Coronavirus Could Disrupt U.S. Medical Supply Lines

For U.S. hospitals, an outbreak of the coronavirus would increase demand for services, but also increase costs.

The corona virus outbreak that has killed more than 1,100 people in China and infected more than 45,000 people globally could disrupt supply lines for U.S. medical device and drug makers that rely on products and manufacturing in that country, Moody's Investors Service says.

At the same time, Moody's says, the outbreak could increase demand for hospital services, medical products and drugs to fight the contagion.

"While the primary impact is on human health, the risk of contagion is affecting economic activity and financial markets," said Moody's associate managing director, Jessica Gladstone.

"The immediate and most significant economic impact is in China but will reverberate globally, given the importance of China in global growth as well as in global company revenue."

For hospitals, if the coronavirus were to spread widely in the U.S., Moody's says that would increase demand for services. However, costs likely would rise as well, as hospitals would need to add staff, possibly through expensive temporary laborers, and cancel more lucrative elective procedures such as orthopedic surgeries.  

And if the outbreak is not contained in China, it could create shortages of medical device part and disrupt the medical supply chain as demand begins to spike, Moody's said.   

For drug makers in the U.S. and Europe, China is a big customer and a big supplier of active ingredients. If China's economy slows or diverts healthcare-associated resources because of the coronavirus, it could have a pronounced impact on drug supplies.

For example, if manufacturing plants in China are adversely affected, that would negatively impact the bottom line for drug companies internationally, Moody's says.