September 15, 2020 The Honorable Governor Newsom Governor, State of California 1303 10th Street, Suite 1173 Sacramento, CA 95814 Re: Request for Veto on AB-2537 - Personal Protective Equipment: Health Care Employees Dear Governor Newsom, Premier Inc. appreciates the opportunity to submit comments on AB-2537 - Personal Protective Equipment: Health Care Employees which was recently passed by the California legislature and awaiting gubernatorial signature. If signed into law, AB-2537 would require acute care hospitals in the state to maintain a 90-day stockpile of personal protective equipment (PPE) by April 1, 2021 and establish civil monetary penalties of up to $25,000 for each violation to maintain the required stockpile. While Premier shares a common goal with AB-2537 of ensuring health care workers have access to necessary PPE during future global pandemics, Premier has serious concerns that the current fragility of the healthcare supply chain cannot sustain the added pressure of mandatory stockpiling at this time. Currently, over 7,000 PPE items remain on national protective allocation due to global shortages. In addition, the Food and Drug Administration (FDA) has identified twenty critical product categories in shortage including gloves, gowns, respirators, swabs, transport media, and more. Due to global shortages, it would be nearly impossible for hospitals to maintain stockpiles as required under AB-2537 by April 2021, would further proliferate global shortages, and would further strain the healthcare supply chain for regions throughout the country experiencing a surge in COVID-19 cases. Furthermore, Premier is concerned that if states continue to get ahead of federal stockpiling requirements, that hospitals would be required to re-do their stockpiles to align with federal requirements resulting in a waste of valuable resources and further fragmentation. Therefore, Premier requests a veto on AB-2537. Instead, Premier recommends California work with public and private sector partners to develop a forward-looking and thoughtful approach to stockpiling that is reasonable, methodological, sustainable, and aligns with forthcoming federal stockpiling requirements. Premier outlines our specific recommendations on how to prepare for the next global pandemic and strengthen the healthcare supply chain below and in Appendix A. I. Background on Premier Inc. Premier Inc. is a leading healthcare improvement company and national supply chain leader, uniting an alliance of more than 4,100 U.S. hospitals and health systems and approximately 200,000 alternate site providers to transform healthcare. With integrated healthcare quality, cost and supply chain data and analytics, supply chain solutions, consulting and other services, Premier enables better care and outcomes at a lower cost. Premier’s sophisticated technology systems contain robust data from nearly half of U.S. hospitals and 200,000 ambulatory clinicians. Premier is an agnostic, data-driven organization with a 360◦ view of the supply chain, working with more than 1,300 manufacturers to source the highest quality and most cost-effective products and services. Premier’s work is closely aligned with healthcare providers, who drive the product and service contracting decisions using a data-driven approach to remove biases in product sourcing and contracting and assure access to the highest quality products. Governor Newsom September 15, 2020 Page 2 of 9 Premier is also a leader in identifying, fulfilling, and closing gaps in diverse sources for product categories and working directly with manufacturers to incentivize new manufacturers to enter the marketplace through programs such as ProvideGx for drug shortages and S2S Global for personal protective equipment (PPE) – a strategy that will be critical as the country looks to increase domestic manufacturing and identify new sources of essential supplies. Premier also identified and solved a major gap for alternate site providers to obtain PPE and created an e-commerce platform, Stockd, to ensure alternate site providers can access critical medical supplies. Premier also has a long history of partnering with the government through initiatives such as managing one of the largest Centers for Medicare and Medicaid Services (CMS) demonstration models that led to the enactment of the hospital value-based purchasing program. As a government contractor, Premier has served as a trusted advisor and has a proven track record of positive results. A 2006 Malcolm Baldrige National Quality Award recipient, Premier plays a critical role in the rapidly evolving healthcare industry, collaborating with healthcare providers, manufacturers, distributors, government, and other entities to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, North Carolina, Premier is passionate about transforming American healthcare and ensuring healthcare providers have access to the right supplies, at the right time, to treat the right patient. Premier’s Leadership in COVID-19 Response Efforts II. From the beginning of the COVID-19 pandemic, Premier has been at the forefront of response efforts working around the clock to ensure hospitals, health systems, and alternate site providers across the country had access to the necessary PPE, medical supplies and pharmaceuticals to treat COVID-19 patients. To meet the