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Health care outlook 2024: Chip Davis, president and CEO HDA

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In the second of a two-part series, leaders of industry associations present their expectations for pharmacy operators for this year.

Health care policy issues will inevitably emerge as a topic of the national debate in the 2024 election season. Access and affordability remain part of the dialogue, and implementation of the Inflation Reduction Act — the most consequential drug-pricing-related legislation of our time — is moving forward.

Chip Davis

However, after the pandemic tested, but did not topple the safe and efficient delivery of medications, the importance of a strong and resilient pharmaceutical supply chain will remain part of the broader policy discussion. Some legislators, health industry experts, and now the White House, view it as a matter of national security.

Against this backdrop, HDA and our 37 pharmaceutical distributor members — the vital link between 1,500 manufacturers and approximately 330,000 pharmacies, providers and other sites of care — will stay engaged and eager to collaborate and convene with private- and public-sector stakeholders alike during another consequential year. In 2024, we will further demonstrate distributors’ expertise as a strong, clear voice for supply chain reliability, security and, ultimately, patient access to health care.

Product shortages

Shortages of cancer drugs and other medicines, most commonly generics, have reached their worst point in nearly a decade. Speaking to the HDA board of directors late last year, Food and Drug Administration Commissioner Dr. Robert Califf stated, “Despite the amazing progress in logistics, there are dangerous and troubling issues involved in our ongoing shortages and vulnerability of our essential low-cost products.”

Mitigating drug shortages deserves our attention, and HDA supports policies that will preserve the strength and efficiency of the pharmaceutical supply chain while promoting patient access to lifesaving medications. Indeed, the distribution industry’s enduring focus is on finding the safest and most reliable ways to deliver medications and health care products — an estimated 95% of all pharmaceutical sales move through HDA members.

Testifying before the House Energy and Commerce Health Subcommittee on proposals to decrease drug shortages in the generics industry last summer, I reaffirmed distributors’ capabilities to mitigate and manage supply-and-demand-driven drug shortages through the industry’s forecasting, supply chain monitoring and fair-share allocation processes. As the subcommittee considered solutions, I also cautioned against policies that might hinder supply chain continuity or the stability of the generic manufacturing sector.

The current market challenges did not happen overnight. Complex issues brought us to where we are today, so we must be nimble and multifaceted in our approach. HDA is very supportive of the White House’s announced initiatives to strengthen U.S. supply chains, which include enhancing the domestic production of essential medicines. Looking forward, any study of potential partnerships and policy solutions should consider incentives and operational needs to increase domestic drug manufacturing.

Given HDA-member distributors’ logistics expertise, we welcome exploration of how our industry could play a key role in building targeted safety stock/buffer inventory capacity to help ensure the continued flow of medications to patients.

Drug pricing

Americans are frustrated by the price of health care, and there has been increasing scrutiny by policy makers on the role of “middlemen” in the ecosystem. We expect that will not change in the coming year. However, it is important to note the difference between the entities charged with the physical handling and logistics of medicines, like distributors, versus payment chain stakeholders that charge fees for formulary access.

HDA and our members will continue to distinguish our industry’s role and strengths to lawmakers, because our value is clear. In supporting both ends of the pharmaceutical supply chain, distributors ultimately save the health care ecosystem up to $63 billion annually. We do this on one of the lowest margins in health care — 0.4% after taxes.

All supply chain partners have a voice in this debate. For our part, distributors are committed to working with policy makers to do what our industry does best: improving access while promoting services and solutions to reduce costs for patients.

Supply chain resilience

While drug shortages and market concerns are challenging operations today, other supply chain threats may emerge — and without warning. As the nation moves further from our COVID-19 lessons learned, we may find ourselves moving further away from staying prepared. At the time this column was written, HDA was one of 100 stakeholders calling on Congress to reauthorize the recently lapsed Pandemic All-Hazards Preparedness Act for an additional five years to prepare and respond to public health emergencies and other threats.

Innovative therapies, evolving technologies and data will continue to transform how the supply chain operates, but certain health-security vulnerabilities, such as physical risks, threat of cyberattacks, even the annual flu and RSV season, among other concerns, go hand in hand with this rapid evolution. We must be prepared to collectively respond quickly to the changing landscape. As announced by the Biden administration last year, the designation of a new supply chain resilience and shortage coordinator through the Department of Health and Human Services is an important step toward strengthening the resilience of the pharmaceutical supply chain. But more can and should be done.

HDA distributor members’ logistics expertise and capabilities play a key role in bolstering supply chain resilience. As an association, we recommend greater public-private sector collaboration, private-sector resource use, health care workforce investment and other policies/initiatives to bolster our country’s ability to respond to a disaster or crisis.

Drug Supply Chain Security Act (DSCSA) implementation

Speaking of supply chain resilience, HDA was pleased with the FDA’s late-summer announcement of a stabilization period for the final DSCSA requirements. The law’s interdependent requirements and uneven supply chain readiness would have undoubtedly led to supply chain disruptions and product shortages, and the FDA’s decision came following months of concerted efforts by HDA and the distribution industry to provide our sector’s on-the-ground perspective. While FDA made the right call in allowing another year for trading partners to scale critical processes, it should not be taken as a signal for companies to slow their implementation progress.

Like last year, there will be a race to the final milestone, but it is important to note that:

• Uneven readiness still exists across the supply chain.

• There is still a single compliance date for the industry (November 27, 2024). Knowing this, HDA urged FDA to allow the final DSCSA requirements to be met in three phases during this stabilization period, offering trading partners a stepwise approach and clear direction to achieve the package-level tracing and enhanced security Congress envisioned — and avoid drug shortages. We look forward to providing further expertise to the agency over the next year.

HDA is proud of the decades-long leadership role we have played on traceability issues and will lean into that role over the next few months. We call on supply chain companies to keep the momentum going on DSCSA compliance — and to work collaboratively with our distributor members as appropriate. Further, HDA is reaching out to both the manufacturer and pharmacy communities to help inform and educate partners on DSCSA. For dispensers, specifically, DSCSA.pharmacy offers straightforward resources and education for pharmacists to understand their sector’s obligations under the law.

Our association will remain an important forum for industry stakeholders to engage in operational and strategic discussions. Among other activities, both HDA’s Distribution Management Conference (March 10too March 13) and Traceability Seminar (late August) will provide ample opportunities for supply chain to meet and keep working toward compliance.

The people behind Health Delivered

We cannot speak about the greater appreciation and respect for pharmaceutical supply chain operations without talking about the people that ensure health is delivered. Last fall, HDA unveiled a new initiative, We Are Health Delivered, spotlighting how pharmaceutical distributors harness the power of a diverse and innovative workforce to support communities across the U.S. HDA is also promoting pharmaceutical distribution as a purpose-driven industry and attractive employment opportunity through our new Career Center (careers.hda.org).

Through these efforts and more, HDA is not only reinforcing the role and value of pharmaceutical distributors but attracting a new generation of leaders passionate about ensuring access to 10 million life-saving medicines, health care products and vaccines every day.

Chester “Chip” Davis Jr. is president and CEO of the Healthcare Distribution Alliance (HDA).


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