Dive Brief:
- AdvaMed is calling on the Biden administration to send semiconductor manufacturers “a clear and unambiguous message” that they need to prioritize the healthcare sector.
- With the chip shortage affecting all industries, medical device companies are competing with large consumer electronic companies, automakers and other businesses for limited stocks. AdvaMed wants the U.S. government to step in to help medtech given the impact of the industry’s devices.
- Specifically, the organization said it's pushing for the prioritization of medtech, “full transparency for future allocations” to the industry and actions to ensure the continuity of patient care in the U.S.
Dive Insight:
AdvaMed last year began requesting that the White House push semiconductor manufacturers and distributors to put medical device companies at the front of the queue. Since then, evidence of the impact of supply disruption on medtech has mounted, with a call for feedback by the government revealing lead times that were once measured in weeks are now counted in months. Some inventories have been completely depleted as lead times have increased. AdvaMed said it sees a need for changes.
“In this challenging environment, we simply cannot compete with larger players to gain access to chips, particularly given the fact that we’re only 1% of the total market — and it’s precisely because we’re only 1% of the total market that we believe the prioritization of the medical technology industry can be done with minimal disturbance to the rest of the economy,” AdvaMed CEO Scott Whitaker said in a statement.
The request for support focuses on “two concrete steps,” the group said. First, AdvaMed wants the government to “use any and all tools at its disposal to ensure the continuity of patient care in this country.” Second, the trade organization is calling for the White House “to send a clear and unambiguous message to chips manufacturers and distributors that our healthcare system must be prioritized, and ensure full transparency for future allocations to our industry.”
AdvaMed has made similar requests in the past without triggering the changes it wants. This time, the trade group met with Secretary of Commerce Gina Raimondo, and brought leaders from Hologic, BD, ResMed, Royal Philips, GE Healthcare, Boston Scientific, Stryker and Varian to make the case for change.
The companies, and others not at the meeting, recently have articulated the impact of the disruptions to supply on operations during conference calls on quarterly results.
At the beginning of 2022, Hologic indicated that the chip shortage would lengthen mammography delivery timelines, leading the company to adjust its full-year revenue forecast to reflect $200 million in deferred sales. Since then, Hologic said it has secured a higher allocation of chips than expected, but is still planning for another $50 million headwind from supply chain volatility.
Hologic CFO Karleen Oberton told investors that the additional $50 million has more to do with timing.
"We are pleased that we got a higher allocation of chips than we had thought, than we had originally expected, but the timing of that is such that it won't come in until 2023," Oberton said.
At ResMed, the chip shortage is affecting its attempt to get sleep apnea devices to patients affected by the Philips recall, leading it to shave about 30% off the increased sales it expected to generate this fiscal year from its competitor's recall.
As a result of the supply chain difficulties, ResMed is looking into sourcing new parts from different suppliers. Still, switching components requires reengineering and validation steps that slow the process.
“Our issue around quality and patient safety is just so important. So we can't really take any undue risks,” Rob Douglas, ResMed's chief operating officer, told investors. “We can't just throw in a new component and say, ‘let's see if it works.’ We've got to really do all the proper life testing and check-throughs. That's why it doesn't happen overnight, but the teams are working on it.”
Baxter also is redesigning some of its boards and getting secondary raw material suppliers in place. The work will take time, and while the company has said it expects the disruption to last all year, Baxter aims to improve its resilience for the long term.
