The COVID-19 pandemic is “an unprecedented crisis, and we’ve never seen anything like it,” Pat Shafer, managing director in Grant Thornton's healthcare and life sciences industry business, told MD+DI recently.
Judging from the amount of stories MD+DI has published alone in the last several weeks on the rapid responses from many medical device and diagnostics companies as well as industry suppliers, manufacturers are working quickly toward several potential solutions.
The medical device industry has been very agile in responding to the pandemic, Shafer said. “Most manufacturing has not had any production stoppages, and factories are still open, and many have sufficient supplies on hand.”
Added Maria Shepherd, president and CEO of Medi-Vantage: “I am really proud of how medical device and diagnostics companies have responded.” She pointed to work by Thermofisher, J&J, Hologic, and Roche. “They’ve been able to come through very quickly.” She said there will be “lessons to be learned on how a big company can move quickly when necessary.”
However, it is not business as usual, as virtually everyone who typically works in medical device company offices is working remotely and devising ways to continue critical processes, observed Shafer. Employees are practicing social distancing and reducing face-to-face meetings. For instance, inspections have now become “virtual,” he said, as inspectors view virtual front rooms and back rooms, review documentation, and discuss processes. “One day the production line will be seen in person,” he said.
And there are some medical device sectors that have seen demand dry up. “There’s a reduction in elective surgeries, such as for orthopedic implants, as well as the whole continuum of care from imaging through physical therapy and rehabilitation,” said Shepherd. “In addition, many other ‘bread and butter’ elective surgeries in breast, bariatric, GI, women’s health, and vascular surgery are being postponed."
Following are some recommendations that could help manufacturers experiencing urgent, unprecedented demand as well as some ideas that could help those seeing a drop in business.
Keeping up with High Demand
Medical device manufacturers often have production in multiple areas with certain registrations, so if needed, companies may be able to move production and work with authorities to get exemptions, Shafer said. For instance, “if a company were to produce infusion pumps in Brazil for the Latin American market, it may be able to work with authorities to get approvals for another market,” he said. FDA does also have some leeway in terms of how to apply exemptions. “I am sure they are making [it] a priority,” he said.
If manufacturers need more materials and components than on hand, they may be able to turn to safety stock triaged for distribution or to repurpose work-in-progress materials or those set aside for testing, he added. And there are other options. “For instance, there may be electronic device subassemblies that may not have met specifications or were ordered from the wrong supplier. Maybe with some rework they could be acceptable,” Shafer said. “If companies dig into inventory, they may find they can be more flexible.”
Shepherd pointed out that medical device manufacturers are required to identify secondary supply sources. However, there still could be supply-chain challenges with backup sources. “We’ve all become so reliant on sourcing from other countries,” she said. “Maybe that is something we should reconsider for future strategies.
“Switching from one supplier to another takes time, effort, and money,” she acknowledged. But it is possible. “Communicate with your secondary supplier and find out how much material can be supplied in a short amount of time, and be realistic. And if you have a third source, immediately begin to work with them.”
Quality procedures may also need to switch from quality assurance to quality control, she said. “Inspect product as it comes in—you may need to go back to this approach in order to get over any shortages. This worked at one point,” she said. “Companies should be inspected and visited at some point when things get back to normal.” She added that decisions based on incoming sample inspections should be based on “statistically significant numbers.” Such a shift may be difficult for large companies, as adapting their quality system could be a bureaucratic nightmare—but smaller companies could, she said.
When asked whether there are regulations or standards that could offer companies guidance for responding to heightened demands and shortages during a pandemic, Shepherd said, “I trust we’ll be working on it in the future.”
Surviving Low Demand
Shepherd points out that “until recently, no one has really defined what ‘elective procedures’ are, but now the lists are starting to emerge.” She says that “cancer patients are still receiving treatment, and cardiology procedures may be necessary.” However, she is not sure of the impact on new diagnoses.
Venture capital may be impacted. “The nation’s attention is on the coronavirus,” Shepherd said. “I am worried it will affect funding.” Her advice to start-up companies seeking funding is to “keep trying and rethink your sales pitch to investors. Examine strategy, value proposition, [and] how should/could it be updated? This won’t last forever.”
Shepherd added: “Be sure you understand what investors are looking for, during and post coronavirus. Medical device start-ups need to re-examine their business and funding plans to make them fresh, compelling, and current to ensure that new ideas are carried over into investor decks, company plans, and PR materials. Also, what do your contingency plans show? There is always more than one way to skin a cat—what can you do uniquely, more efficiently? Now is the time to re-assess strategies or gain outside perspective."
Companies may also want to reduce spending to conserve cash. “The immediate impact on cash flow will hurt many industries,” explained Kristine Kopsiaftis Lampert, managing director at Fulcrum Partners, experts in executive compensation and benefits consulting. “Many companies are working hard to balance conserving cash flow and managing supply chain disruptions. We are recommending that our clients review their executive benefit financing strategies for opportunities to conserve cash flow.”
In terms of manufacturing, while Shafer believes that most U.S. manufacturing hasn’t taken a dip—some clients are diversifying, such as producing novel coronavirus test kits.
Preparing for Future Crises
The pandemic could bring more manufacturing back to the United States. Shafer said U.S. legislation could evolve that would be “very reactionary against China, but it does underscore the effort to move manufacturing from China to the United States. Companies can also think about near shoring production.”
Many companies had already been bringing manufacturing back to the United States, so these companies are in a good position with U.S. capacity, he said. “The defect rate in China has typically been higher, and there has been an unreliable workforce. These companies felt the reliability of the supply chain was more important than the lower per-piece cost,” he said.
Shafer wonders whether there may also be companies that had built up inventories given past political turmoil, such as that involving tariffs.
Supply chains could face issues if the U.S. border were to close. “Five or six medical device companies have significant manufacturing in Juarez alone,” he said. However, “I think all companies would have to do is to apply for an exemption for medically necessary goods.”
Grant Thornton offers a supply-chain resiliency plan, “but the crisis is here now, and companies need to react,” Shafer said. “They can use all the regulatory and quality tools at hand in order to respond to the crisis.”
But once the crisis subsides, manufacturers should begin to take stock of their own situations. “It won’t be this again, but it will be something else,” Shafer said. “There are important lessons to be learned, and companies that were previously sitting on the fence to diversify or de-risk their supply chains may no longer be.”