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2 Understanding Medical Product Supply Chains
Pages 49-68

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From page 49...
... Medical product supply chains are designed for efficiency and cost, and do not always consider transparency or resilience. This can have negative consequences for public health and national security as evidenced by the ongoing COVID-19 pandemic as well as persistent medical product shortages that take place every year in the United States.
From page 50...
... General Structure of Medical Product Supply Chains As discussed in Chapter 1, owing to the complexity and interconnectedness of medical product supply chains, there are a variety of stakeholders involved in supply chain operations, including government agencies, raw material suppliers, manufacturers, distributors, group purchasing organizations, health systems, providers, and patients. These stakeholders make the decisions that enable medical product supply chains to facilitate the flow of medical products from raw material or component suppliers (e.g., makers of ingredients, subassemblies)
From page 51...
... . To keep production efficiency high, produce less waste, and reduce inventory costs, raw materials are produced only as ordered and many drug manufacturers use just-in-time inventory management and receive the raw materials or APIs only as they need them (Dias et al., 2012; Stevens, 2020; The White House, 2021)
From page 52...
... . The manufacturing processes for originator and generic drugs are virtually identical, with the supply chains for each differing mainly by location, meaning the two kinds of drugs only differ where they are made or packaged, not how they are made.
From page 53...
... DIFFERENCES IN SUPPLY CHAIN ECONOMICS BY PRODUCT CATEGORY Supply chain complexity is not the only factor that affects the likelihood of a medical product supply disruption. Management decisions are also important.
From page 54...
... For all of these reasons, lowmargin products -- and generic drugs in particular -- have been much more prone to supply disruptions than products with higher margins have been. It is possible to build just-in-case inventory or other business continuity protections into the supply chains for these products, but when margins are low, the returns on such investments do not justify the costs.
From page 55...
... This section highlights the policies most relevant to medical product supply chains.4 4  For a summary of existing U.S. legislation governing medical product supply chains and relevant legislation introduced in the 116th Congress see Appendixes A and B, respectively, at https://sgp.fas.org/crs/misc/R46507.pdf.
From page 56...
... The FD&C Act contains a number of statutory requirements relevant to the medical product supply chain. The BOX 2-1 Current Tools for FDA to Address Supply Chain Shortages Once a shortage or supply disruption is identified, FDA has several tools to respond: • Working with the product manufacturer to identify actions it is willing and able to take to avoid or mitigate the shortage.
From page 57...
... Below, some key aspects of this act are summarized in four categories -- awareness, mitigation, preparedness, and response -- in line with the committee's medical product supply chains resilience framework as detailed in Chapter 5. Awareness of Medical Product Shortages In response to the increasing frequency and threat of medical product shortages, the U.S.
From page 58...
... This is covered in more detail in the CARES Act section below. Mitigation of Medical Product Shortages In addition to measures to detect and track medical product shortages, the FD&C Act contains provisions to prevent shortages and blunt their effects.
From page 59...
... legislation governing the medical product supply chain and relevant legislation introduced in the 116th Congress see Appendixes A and B, respectively, at https://sgp.fas.org/crs/misc/R46507.pdf.
From page 60...
... Several gaps exist in the current legislation on medical product supply chains, leaving vulnerabilities unaddressed at the federal level. First, the reporting requirement for drug and device manufacturers focuses on disruptions to manufacturing, excluding downstream disruptions that could also lead to shortages, such as transportation disruptions, or disruptions that distributors detect.
From page 61...
... government passed the CARES Act in March 2020, which called for the present study on the security of the medical product supply chain, and provided additional requirements for tracking and preventing medical product shortages.20 Due to a lack of transparency between manufacturers and HHS and incomplete reporting under existing regulations, the CARES Act amended the FD&C Act, adding certain API and device manufacturers to the categories of manufacturers that must notify the HHS secretary and Center for Devices and Radiological Health (CDRH) of device and drug shortages (FDA, 2020)
From page 62...
... These are discussed below. Executive Order 13944 List of Essential Medicines, Medical Countermeasures, and Critical Inputs -- August 6, 2020 The Trump administration released an executive order regarding the security of the medical product supply chain.24 The order directed relevant 22  Drug Quality and Security Act, Public Law 113-54, 113th Congress (November 27, 2013)
From page 63...
... government's ability to monitor and manage the public health supply chain through stockpiles, visibility, and engagement; and (3) to establish standards, systems, and governance to manage supply chains and ensure fair, equitable, and effective allocation of scarce resources.
From page 64...
... CONCLUDING REMARKS Medical product supply chains are vital to the nation's collective health and safety, in ordinary times as well as emergencies. But these supply chains are complex, varied, global, and constantly evolving.
From page 65...
... There is also no systematic framework for enumerating, prioritizing, and combining measures into a medical product supply chain resilience strategy. The remainder of this report will focus on these questions in order to inform recommendations that will substantially increase the resilience of medical product supply chains.
From page 66...
... 2021b. Drug supply chain security act public-private partnership.
From page 67...
... 2021. Building resilient supply chains, revitalizing American manufactur ing, and fostering broad-based growth: 100-day reviews under Executive Order 14017.


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