Russia-Ukraine conflict's impact on US health supply chain — 4 expert takes

U.S. healthcare organizations could see a rise in prices for some medical supplies as a result of the Russian-Ukrainian conflict, as some common raw materials come from the region. 

A March 1 report from Premier, a healthcare improvement company, outlined a series of indirect threats the conflict could pose for hospital supplies. Becker's spoke with experts about more potential immediate and long-term effects on U.S. healthcare systems.

Raw materials

Amanda Chawla, chief supply chain officer at Stanford (Calif.) Health Care, said that while Stanford doesn't have direct suppliers in Ukraine or Russia, there are raw materials coming from the region that their secondary suppliers rely on. 

"The primary immediate short-term to long-term concern is in price hikes and increases above and beyond the inflation we have already seen," Ms. Chawla said. 

Tinglong Dai, PhD, professor of operations management and business analytics at Baltimore-based Johns Hopkins Carey Business School, said the dependence on other countries for manufacturing supplies used in common medical supplies, like plastics, could lead to higher prices. 

"In the short term, I don't expect to see major impacts and hospitals to immediately feel the pain, because generally they have annual contracts, and the prices have pretty much locked in, but they may be seeing much higher prices for next year," Dr. Dai said. 

Russia produces about 12 percent of the world's oil and about 17 percent of its natural gas supply, according to the Premier report. The Biden administration on March 8 imposed a ban of all imports of Russian oil and natural gas, according to The New York Times.

A scenario in which the invasion is accompanied by intense sanctions could prompt crude oil to jump from around $110 a barrel to $120 per barrel, and could spur a similar price spike in natural gas prices. The price hikes could affect the production of plastics used in many medical supplies, such as syringes and pharmaceutical bottles. 

Transportation costs 

Willy Shih, PhD, is a professor of management practice in business administration at Harvard Business School in Boston. Dr. Shih said the conflict and subsequent ban on Russian oil has "knockoff effects" on transportation. "Essentially, all the cargo lines have discontinued services to Russia," he said.

Ms. Chawla said another transportation-related consequence of the conflict involves freight companies, as some have shifted to avoid that part of the region.

"We could potentially see an increase in container backlogs, which still exist, therefore exacerbating other supply disruptions in delays as a result of supply-rerouting/sanctions," said Ms. Chawla.  

The rerouting of ocean, freight and air cargo has led to longer transportation times and higher costs. 

"If you are importing from Asia, especially if you're going to Europe, and you can no longer overfly Russia … I think it's three or four hours longer depending on the destination," Dr. Shih said. "Cargo jets burn 10,000 to 20,000 pounds of fuel per hour, so now you're talking about more expensive fuel and are going to use more of it to move everywhere. Air cargo prices, which are already very high, historically, are headed much higher."

Heitham Hassoun, MD, vice president and medical director at Los Angeles-based Cedars-Sinai, said another factor to consider is the impact on care delivery. Dr. Hassoun said the U.S and Russia are examples of "net importers" of healthcare, meaning more citizens leave to get care abroad than those entering to receive care. 

"I think not every person will be directly affected by all these things going on, but I do think that there's a fair amount of patients leaving Russia to come to [other parts of] Europe, like Germany, U.K., and as well as Turkey, for care," Dr. Hassoun said. "It's unlikely that they'll be able to, due to the sanctions."

Long-term effects

Though the conflict may not pose many immediate effects for U.S. healthcare providers, long-term supply chain disruptions are possible. Both Dr. Shih and Dr. Dai said the conflict has revealed long-term structural problems: U.S. dependence on imported medical supplies. 

"We don't have a lot of manufacturing capacity in the U.S. for a lot of these materials," Dr. Shih said. "And so even though the costs are high, the impact we'll see, and we've been seeing, over the last few months is record levels of imports just because that's where the sources are and whatever the costs are, we have to pay that."

"I hope this Russia-Ukraine conflict will trigger the industry to really rethink how we measure, and also how we mitigate, risk," Dr. Dai said. "And potentially we should build a more automatic capacity. Because in times of crisis, there's no way you can rely on an adversary or competitor, like China, to provide a reliable supply of medical devices or critical drugs." 

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