New Report Details Federal Spending on Medical Supplies

The federal government buys a wide range of medical supplies, including hospital beds, surgical instruments, defibrillators, bandages, needles, and syringes.

The federal government spent more than $8.2 billion on medical supplies in fiscal year 2021, according to the Health Industry Distributors Association (HIDA).

The federal spending figure is one of the findings in HIDA's first-ever Federal Procurement Market Report. HIDA examined medical products within the North American Industry Classification System codes that showed federal government purchases. Among a wide range of products, these purchases included supplies such as hospital beds, surgical instruments, defibrillators, bandages, needles, and syringes.

Public-private partnerships are important in supply chain operations, Linda Rouse O'Neill, vice president of supply chain policy and executive branch relations at HIDA, told HealthLeaders. "The COVID-19 pandemic proved that the public and private sectors have complementary roles to play in supply chain operations. The private sector has expertise in the manufacture and distribution of medical products across the entire continuum of care. The public sector has greater resources and access to information to respond effectively to a pandemic. Private companies and government agencies must work together to ensure the seamless functioning of the medical supply chain."

HIDA represents the healthcare distribution network, which links global healthcare supply manufacturers and local care providers. HIDA members operate more than 500 distribution centers that bring critical products, supplies, and services to more than 560,000 healthcare settings across the country including hospitals and physician practices.

HIDA's Federal Procurement Market Report includes several key findings:

• Compared to fiscal year 2020, federal government medical supply purchases decreased 38% in fiscal year 2021, but spending was well above pre-pandemic levels.
   
• Nearly all of the federal government medical supply purchases (98%) were made by four departments: Department of Defense, Department of Health and Human Services, Department of Homeland Security, and Department of Veterans Affairs.
   
• In fiscal year 2021, $2.4 billion in federal contracts for medical supplies were awarded to small businesses.
   
• In fiscal year 2021, $1.35 billion in federal government medical supply contracts were awarded to diverse small businesses.

Interpreting the data

Regarding the drop in federal government medical supply purchases from fiscal year 2020 to fiscal year 2021, federal purchases related to the pandemic have followed a boom and bust cycle tied to public health priorities, a HIDA spokesperson told HealthLeaders. "The Administration for Strategic Preparedness and Response, which manages the Strategic National Stockpile, went from approximately $4.5 billion in purchases in FY 2020 to approximately $842 million in FY 2021. This accounts for approximately $3.7 billion of the approximately $4.9 billion federal government purchasing difference between FY 2020 and FY 2021."

The agency concentration of federal government medical supply purchases is not surprising, the spokesperson said. "With a total spend of $8.2 billion in contracts to healthcare distributors and manufacturers in 2021, the federal government is a major purchaser of medical supplies. It makes sense for the overwhelming majority of federal purchases in the medical supply chain to be made by agencies tasked with preparedness (Department of Homeland Security), agencies with significant patient needs (Department of Defense and Department of Veterans Affairs), or both (Department of Health and Human Services)."

Federal incentives for small businesses provide opportunities for many small and independent distributors and manufacturers in the medical supply chain, the spokesperson said. "Such support for all businesses—from national to local—diversifies the source of medical supplies, building resilience and capacity in the event of future surges in demand."

The level of federal purchases from diverse small businesses is substantial, the spokesperson said. "This reflects a significant federal strategic commitment to provide equitable access to purchasing and contracting opportunities for diverse businesses. Supplier diversity is an important goal for both the public and the private sectors. It promotes innovation, identifies new sources of talent, and rewards experience."