Government Control and Globalization: Industry Resists DPA, But Urges Centralized Procurement

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ARTICLE SUMMARY:

How much command and control should the US government be exerting over the medical device industry’s production activities? It’s one of the central topics of debate raging about the US response to the coronavirus pandemic. Industry representatives say companies need more centralized control of procurement, but worry about the impact of “Defense Production Act” orders on the global supply chain.

The level of federal control the US government should be wielding over device industry activities during the current emergency is an area of major ongoing controversy and debate. In the industry’s view, there is no one simple answer—the government needs to increase its management in some areas, and restrain itself in others where actions could have unintended consequences, like restricting the global medtech supply chain.

On the one hand, device companies are pleading with the federal government to exert more control over US procurement and allocation of COVID-19 emergency devices like ventilators and personal protective equipment. But, on the other, industry is advising the White House against employing the Defense Production Act to order companies to manufacture certain devices.

DPA and Free Trade

The Trump administration has sent mixed signals on its application of the DPA, a Korean War-era statute that allows enhanced government control of industrial production during times of emergency. For weeks, the president said it was unnecessary, suggesting companies were ramping up production on their own. But more recently, administration officials started to suggest they were invoking the DPA in targeted circumstances to acquire needed COVID-19 tests and for PPE. And then, on Friday, Trump tweeted plans to use the DPA to force General Motors to prioritize making ventilators (even though the automaker said it was already doing so in collaboration with ventilator-maker Ventec Life Systems).

The moves make the device industry trade group AdvaMed wary. That’s not because the government shouldn’t vigorously be pressing to maximize emergency suppliers, explains AdvaMed CEO Scott Whitaker. The concern is that the US-focused DPA doesn’t smoothly align with the global supply chain framework of the device industry.

“The signal that we don’t want to have with the use of the DPA is that the government is going to oversee and direct production of these suppliers and narrow the focus to just the US,” Whitaker said on a March 27 press call. “That does send a message, I think, outside of our borders that that is what we are doing, and others may do same thing. We don’t want that to be the case.”

Industry is worried that an overly nationalized focus on production could cut off the supply of needed components made outside of the US.

“Even your strongest domestic manufacturer that is sourcing domestic products 85%-95% inside for a 1,700-part ventilator, if you are missing 170 parts, you don’t have a ventilator,” noted Greg Crist, AdvaMed’s chief advocacy officer. “Our message has been, at this critical time, where peak capacity is of upmost importance, let’s have the redundancy in the systems, let’s have backups to backups, to ensure the supply chain downstream is steady and consistent.”

In a related effort, AdvaMed joined with other international trade group members of the Global Medical Technology Alliance to pen an open letter on March 25 urging G-20 nation heads of state to resist export controls and to maintain free trade.

Centralizing Decisions

Meanwhile, industry is urging the federal government to tighten the reins on where device companies should sell ventilators and other COVID-19 products based on emergency needs.

Device firms are facing “unprecedented demand” for ventilators, but they do not have enough information to know how best to prioritize their inventory to the healthcare providers who need the equipment most at a particular time, AdvaMed said in a March 24 letter to the Federal Emergency Management Agency (FEMA). It is also often difficult for a company to know which source of products—a particular manufacturer, the Strategic National Stockpile, or other sources of inventory—can most efficiently provide products to certain users.

FEMA, or another agency, should take control of these matters, the trade group said. “These decisions can most effectively be made by a single federal coordinating entity that has information about possible sources of devices and the needs of individual users,” the letter reads.

As of Friday, AdvaMed said it was still waiting on a formal policy response from FEMA, Whitaker said.

More broadly, the industry and government agencies, including FDA, have been in close, productive coordination about device supplies and the potential for shortages in the midst of the pandemic, officials on both sides say. Unlike drug companies, device companies historically have not had any legal mandate to keep FDA informed about conditions that may lead to a product shortage. That changed with the March 27 enactment of the CARES Act, the $2 trillion coronavirus stimulus package that includes a provision requiring such disclosures by device firms during a declared public health emergency.

AdvaMed said it wants to make sure the provision isn’t implemented too broadly to require shortage reports on non-COVID-19 emergency response products. “But if Congress believes in the near term that under the scope of the public health emergency , there is a process improvement that could be in place, we will support that and we will make it work the best we can,” Whitaker said.


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