Supply chains are frequently discussed, but mostly in the context of physical products that can be manufactured and delivered. However, the supply chain’s role in other industries, such as healthcare, is rarely highlighted. In this article, we will give an overview of the U.S healthcare supply chain system.
What is the Healthcare Supply Chain?
Awareness of the supply chain, especially the healthcare supply chain, increased during COVID-19 when lockdowns globally slowed down manufacturing, trade, and the availability of healthcare goods. COVID-19 made Americans know that the healthcare supply chain refers to the network of companies, suppliers, and distributors that collectively work to ensure medicines and other healthcare supplies are smoothly manufactured, distributed, and provided to patients without any disruption. This network plays an important role in every step, from arranging raw materials for medicines and medical equipment to prescribing and giving drugs to patients.
Different Players in the U.S Healthcare Supply Chain:
In the above section, we discussed some major players of the healthcare supply chain network. But how do these players contribute to the whole system? Here is the breakdown and explanation:
Manufacturers:
Healthcare manufacturers create many products, including medical devices, bandages, surgical tools, and diagnostic equipment. They also produce PPE like gloves, gowns, and masks. These products are essential for medical procedures and patient care.
Distributors:
A distributor includes both wholesale suppliers and logistics companies. They ensure medications reach providers and healthcare facilities. They also track deliveries to keep everything running smoothly. According to ECRI, distributors sell over 90% of all prescription drugs.
Third-Party Logistics:
Third-party logistics providers are also distributors but serve specific needs for some organizations. These smaller suppliers specialize in certain areas. Their local presence, lower costs, and faster delivery make them a top choice for healthcare providers.
Providers:
Providers are organizations that offer healthcare services, such as hospitals, pharmacies, and assisted living facilities. They receive medications, refill prescriptions, and manage inventory to ensure they have enough supplies for patients.
Globalization of U.S. Healthcare Supply Chain:
The U.S. healthcare supply chain has become increasingly global over the past few decades. This shift has brought cost advantages, efficiency, and innovation but also raised concerns about resilience and dependence on foreign sources. The COVID-19 pandemic exposed vulnerabilities, prompting discussions on reshoring production to strengthen supply chain security.
Evolution of U.S Healthcare Supply Chains:
The globalization of U.S. healthcare supply chains began in the 1970s, with companies moving production to Puerto Rico. According to the report by the National Institutes of Health (NIH), in the 1990s, firms expanded to Europe, China, and India to reduce costs and leverage global expertise. Lean manufacturing strategies further encouraged sourcing from multiple international locations to maintain competitiveness.
Dependence on International Manufacturers:
NIH reports that the U.S. relies heavily on international suppliers for pharmaceuticals, medical equipment, and protective gear. In 2019, 39.9% of pharmaceutical and medical equipment imports came from Europe, while 20% originated in Asia. Many critical components, such as active pharmaceutical ingredients (APIs), are sourced from China and India. The Below figure shows a breakdown of U.S imports of pharmaceuticals and medical equipment, products, and supplies in 2019.
Key Global Players in the U.S Healthcare Supply Chain:
Several key global players are contributing to the U.S. healthcare supply chain network. Europe remains a key supplier of medical products, with Ireland emerging as a hub for medical device manufacturing due to skilled labor and tax incentives. Leading European pharmaceutical firms like Roche, Merck KGaA, and Bayer dominate the global market. India is a major producer of generic drugs, leveraging low labor costs and a strong pharmaceutical industry to provide cost-effective medications worldwide. Indian manufacturers offer bulk drug production at significantly lower costs than U.S. manufacturers. China plays a crucial role in supplying active pharmaceutical ingredients (APIs) and medical supplies, producing essential drugs like antibiotics and cardiovascular treatments. The U.S. imports billions of dollars in medical products from China, making it a key healthcare supply chain partner.
Challenges in the U.S. Healthcare Supply Chain:
The globalized network of the U.S. healthcare supply chain presents several critical challenges:
Supply Disruptions Due to Natural Disasters:
Natural disasters can severely disrupt the supply chain. According to the report by the American Hospitals Association, Hurricane Helene in 2024 caused significant flooding at Baxter International’s North Carolina facility, which produces 60% of intravenous (IV) solutions for U.S. hospitals. This led to nationwide shortages, forcing hospitals to delay surgeries and seek alternative hydration methods for patients.
Impact of Trade Policies and Tariffs:
Trade policies and tariffs can adversely affect the supply chain. In 2025, a 10% tariff on Chinese imports threatened to increase medical supply costs, create drug shortages, and hinder the import of critical components for U.S. medical device manufacturers. According to one of the reports, health systems anticipated cost surges of at least 15% due to these tariffs.
Dependence on Foreign Manufacturing:
The U.S. healthcare system’s dependence on foreign manufacturing creates significant risks. Pharmaceutical manufacturers source supplies from 47 countries, including Italy, India, Germany, China, and France. During natural disasters or pandemics, disruptions in the supply chain can severely impact access to essential medicines and medical equipment, highlighting the need for a more resilient and diversified approach.
Vulnerabilities Exposed by Global Events:
Geopolitical tensions and international conflicts can disrupt supply chains. MedCIty News reports that unrest in the Middle East and attacks on commercial ships in the Red Sea have impacted vital sea-based shipping lanes, affecting the timely delivery of medical supplies. Such events underscore the interconnected nature of global supply chains and their susceptibility to external shocks.
Conclusion:
The U.S. healthcare supply chain is deeply intertwined with global networks, making it susceptible to various disruptions. Natural disasters, trade policies, and geopolitical tensions have exposed significant vulnerabilities, leading to shortages of critical medical supplies. Addressing these challenges requires enhancing resilience, improving visibility, managing costs, integrating systems, adopting advanced technologies, and reducing reliance on foreign manufacturing. By implementing strategic measures, the U.S. healthcare supply chain can better withstand future disruptions and ensure the continuous delivery of quality patient care.
Have any questions or want to know more about U.S Healthcare Supply Chain? Please reach out to the COBE Ethics Chair at COBEEthics@boisestate.edu. Explore the College of Business and Economics (COBE) website to learn more about undergraduate and graduate degree programs in economics and supply chain management.