Personal Protective Equipment supply updates

As the pandemic surges, Personal Protective Equipment (PPE) demand continues to increase significantly. Several challenges — beyond increased demand — are impacting the entire industry, including:

• Strains on shipping capacity by sea, air and land are causing PPE delivery delays and cost increases
• U.S. Customs and Border Protection impacting the industry’s imports
• Manufacturing capacity limitations
• Shortage of raw materials
• Impact of COVID-19 restrictions on workforce capacity
• Global demand for exam gloves exceeding global supply

We understand that what matters most is how these industry-wide challenges impact our healthcare provider customers, who depend on us to deliver products that can help them safely care for patients.

To do that, we are working aggressively through multiple channels. More information about our efforts can be found on the manufacturing and sourcing, medical distribution and pharmaceutical distribution pages.

Supply Assurance Program: The volatility of the PPE market is at an all-time high. In the summer of 2020, we offered acute, non-acute and lab customers a chance to opt-in to a Supply Assurance program. Customers in the program have our assurance that we will meet their specific supply need and compensate them if we can’t. Customers who did not opt-in to the program do not have access to the same level of assurance.

Increasing supply via sourcing or manufacturing: We expanded our supplier network, found new sources of raw materials and manufactured goods, and set up additional manufacturing lines. Examples include:

• Infection Control Apparel: Invested in isolation gown capacity in two existing North American manufacturing sites, which will produce more than 20 million gowns annually.
• Facial protection: Expanded our North American surgical and procedure mask capacity by more than 150 million masks annually. In addition, we purchased equipment to begin producing N95 respirators in the U.S., and that will come online in spring 2021.
• Exam gloves: Secured more long-term strategic partnerships with exam glove suppliers that will yield increased volumes and reliability through 2021.

Expediting Freight: We’re using premium freight options to expedite supply into our network as quickly as possible. With service remaining a top priority, one of the factors related to price adjustments is the need to ensure timely delivery and receipt of product in a challenging transportation environment.

Developing/streamlining products:  In addition to reducing SKU complexity that unnecessarily diminishes global capacity (for example, multiple colors of the same product), we’re also developing new products as rapidly as possible, including multiple new face shield designs and a pediatric procedure mask. This process aims to maximize access to high-quality, compliant and reliable PPE.

Thoroughly vetting suppliers and products: We are committed to an aggressive and consistent supplier vetting process. We’re investing substantially in our supply chain while adding the appropriate resources, and partnering with external manufacturing partners, to increase supply of high-quality products that will be sustainable.  There has been quite a bit of media coverage about fraudulent deals or poor-quality goods, and that is an unfortunate result of the emergence of an opportunistic secondary “grey” market for medical supplies. Since the start of the pandemic, Cardinal Health has received more than 800 external PPE leads. Each lead was thoroughly vetted, and less than 2 percent resulted in viable sources.  While we are leaving no stone unturned, we are also very carefully inspecting each stone to ensure it meets our standards.

Ensuring appropriate and ethical standards within our supply chain:  We are committed to ensuring our supply chain reflects our core values and our prioritization of both product quality and social responsibility.  Our Global Environmental Health and Safety priorities are built into our procurement and manufacturing standards and procedures. This includes thorough evaluation of our suppliers and sites to ensure no forced labor, safe work environments, and effective waste programs.

Pricing Adjustments: Demand for PPE remains extremely high, and raw materials, labor and transportation costs have increased, driven by global supply and demand dynamics. As a result, Cardinal Health is experiencing extreme cost increases associated with sourcing high-demand products.  To provide quality products that deliver effective and reliable care, we have had to implement price increases for PPE products. We committed to advance notification (at least 30 days) of price adjustments.