Senior U.S. healthcare executives divided over healthcare reform: Survey

With their world turned upside down by enactment of healthcare reform, senior U.S. healthcare executives are divided over whether the new environment offers growth possibilities or challenges to the survival of existing business models, a new survey shows.

“Reform as well as other industry factors are placing unprecedented pressure on healthcare companies and stressing their supply chains. Logistically, healthcare companies will have to re-examine their strategy. UPS is in position to help with that process and then to manage this new type of global supply chain.”

Of the senior supply chain executives surveyed, a third said reform would either open up new markets or create new customers. But 20% doubted the ability of their companies "to afford to operate" in the coming new world; 26% said flatly that reform would hamper their research and development programs, and another 22% said they already had concluded their firms did not have the infrastructure needed to compete in the future.

Despite domestic upheaval in the wake of reform and a still-recovering economy, many healthcare companies show signs of positive change. Companies are pursuing global expansion plans to develop new market opportunities outside the United States and supply chain investments are on the rise.

The results are drawn from the latest annual UPS "Pain in the (Supply) Chain" survey of senior-level healthcare supply chain executives. Now in its third year, the survey is conducted by Harris Interactive and is designed to identify the greatest pain points and future trends in the supply chains of companies in the pharmaceutical, medical device and supplies and biotech sectors.

Beyond the issues of healthcare reform and globalization, the 2010 survey also explored healthcare companies' top business and supply chain issues. Not surprisingly, the top business concern remains what the industry considers an escalation of complex regulations around the world. The top supply chain concern is managing costs.

"What we're seeing here is a huge dose of uncertainty about every aspect of their business, inside and outside the United States," said Bill Hook, vice president, global strategy, UPS Healthcare Logistics. "Reform as well as other industry factors are placing unprecedented pressure on healthcare companies and stressing their supply chains. Logistically, healthcare companies will have to re-examine their strategy. UPS is in position to help with that process and then to manage this new type of global supply chain."

Global market expansion plans

Many 2010 survey findings centered around healthcare companies' global operations and expansion plans, with nearly half (47%) of respondents planning to expand into new or emerging markets in the next 18 months.

China, India and Brazil are the emerging markets with the most current healthcare business. These countries, along with Argentina, also are the top four markets into which healthcare companies are most likely to expand in the next two to three years.

"Globalization of the healthcare market has led to numerous opportunities while simultaneously creating challenges," added Hook. "Among these challenges are country-specific regulatory hurdles; the security of high-value, temperature-sensitive products, and the difficulties of managing multiple suppliers. To manage risks while reaching new customers, companies must focus on building greater flexibility and visibility into their supply chains."

While most companies already are participating in some activity abroad (selling, manufacturing, sourcing and/or clinical trials), 21% of healthcare companies surveyed don't participate in any of these activities outside the United States.

The ability to access new global and emerging markets is a growing concern for many healthcare companies with 22% more respondents reporting concerns around this in 2010 versus 2009 findings. Only 32% of this year's respondents claim success with accessing global markets. Country regulations are the largest barrier to global expansion, cited by 54% of respondents.

Top business and supply chain concerns

The 2010 UPS Pain in the (Supply) Chain survey also explores healthcare companies' top business and supply chain issues.

As the top business concern ("increasing regulations") and second largest supply chain concern ("regulatory compliance"), industry regulations are a critical focus area for healthcare companies. In addition to country regulations being named the largest barrier to global expansion, 60% of companies are "very" or "extremely concerned" with regulatory compliance as a supply chain issue. Fifty-eight percent rank increasing regulations as their top business concern, making this the top overall business concern ahead of such things as intellectual property protection, increasing competition and patent expirations.

For the third year in a row, managing costs tops the list of healthcare companies' supply chain concerns. Sixty-four percent of respondents report being "very" or "extremely concerned" with managing supply chain costs, up from 55% in 2009. At the same time, only 44% of companies report success in addressing cost management.

Other key areas covered in the 2010 UPS Pain in the (Supply) Chain survey include environmental practices and plans, outsourcing trends and changing go-to-market strategies.