The Healthcare Hub

Keep Dreaming: The Future of the Medical Device Supply Chain

Thursday, November 12, 2015

Strategies for cleaning up item masters, maintaining integrity over time through data synchronization and automation. Recently, I have been speaking with hospital supply chain executives about the Accountable Supply Chain Leader. What kinds of skills and leadership traits are needed to lead supply chain in a value-based world and what kinds of skills and traits should you look for in your team? I close the presentation with a quote from 19th Century English mathematician and author Lewis Carroll in Through the Looking Glass.

"Why, sometimes I have dreamed six impossible things before breakfast!"

I like that quote - at least in part - because in healthcare, we need to dream the impossible.

It’s not that the seemingly impossible doesn’t happen in healthcare. We hear about medical miracles all the time - like the 63-year-old tire salesman who, after being blind for nearly 30 years, can see again thanks to a bionic prosthetic eye implant eye or the paraplegic man who literally kicked off the 2014 World Cup Soccer tournament with the aid of a mind-controlled exoskeleton. Many of the more recent medical marvels are the result of advances in 3D printing. While it’s already widely used for dental implants, contact lenses and prosthesis, many predict that bioprinting of functioning human organs will be commercially viable in less than a decade.

What’s concerns me is that these seemingly impossible advances are happening in an industry that still struggles with the basics – like the adoption of data standards such as Global Trade Item Numbers (GTINs) or even getting clinicians to wash their hands. In both cases, it has come down to regulation to drive change. For the former, the U.S. FDA has mandated that manufacturers assign and label medical devices with unique device identifiers (UDIs) – the GTIN is a UDI complaint code. Meanwhile, the Office of the National Coordinator for Health IT (ONC) and the Centers for Medicare and Medicaid Services (CMS) have ruled that electronic health record vendors and hospitals need to store and share UDIs for medical devices implanted in patients. As for the latter, CMS no longer reimburses hospitals for the cost of treating hospital acquired infections, many of which have been directly linked to deficiencies in hand hygiene.

So what do 3D printing, data standards and handwashing have in common? They are all areas where the supply chain can and will play an increasingly important role in both the quality and cost of healthcare. First, let’s look at handwashing. In his bestselling book, The Checklist Manifesto, surgeon Atul Gawande, MD, recounts the Keystone Initiative in Michigan which successfully reduced central line infections at Michigan hospitals. In the process, the Michigan Hospital and Health Association discovered that in one-third of the ICUs the supplies considered essential for infection control – including chlorhexidine (antiseptic and antibacterial) soap and sterile drapes – were in short supply and sometimes unavailable to clinicians when needed. The hospitals partnered with a supplier to create central line kits that included both the soap and drapes. While the Keystone Initiative was about more than just supply issues, this single action played an important role in the overall success. An article in the New England Journal of Medicine reported that within three months, infection rates in Michigan intensive care units had fallen by two-thirds, and within 18 months, the Keystone Initiative was credited with saving 1,500 lives and $175 million in costs.

As for 3D printing, beyond the life-changing if not life-saving nature of the applications in healthcare, it is expected to have a profound impact on the healthcare supply chain. As in other industries, 3D printing will create demand for smaller and more localized manufacturing sites, many of which could be located at hospitals and other locations where healthcare is provided. In an industry noted for the lack of trust between providers and suppliers, it is intriguing to think of the implications when providers become suppliers.

Perhaps even more importantly, 3D printing creates the opportunity to personalize production of products for specific patients. In many ways, this goes against more recent movement in the healthcare supply chain to standardize on fewer products and commit a larger percentage of spend for a specific type of product from a smaller number of vendors. Such efforts have been largely driven by wide variations in prices for what clinicians consider to be functionally equivalent products. 3D printing of medical devices could be a real game changer, on many levels. While there would be significantly more variation in the products themselves, there could be less variation in how the products are produced, delivered and stored, all of which contribute to the cost of healthcare.

The question in the end will come down to value, which must be considered from both an economics point of view and the unique peculiarities of healthcare that do not always fit the classic economic model. Even if the technology exists, will markets arise (e.g., payors and/or individual consumers) to meet the demand for these products? And what role will politics play a role in determining what is or is not covered by public programs?

These issues are currently being addressed in the pharmaceutical world, raising awareness that current approaches to cost effectiveness analysis for reimbursement purposes do not work well for drugs designed specifically for individual patients. Such questions should focus first on effectiveness – do new technologies deliver better value – but the economics of scarce resources introduce often harsh realities. Once again the role of the supply chain, e.g., does 3D printing raise or lower the total cost of ownership in the short and long run, must be considered, as opposed to our often myopic view of the price paid for the product. Of course, we need to pay attention to price, and especially whether we are paying the correct price, which is another complexity in healthcare that GHX provides tools to address, but it is still just one dimension in a multi-dimensional environment.

If you have thoughts on the role supply chain can play in this exciting but complex environment, I would love to hear from you.

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Karen Conway

Vice President, Healthcare Value