One hurricane is enough to do it—to expose how fouled up our medical supply chain is.
In the wake of Helene, physicians and nurses in the United States are short of sterile saline, aka salt water.
In some situations, they’re relying on Gatorade.
This is the corner into which we’ve been driven by decades of a wacky law…
… while Congress paid no attention to its consequences…
… while regulators in the Executive Branch ignored their responsibility…
… while medical-supply middlemen gamed a system that had been warped by Washington.
Saline shortages are not new. When hurricane Maria hit in September 2017, damaging a saline production plant, a similar shortage developed. The very same maker of saline, Baxter International, has just issued a warning to American hospitals about the lingering effects to be expected from Helene.
The problem with significant vulnerability in our supply of sterile saline goes back at least as far as 2011.
Can we import the stuff? Not for long. There’s been a worldwide shortage since August.
If you think that bags of sterile saline are the only drugs in short supply, think again. The American Society of Hospital Pharmacists lists shortages of 240 drugs and solutions—including chemotherapeutics, antibiotics, and critical-care medications. Shortages are now at a ten-year high. Many involve sterile solutions used for decades.
Shouldn’t we be operating under arrangements that generate a slew of producers, well-dispersed geographically, for common medical products that people need?
Our political class has been at least marginally aware of the problem for a while.
In June 2021, a 250-page paper was prepared for the White House. The title? “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth.”
Seen any interim progress reports on all of that building, revitalizing, and fostering?
What of generic prescription drugs? The National Bureau of Economic Research declares that 60% of generic medications now have three or fewer manufacturers, and 40% have only a single manufacturer.
How did we get here?
The problem’s root cause lies in Washington, D.C.
Legislators and system-gaming businesses have created monsters that deal in billions upon billions in revenue. What monsters? They’re called Group Purchasing Organizations (GPOs) and Pharmacy Benefit Managers (PBMs). Never heard of them? They’re the healthcare sector’s gigantic middlemen.
Since 1987, the GPOs have been protected by a legislative “safe harbor” that allowed them to receive “rebates” (aka legalized kickbacks) from makers of medical products. The PBMs had the same protection extended to them in 2003.
Three GPOs control about 90% of hospital purchasing; three PBMs control about 85% of the drugs that insurers will cover.
Manufacturers of medical products and pharmaceutical companies, hankering for market share, are more than ready to pay the GPOs and PBMs for it through the legally protected “rebate” mechanism. Again, that’s a euphemism for kickbacks. Remember George Orwell’s dictum: “If thought corrupts language, language can also corrupt thought.”
And the GPOs and PBMs? They do no research; they produce nothing, and they don’t distribute products physically.
They simply write contracts with manufacturers on one side of the process and then turn around and write contracts with insurers and medical institutions, limiting hospital's and patient's ability to shop around for the best buys. This keeps the dwindling number of kickback-paying manufacturers in business.
The wealthiest manufacturers can afford the ever-increasing kickbacks, the less wealthy disappear. And prices ALWAYS go up. You can find a hospital charging as much as $26,667 for a bag of sterile saline, but that same hospital may be contractually prevented from buying it online for $15.
When anything disturbs a supply chain this narrow and fragile, the marketplace ends up with shortages.
And we wonder why inflation in our healthcare system seems to have been on steroids for years.
Some members of our political class, which created this perverse arrangement have been conscious of the “safe harbor’s” consequences for close to 20 years. A member of Congress once described GPOs as players in “an insidious, incestuous, insider system.”
But here we are in 2024, and we have major media giving a platform to executives from these rapacious, unproductive middlemen to tell us how they’re making life better and saving money on the nation’s annual bill for healthcare.
When being questioned by Congressional committees, these same executives take few hardball questions. Instead, some committee members suggest that the solution is to toss more money and more power at Executive Branch regulatory agencies.
In the legislation exempting GPOs and PBMS from prosecution for taking kickbacks, did Congress delegate oversight to a watchdog to prevent abuses?
Yep.
Has the Office of Inspector General (OIG) in the Health and Human Services Department done its job as a watchful dog?
Nope.
Do you prefer seeing wealthy middlemen and manufacturers entangled in conflicts of interest and managing a supply chain of Soviet-style fragility? If not, but would instead prefer a robust, secure supply chain for the United States, you will have to become demanding. You will have to demand that every elected and appointed official get cracking to make kickbacks illegal for GPOs and PBMs.
Otherwise, just drink your Gatorade.
Marion Mass, a practicing pediatrician, is a co-founder of Practicing Physicians of America. She and David Balat are board members of Free2Care.
