HDA Chief Gauges Resiliency of Healthcare Supply Chain in 2023

The president and CEO of the Healthcare Distribution Alliance says the supply chain is adapting to the "new normal."

"Transformational change" in the healthcare sector is having a significant impact on the healthcare supply chain, says Chester "Chip" Davis, JD, president and CEO of the Healthcare Distribution Alliance (HDA).

As the U.S. healthcare system emerges from the coronavirus pandemic, the healthcare supply chain is recovering from serious disruptions such as shortages of personal protective equipment early in the pandemic. The healthcare supply chain is still coping with challenges, including drug shortages and a changing regulatory environment.

While the healthcare supply chain has been challenged in recent years, it has largely weathered the storm, Davis says. "While not perfect, the healthcare supply chain has been resilient during the pandemic and since the wind down of the pandemic. There are still areas we need to work on collectively with our partners both upstream and downstream. For example, there are growing concerns about the sustainability and viability of the generic drug market—that is a critical area for all stakeholders who rely on generic drugs, which is essentially the entire healthcare ecosystem."

The biggest lesson from the pandemic is the need for active communication and collaboration between all partners in the supply chain, he says. "I started at HDA in the first week of March 2020—right when the pandemic arrived here in the United States. In my first couple of months at HDA, seeing the evolution of the communication cycle, particularly with the federal government, improved when the communication was no longer one-way. When it was the federal government telling us what to do, it was difficult as opposed to a constant feedback loop. We think it is important to maintain two-way communication."

The expiration of the COVID-19 public health emergency is going to have a significant impact on the healthcare supply chain, Davis says. "Obviously, with the expiration of the PHE on May 11, the most important thing is to ensure the sustainable availability and distribution of the treatments for COVID-19 that were developed, including vaccines and therapeutics. During the pandemic, the government played a key centralized role, and by definition with the cessation of the PHE a lot of the medicines are transitioning into the traditional commercial market. The fortunate thing for everyone who relies on the healthcare system is that our members at HDA, who are distributors between the frontline manufacturers and the frontline providers, are in a unique position to ensure that the transition process will be as smooth as possible."

The healthcare supply chain is adjusting to the "new normal," he says. "Things have not gone back completely to what they were pre-pandemic. Healthcare is experiencing an incredible amount of transformational change and it is impacting our members."

Impact of regulatory environment

The second half of 2023 is going to be "very busy" for the healthcare supply chain, Davis says. "We have the final implementation date of DSCSA—the Drug Supply Chain Security Act—which was passed in November 2013. Everyone from manufacturers, to distributors, and to pharmacies must be ready to go as of Nov. 27, and everyone is in various stages of operational preparedness to be in compliance. There is a lot of focus both within the Biden administration and Capitol Hill on the supply chain—what worked during COVID and areas that need improvement. A lot of that will manifest itself through a piece of legislation called PAHPA—the Pandemic and All Hazards Preparedness Act. This must be reauthorized by Congress by Sept. 30."

Implementation of the federal Inflation Reduction Act will have an impact on the healthcare supply chain for years, he says. "That has a profound impact on our partners in the manufacturing community—both brand and generic manufacturers as well as biologics and biosimilars companies. Anything like the Inflation Reduction Act that has a major impact on our partners upstream is ultimately something that the supply chain is going to have to deal with as they realize what the changes to their business models are going to be. We will have to react to that accordingly."

Drug shortages

A challenge related to the healthcare supply chain that has re-emerged after the crisis phase of the pandemic is drug shortages, Davis says. "It is not an easy issue. In terms of the causation, it is not a sole-source problem. There are multiple reasons why there are drug shortages in certain areas of the treatment regimen. It can be related to anything from shortages of raw ingredients and raw materials, to generic or biosimilar companies not having access to the market when they get Food and Drug Administration approval because of formulary designs, to economic challenges in the generics market, where the generics companies are claiming the margins are too low for them to continue manufacturing products."

There are market anomalies that need to be addressed, he says. "At a time when there is sensitivity to high prescription drug costs, there are also instances where prices have gotten so low that manufacturers are having to make hard decisions about what products will remain in their portfolio and what products they are going to stop manufacturing."

The pharmaceutical supply chain has a role to play in easing drug shortages, Davis says. "In the unique position that our members are in, we have a 360-degree lens on the supply chain. We can look upstream to our manufacturing partners. We can try to find out whether they anticipate any manufacturing disruptions. Then we can use the logistics and data expertise that we have to plan accordingly, whether it is accessing secondary manufacturers or alternative manufacturers if we anticipate the primary manufacturer is going to run into challenges."