Coronavirus affecting medical supply chain

The coronavirus will affect the medical supply chain coming from China. Various reports indicate that while 50% of Chinese factories are now open, only about half of these are actually producing medical products. Many Chinese employees are still working from home.

While some low-tech medtech products (i.e. examination gloves) that the West imports from China can be sourced from other countries, the West also imports more sophisticated devices like orthopedic implants, MRIs, etc. With the slowdown in China, some of these products will be harder to import. Also, companies in the West that source device components or sub-assemblies from China will also find it more difficult to replenish inventories. Today, most Chinese factories need government approval to open. The FDA commissioner, Stephen Hahn has recently asked medical device manufacturers to alert the FDA as shortages develop.

Besides devices, drug companies are also very concerned about shortages of APIs, excipients and other intermediate drug substances that they need for their finished drug manufacturing in the West. China makes the most API’s in the world for use in coronary, cancer and antibiotic drugs. Drug companies normally have 3-6 months of these drug substance supplies on hand, but if the coronavirus continues, such drug substances may need to be sourced outside of China. This may cause a serious disruption to a Western drug company’s supply chain and likely increased costs and prices. Already some drug substance prices have increased between 10-40%. Many Western drug companies have expressed strong concern over the lack of Western domestic drug substance manufacturing and an over-reliant dependency on China and other foreign suppliers.