Medical Device Daily

One of the top concerns among healthcare executives in the U.S., Europe and Asia is the potential impact healthcare reform legislation will have on their supply chains, according to a new survey released by the United Parcel Service (UPS; Atlanta).

The annual survey, known as the UPS “Pain in the (Supply) Chain“ survey, questioned senior-level healthcare supply chain executives at pharmaceutical, biotech and medical device companies in the U.S., Europe and Asia.

Facing unprecedented demands to reduce costs, keep up with fast-changing regulatory requirements and ramp up innovation in the age of patent expirations and increased competition, executives are making investment plans and looking to protect their intellectual property and market share, the survey said.

“We asked them a number of questions about their healthcare supply chain and the logistics of their business,“ John Menna Director of Healthcare Logistics Strategy, UPS told Medical Device Daily. “But one of the questions we asked was their overall impression of things that would impact their business. So of the general list of concerns the thing that concerned them the most was healthcare reform or legislation.“

Among U.S. companies, concerns around reform have risen since 2010, with 60% reporting concern in 2011 vs. 55% last year. Changes in healthcare legislation/reform also was cited as the greatest perceived barrier to providing quality and affordable healthcare by 47% of respondents.

“This year we did the study on three parts of the world Asia, Europe and the U.S., Menna said. “Last year we did it for the U.S. only, so the only thing we can compare is the U.S.“

The decision to include other nations, was the result of prevalence of emerging markets Menna told MDD.

“North American companies are progressively looking at future growth markets and Asia and Eastern Europe come up time and time again, as areas that these companies are trying to extend their supply chain into,“ Menna said. “So because our clients are telling us that's a priority of theirs we thought it would make sense to extend this survey to supply chain professionals who work in those parts of the world.“

Another issue that medical device companies face are the different regulations for these emerging markets. Regulatory compliance was cited as a supply chain concern by 73% of respondents.

“As these companies are trying to expand and sell their products in these emerging markets, barriers that they see that are getting in the way of them being more successful in doing so, include country regulations and the fact that there are different regulations that vary from country to country,“ he said. “These range from importing products into each of these markets to the tariffs that you pay for the products. It becomes pretty complex to maintain the different sets of regulations.“

Several other interesting differences arose between regions. When asked about business concerns, only 30% of U.S. company respondents had concerns about increasing competition vs. 51% in Asia. Around the issue of intellectual property protection, 50% of companies in Asia reporting concerns vs. only 34% in Europe.

“The concern is that as you distribute these products in emerging markets as you distribute them is this intellectual property going to be protected,“ Menna said. “Obviously if there is a compromise there, then obviously it isn't as unique if there are copycats.“

The survey also said that amidst industry pressures and change, healthcare executives also are focused on investing in their supply chains to increase their competitiveness. Technology investments ranked as the number strategy, with 86% of respondents reporting that they would invest in new technologies over the next three to five years. Tapping into new global markets was the second top strategy for increasing competitiveness, with 81% of respondents reporting plans to expand in new areas in the next three to five years.

“I think the bright spot in this survey is that while manufacturers are facing diminishing reimbursement revenue in the established markets such as the U.S. and Western Europe and they realize their future growth won't be as strong in those parts of the world, they steadily see that there will be significant growth in emerging markets,“ he said.

Menna added the companies see growth “particularly in China, India, Russia and Brazil, as middle class populations in those countries are growing extremely fast and more of these people will be consuming healthcare products and the governments of those countries are trying to put in more reform to access healthcare to their population. The positive side for healthcare manufacturers is that there are huge opportunities to grow their top line revenue if they can figure out the best way they can get their products into these markets and properly distributed while complying with all the regulations.“