In a nation concerned about rapidly rising healthcare costs, attention often turns to medical supplies and equipment. This includes products ranging from Band-Aids to IV bags and surgical instruments. It also encompasses the entire operation of the supply chain, which includes suppliers, intermediaries, third-party service providers, and customers. It may also include logistics, manufacturing, sales, product design, finance, and information technology.
The supply of pharmaceuticals and medical supplies is a complicated business. For example, while a pharmaceutical drug is an important part of the treatment process, it must be carefully administered by a physician and cannot be used without proper training or supervision. On the other hand, medical supplies must be properly stocked to ensure that hospitals and healthcare facilities have what they need in an emergency.
In addition, many patients are insensitive to price and may be willing to pay much higher prices than would occur in a competitive market because they or their insurers are paying for the equipment. This is particularly true for durable medical equipment (DME) like oxygen equipment, manual wheelchairs, and diabetes testing equipment. In fact, Medicare’s experience with competitive bidding suggests that DME prices are about 20 percent too high.
In contrast, non-durable single-use medical supplies are typically more standardized and less expensive. Examples of these include sterile gloves and gauze. Nevertheless, the distinction between these two categories is not always clear because many medical supplies and equipment are a combination of pharmaceutical and non-pharmaceutical components.