The COVID-19 pandemic has exerted a massive effect on procedure volumes across the globe, but concerns over supply chains have prompted political officials in Washington to encourage domestic production of drugs. That approach is also in play in a number of nations in the Asia-Pacific region, said Sana Siddiqui of Decision Resources Group, who noted that Beijing wants hospitals in China to ensure that 70% of devices used there are domestically manufactured by 2025.
Siddiqui was speaking on an Aug. 12 webinar hosted by DRG, which is part of Clarivate Analytics, and APACMed, the Singapore-based trade association for medical technology. Prior to the pandemic, med tech saw “a steady growth of 4%-6% over the past five years,” she said, which accounted for a market value of roughly $400 billion in 2019. The Asia-Pacific market accounted for about 25% of that amount, although the pandemic has had a major effect on the market.
Beijing announced its Made in China 2025 program several years ago, and a 2018 report on the program by the Office of the U.S. Trade Representative highlighted some of the hazards to device makers in other nations. Siddiqui did not indicate whether the push for a 70% threshold for domestically manufactured devices in Chinese hospitals reflected the Made in China program, but she noted that other nations in the region are pressing similar programs.
The government of India has decided to invest the equivalent of $500 million to boost domestic manufacture of drugs and devices, Siddiqui said, adding that Australia is also emphasizing domestic manufacturing for areas of national priority. The Australian priority list includes advanced medical devices, while Tokyo has engaged with firms in Japan to boost domestic production there as well.
While the downturn in medical procedures has been perhaps most visible in the U.S., Europe has seen a dramatic drop as well. Siddiqui said India has been seriously affected, and has seen a sharp increase in COVID-19 diagnoses due in part to high population density, which in turn has applied pressure to health care systems there. Nations in the Asia-Pacific region are applying a tiered system for surgical procedures similar to that published by the U.S. Centers for Medicare & Medicaid Services earlier this year, and Siddiqui said in some cases, facilities were completely given over to treating patients infected with the SARS-CoV-2 virus.
Inventories for some devices piling up in hospitals
The deferrals have shifted the demand for and prioritization of supplies, Siddiqui said, adding that some surgical supplies are in shortage, while items such as orthopedic implants are gathering dust. Despite the current circumstances, the backlog of surgical procedures suggests that the market will recover rapidly. “We are already seeing some procedures return” as hospitals and outpatient clinics reopen under fewer constraints, Siddiqui said, adding that the volume of urgent procedures are more rapidly returning to pre-pandemic levels. Despite this, elective procedures might not fully recover those volumes until sometime in 2022.
Another factor that will affect volumes is that some patients’ conditions will worsen, and thus any procedure that might have been invoked will no longer be applicable. The effect of excess non-COVID fatalities on some procedural volumes will play out over several years, and the attendant damage to the global economy will also hamper the recovery of procedural volumes.
Some hospitals are planning for a spike after the pandemic comes to an end, but inventory management methods have changed, including an expansion of suppliers. Siddiqui said hospitals in the Asia Pacific region are shifting toward a just-in-time model for inventory management, and product demonstrations are more likely to be handled virtually. Hospital administrators are becoming increasingly interested in supplier warehouse decontamination processes, while local suppliers are faring better than more distant suppliers due to lags in delivery from the more distant distributorships.
Siddiqui advised that the economic effect of the pandemic might in turn hamper purchases of capital equipment. Hospitals will replace any such systems that are the end of their serviceable lives, but may also defer replacements when possible, including items that have previously been on a regular replacement cycle.
The focus on urgent procedures, such as cardiology procedures, have witnessed a more modest effect from the pandemic than other types of devices, but Siddiqui said she expects that sales in the region to spike in 2021, assuming the region’s economies clamber back to their feet by the end of this year. That spike in 2021 should flatten to more historical norms in 2022 in this scenario.
Drop in demand runs parallel to drop in manufacturing
Probir Das, chairman and managing director for Terumo Asia Holdings Pte. Ltd., of Singapore, who is also on the board of APAC Med, said Terumo’s manufacturing plants and distribution centers “have managed to stay mostly operational,” although sites in the Philippines and India have experienced slow-downs. Some assembly lines and warehouse operations have been impeded by social distancing requirements, but demand is down as well, so the company has experienced few problems keeping up with demand.
Das said transportation was also affected both intra- and internationally, but added, “on a global basis, we are more or less back to fighting levels of operation and being able to service our clients to their requirements.”
Art Butcher, executive vice president for Asia Pacific and president of endoscopy at Boston Scientific Corp., of Marlborough, Mass., said in the early weeks of the pandemic, “we were in hyper-productivity mode” in an effort to offset the anticipated production and upstream supply chain issues. That decision allowed the company to boost inventories, but as the pandemic unfolded, manufacturing sites had to shift production equipment to facilitate social distancing. Shift work also became more common, but all of the company’s plants were shuttered for a month at the peak of the pandemic.
Boston Scientific’s production is back to near-normal levels even with accommodations for social distancing, although protective barriers have been added. “A lot of the risk for disease transmission is happening outside your facility, so we focused heavily on employee education” for both inside and outside facility mitigations, he said.
Butcher said the company witnessed “a radical reduction in demand for certain things,” although there was a surge in demand for some items that hospitals ordered in greater than usual quantities to build reserves of inventory. Physician proctoring and training are among the functions that have been badly hampered by the pandemic, but Butcher said BSX and other device makers have devised several novel approaches to fulfillment of these needs. The company has used virtual and augmented reality to aid in these efforts, but Butcher said the company has begun to consider how it might go about engaging in remote servicing of equipment and remote reprogramming of implanted electronic devices as well.