This is an excerpt from the May 4, 2021 edition of Medically Necessary, a health care supply chain newsletter. Subscribe here.
As the pandemic wanes, manufacturers and suppliers are predicting the demand for personal protective equipment will slow as well.
“Demand, as COVID becomes a bit more stabilized, is coming down, although I will say it depends on region and geography,” Craig McKasson, CFO for Premiere, which operates a large group purchasing organization, said on a conference call Tuesday morning.
For the moment, worldwide demand for N95 respirators still exceeds manufacturers’ ability to produce them, according to a recent quarterly report from 3M.
3M CEO Mike Roman told investors that demand for respirators could soon shift away from the health care industry, where 90% of respirators went during the first quarter of 2021.
“We see some shifting as we go forward over time from … health care, shifting more into industrial and consumer,” Roman said on a conference call last week. “But we’re expecting to continue to see demand in industrial and consumer and health care as we go through the year.”
Premier’s revenue from directly sourcing products for customers, fueled by PPE purchases, was up more than 250% compared to the previous year. However, Premier expects the demand for PPE to start slowing down soon.
“A lot of health systems have spent the past year ensuring they have appropriate stockpiles of critically needed PPE and other equipment,” McKasson said. “We think that’s been built up and we will get back to more of a normalized trend.”
The hope for these companies is that declining demand for PPE is also a sign that, after a year of delays, patients are starting to feel more comfortable scheduling elective procedures.
“Post-COVID for our health systems it’s all about getting back to normalcy. As COVID, in many cases, is on the downward swing, they’re trying to get as many elective procedures back up and running as quickly as possible,” Premier’s new CEO Mike Alkire said on the call Tuesday morning.
Premier’s administrative fees, a payment from suppliers based on the volume of purchases, plummeted during the pandemic, along with elective procedures. Directly sourcing PPE for health care providers made up for some of that, but margins are low.
Normal may still be a long ways off, Premier executives warned. The company expects overall health care use to remain low for at least the next quarter.
Opioid trial for drug distributors starts in West Virginia
The trial: On Monday, a trial started in West Virginia to determine whether drug distributors, including AmeriSourceBergen, Cardinal Health and McKesson, played a role in fueling the state’s opioid epidemic.
State and local governments have already won cases accusing opioid manufacturers of fueling the epidemic, according to The New York Times.
The case in West Virginia is the first to test whether drug distributors should be culpable as well. There are more than 3,000 cases across the U.S. making similar arguments, according to The Wall Street Journal.
The argument: In this case, lawyers for Cabell County and the city of Huntington in West Virginia are arguing that drug distributors didn’t maintain effective controls over the distribution of opioids.
“Supply chain defendants and national pharmacies continued to pump massive quantities of opioids despite their obligations to control the supply, prevent diversion, report and take steps to halt suspicious orders,” the plaintiffs argued in their complaint.
The defense: On Monday, lawyers for distributors argued those companies were only the middlemen, delivering what doctors prescribed for their patients.
“We are a mirror on what happens in health care,” Enu Mainigi, a lawyer for Cardinal, said Monday, according to Reuters. “We reflect it, we don’t drive it.”
The alternative: AmerisourceBergen, Cardinal Health and McKesson have been negotiating a deal with multiple attorneys general that would settle a large number of related opioid lawsuits.
According to financial filings from all three companies, the deal would require the companies to pay a combined $21 billion over the course of 18 years. Huntington and Cabell County opted out of that deal, according to Reuters.
The bulk of that deal could still happen though. A financial filing from McKesson indicates that if some governments opt out of the deal then the distributors could pay a lower settlement for the remaining lawsuits.
The McKesson filing from early February states that a settlement with many of those governments is probable.