Logistics news: UPS survey reveals mixed impact on effects of healthcare reform on supply chain

While healthcare reform is no longer front and center in the minds of most Americans after months of scrutiny and deliberations, the potential impact of the legislation has not waned with healthcare supply chain executives, according to a recent survey from UPS.

By ·

While healthcare reform is no longer front and center in the minds of most Americans after months of scrutiny and deliberations, the potential impact of the legislation has not waned with healthcare supply chain executives, according to a recent survey from UPS.

The survey, entitled “Pain in the (Supply) Chain” is based on feedback from supply chain executives at roughly 150 pharmaceutical, biotech, and medical and surgical device companies. It was conducted by Harris Interactive.

When it comes to healthcare reform, a cumulative 68 percent indicated the legislation poses a legitimate business concern for several reasons, including: not having the current infrastructure in place to support changes from healthcare reform (22 percent); not being able to afford to operate in the new environment (20 percent); and concerns about reform hampering R&D programs and initiatives (26 percent).

And a cumulative 33 percent indicated healthcare reform will open up new markets for their business (33 percent) and 15 percent said they expect it to create new opportunities.

“Healthcare reform for healthcare supply chain professionals is a ‘good news/bad news’ situation,” said John Menna, UPS director of global strategy, Healthcare Logistics. “The good news is by providing more patient access to healthcare that could or should potentially drive demand for healthcare products. But for the challenge from a supply chain manager’s standpoint is to make sure his supply chain is flexible enough to take on that increased demand.”

Added to that are regulatory challenges, which, Menna said provide a “fear of the unknown” now that healthcare reform has been signed into law, with Health and Human Services and the FDA now coming out with the processes and procedures and regulations associated with the law.

That said, it is not surprising that regulatory challenges are a major concern for healthcare supply chain executives. The survey found that 58 percent of respondents reported they are “very” or “extremely” concerned with increasing regulations.

“Not only in the U.S.—but all over the world—there are different regulations for moving healthcare products in and out of countries,” said Menna. “And unfortunately those regulations are not harmonized globally. If you are shipping vaccines into Russia, for example, they sit in quarantine for a certain period before they get released. Those types of things need to be factored into the whole supply chain process.”

Other regulatory challenges cited by Menna include a pending regulation to ensure all pharmaceutical products are serialized down to a bottle level with every serial number tracked. Implementing these processes is costly and daunting for healthcare supply chain executives, according to Menna.

Another survey topic focused on global expansion plans, with nearly half—47 percent—or survey respondents indicating they plan to expand into emerging countries in the next 18 months in an effort to tap into “fast-growing opportunity markets.”

What’s more, the survey found that four out of five companies in the healthcare industry currently do business with more than one country outside the U.S., with most of their emerging market business occurring in China, India, and Brazil. Argentina, China, India, and Brazil were identified as the top emerging markets companies will be expanding to in the next 18 months.

In terms of the impacts of global expansion on healthcare supply chain operations, Menna said there are several things—good and bad—to keep in mind.

“The good news comes from three specific areas: an emerging middle-market, sizable patient population that will be buying and needing healthcare products, which present opportunities to expand sales and reach; low-cost manufacturing and sourcing; and the area of clinical trials…with huge patient populations in these countries that can reduce clinical trial costs and make clinical trials much speedier in terms of going through trials processes to get approval for a new drug or a new device.”

These parts of the world tend to be places where logistics and transportation infrastructures are not necessarily anywhere near as established as they are in other parts of the world, though, said Menna. And the supply chain and the process of getting products to the market is typically underdeveloped and tend to be a fragmented supply chain. 

And as has been the case since the onset of the recession and prior to that, managing costs remains a great concern for healthcare supply chain executives, with 64 percent being “very” or “extremely” concerned, compared to 55 percent in the 2009 survey. And 44 percent of respondents said they had success in addressing cost management issues.

“Managing costs is becoming an increasing concern,” said Menna. “Most respondents [67 percent] expect supply chain costs to increase over the next 18 months. There is increasing pressure with healthcare reform and payers and patients getting more involved in their healthcare to help drive down costs. Part of that is finding ways to have a more efficient supply chain and bringing out some of the costs of the supply chain.”

In some cases, healthcare shippers are taking steps to shed some of the fixed costs such as distribution centers and outsourcing those functions to a company like UPS, which is a strategy that has been successful, said Menna.

Another issue is global transportation capacity. While there was a lot of capacity in the market a year ago before the recession kicked in, a lot of global air and ocean carriers were trying to remove assets although a fair amount of capacity remained. This resulted in low rates, said Menna. And now with that capacity out of the market and demand for transportation and logistics services returning, capacity is tighter and rates are firming up.
“Our customers are seeing this and have some concerns about how to manage that,” said Menna.

For more information on the UPS “Pain in the (Supply) Chain” survey, go to http://www.ups.com.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

All Topics
Latest Whitepaper
Is Your Logistics Strategy Keeping Pace with Your Manufacturing Efficiency?
U.S. manufacturers continue to invest in world-class technology and innovation, as a growing number of businesses choose to expand U.S.-based production — or return manufacturing from Asia.
Download Today!
From the April 2017 Issue
While adoption rates have remained relatively flat, yard management systems (YMS) are helping logistics operations turn that important space between the loading dock and the gate into a vital link in the supply chain.
Information Management: Wearables come in for a refit
2017 Air Cargo Roundtable: Positive Outlook Driven by New Demand
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Maximize Your LTL Driver Adherence with Real-time Feedback
This webinar shows how companies are using real-time performance data to optimize the scheduling of their city fleets, as well as the routing of their standard, accelerated and time-critical shipments.
Register Today!
EDITORS' PICKS
2017 Salary Survey: Fresh Voices Express Optimism
Our “33rd Annual Salary Survey” reflects more diversity entering the logistics management...
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...

ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...
2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...