a prime target for modifications here, while even suggesting that Bluetooth could be integrated for monitoring patients at a safe distance.

Deal or no deal?

It seems clear, in short, that a genuine solution to the medical sector’s woes involves an intimate dance between the public and private spheres. But for that to happen, they obviously need some way to communicate. AdvaMed is at the centre of these developments, too. Unveiled last year and led by the Administration for Strategic Preparedness and Response of the US Department of Health and Human Services, the Joint Supply Chain Resilience Working Group brings together almost 180 experts from across medical life – all united in sharpening the healthcare supply chain. AdvaMed, for its part, sits on the new group’s executive committee, while Pratt believes that similar schemes are destined to follow.

At the same time, Whitaker makes the case for greater state intervention at the international level. As he puts it: “AdvaMed is working with the US government to make the case around the importance that coordination with partners and allies is essential to enhance trade in areas that support our supply chain resilience.” Once again, there are signs this is occurring already. As far as semiconductor chips are concerned, the EU and US have jointly launched an ‘early warning’ mechanism for supply chain shortages, and promised to share information on the support offered to domestic manufacturers. That’s shadowed by other bilateral agreements. In April, the US secretary of commerce and her South Korean counterpart pledged to keep the protectionist implications of the CHIPS Act as clear as possible. Diplomacy of this kind surely makes sense. Especially with the rising bullishness of China and the relative economic decline of the Western alliance through the end of this century, Washington will need all the friends it can get – for the sake of the country’s medical sector and countless other industries.