3rd place submission in the SCAN Health Virtual Business Case Competition 2021 by Timothy Hutama, Padmaja Nair, (Andrea) Xue Qin & (Sally) Yingxi Tang from Rutgers University (the United States)
Executive Summary
COVID-19 has revealed large vulnerabilities in Canada’s PPE supply. Whether from product expiry in the National Emergency Strategic Stockpile (NESS)1 or shortage caused by an overreliance on imports from US and China,2 lack of PPE presented a major challenge in the opening months of the pandemic.
Proposal
Considering the strong federal-provincial split in Canadian healthcare, we recommend that a new agency be formed under Health Canada to implement our solution nationally. We propose a comprehensive strategy involving three solutions: full implementation of GS1 standards in the healthcare industry across the country, integration of NESS into commercial supply as a prime vendor, and local manufacturing requirements. This combination of solutions is critical to address the issues of transparency, sustainability, and adaptability in the Canadian supply chain as no single proposal would completely protect PPE supply. Implementing GS1 will provide end-to-end transparency of entire healthcare supply chain including PPE. This will in turn allow for NESS to sustainably maintain its stockpiles as a prime vendor, and the creation of a prime vendor would automatically provide a large market to local PPE manufacturers and boost resilience in future pandemics.
GS1 Implementation
GS1 standards will allow every medical product in the country to be indexed using product identification (GTIN) and product location (GLIN) barcodes, ensuring accurate inventory tracking. National Product Registry (NPR) would provide suppliers with a common platform to share product and pricing data. GS1 has been used successfully in Australia,3 which has a similar federal-state healthcare division, to reduce costs and increase transparency in medical supply chains. A similar implementation in the province of Alberta4, has been highly successful.
NESS Transformation into a Commercially Integrated System
GS1 standards will allow full transparency into inventory at national warehouses. However, the cost to replace these supplies can exceed $50MM per year5. Transforming NESS into a prime vendor that can buy supplies in bulk and resell them after three months to hospitals at cost, will lower the cost of maintaining inventory by up to 90%, maintain three months of emergency supply, and allow the final part of our proposal, local content requirements.
Local Content Requirements to Protect Canada’s PPE Industry
Today, Canada makes more than half of its PPE domestically,6 and it will be important to retain this capacity in future. NESS as a prime vendor will allow for repeated bulk purchases of PPE which will allow domestic suppliers to compete with international ones. Mandating local content requirements into RFPs will ensure the protection of Canadian PPE industry.
Budget
We estimate that a $700MM capital investment into GS1 implementation and NESS transformation will set Canada on a path to PPE security. We expect local content requirements to be revenue neutral. Approximately $300MM will be required to create a federal NPR system and subsidize the full rollout of GS1 across the provinces through provincial health authorities. Initial acquisition of emergency supplies will cost ~$400MM. Based on the cost of transforming Alberta’s system, national GS1 implementation would amount to $200MM over 5 years in operating costs. We have budgeted for warehouse space in each province, costing approximately $20MM per year based on the current NESS budget. Additional salary costs are estimated to run approximately $100MM over the five years (Appendix 1). Our proposed project has a five-year NPV of $98MM. The full implementation of Canadian content requirements will also retain 1,000 jobs with an average salary of $60,000, in addition to assuring PPE security. We expect RFP requirements to be revenue neutral due to cost increases from local manufacturing offset by larger order lots.
Timeline
Canada can accomplish many of the benefits of our proposal over a five-year timeline. Major government spending into future preparedness will likely be done within 12-24 months. After launch and approximately 3-months of stakeholder engagement, implementation of the NPR-data master will take an additional 6 months, ERP implementation in 12 months (though new companies will be onboarded for the lifetime of the project), and the national warehouse system transformation in 24 months. Following the transformation of the national warehouse system, local content requirements in RFPs can be implemented over an additional 3-5 years. Thus after 5 years, Canada can secure its PPE security and manufacturing capacity in a revenue-neutral way.
Outcome Measures:
We estimate that GS1 implementation will save Canada $200MM per year through improved patient safety outcomes, effective recalls, reduced adverse events, and inventory cost savings with an ROI of 190%. It will also allow NESS to become a prime vendor and ensure a 3-month supply of PPE at a nearly revenue-neutral rate, while protecting domestic PPE manufacturing through local content requirements.
Conclusion:
The comprehensive model we propose aims to reduce overall spending while ensuring PPE security and creating synergies across the system in hospital administration and manufacturing employment, among other areas. As a result, our model can be replicated not only in Canada, but world-wide, to provide countries with a secure source of critical supplies that can tackle any future pandemic.