unprecedented demand, Premier: • • • • • • • • Used our global sourcing arm, S2S Global, to identify new sourcing of manufacturing capacity, ultimately contracting with seven different PPE factories across the globe to secure 36 million masks and respirators and 16 million gowns. Arranged cargo carriers and major airlines to expedite transportation of products so they could be onshore in hours, rather than months. Coordinated and allocated 2 million donated masks. Added 40 new manufacturers of COVID-19 related supplies to our national contracts using an expedited review process to rapidly increase options. Worked with non-traditional and adjacent industries such as distilleries, textile manufacturers, and automobile manufacturers to fill supply gaps for essentials such as hand sanitizer, face shields, isolation gowns and surgical caps. Created an online exchange for health systems, Resilinc, to trade PPE supplies among one another, dynamically moving specific supplies to the neediest hot spots. Partnered with 15 health systems to acquire a minority stake the nation’s largest domestic supplier of PPE, Prestige Ameritech, such as masks and N95s. Leveraged our existing drug shortage program, ProvideGx, to secure additional safety stock and dedicated supplies, thereby avoiding shortages for many critical products. In addition, Premier also worked closely with the Administration to provide data on surge demand, clinical utilization, and barriers to providing care and improving healthcare delivery during the pandemic. This work resulted in numerous waivers, regulatory flexibilities, and guidance documents that were critical during the public health emergency to prevent infection, avoid unnecessary hospitalizations for ambulatory conditions, increase availability of PPE and medical supplies, and more. Governor Newsom September 15, 2020 Page 3 of 9 Premier also played a pivotal role in the creation of the COVID-19 Private Sector Supply Chain Coalition, which was established to coordinate an integrated, public/private supply chain response to the challenges created by the COVID-19 pandemic. The Coalition serves as a single coordination point to share non-competitive, non-pricing information, best practices and strategies among key parties in the healthcare supply chain to promote the efficient management of supply and distribution during the COVID-19 pandemic. The Coalition’s primary goals are to promote public and private sector cooperation, strengthen the healthcare supply chain, and speed answers to urgent supply challenges across hospitals and other US healthcare providers. Finally, Premier has worked closely with Congress to advance needed reforms to address supply chain issues. This included playing a leadership role in working with healthcare organizations, federal agencies and lawmakers to pass sections 3101, 3111, 3112, and 3121 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to mitigate drug and device shortages necessary for patient care during the pandemic. Premier’s Reflections & Learnings From COVID-19 Response Efforts III. Premier has spent significant time reflecting on the experience of the healthcare industry during COVID-19 response efforts to determine elements that worked well as well as areas for improvement for the future. Premier’s reflections have found that: • Elements that Have Worked Well: o Nimbleness and ingenuity of the private sector to anticipate and identify needs as well as respond quickly to fill gaps. o Formation of the Private Sector Supply Chain Coalition to provide a coordinated and collaborative response to the government and in the market o Sharing of supply chain data that accounted for both supply and demand from neutral, vendor agnostic, and value orientated entities o Regulatory flexibilities and waivers from FDA, CMS, HRSA, and CDC that were delivered rapidly o Timely and regular access to government leaders and openness to input • Elements that Led to the Current Situation: o In spite of efforts by Premier and others to counter the trend, a focus for the past 20+ years to move manufacturing offshore as a means to reduce costs to offset decreasing healthcare reimbursement. This is because emerging economies: ▪ Are more willing to take greater environmental regulatory risks ▪ Have large populations of low-cost labor ▪ Have incentives to move manufacturing to their markets o Lack of centralized upstream visibility into supply chain to determine source of raw materials and finished goods. This resulted in a lack of understanding of vulnerabilities, foreign reliance on manufacturing, and impact as export bans and manufacturing shutdowns were announced. o Unprecedented demand both globally and nationally that led to an imbalance in the supply vs demand, e.g., 17X increase in surge demand for N95 masks o Export bans and manufacturing shutdowns globally o Insufficient supplies in the SNS and cumbersome process for accessing supplies in the stockpile. o More reactive approach vs a proactive approach by the government at the outset. Product was not allocated to the “hot spots” because there was not clear identification of them until late. o Fragmented approach to securing supply (private sector vs federal vs states) led to increase in prices as multiple entities competed for the same inventory and out-bid one another o Lack of clear visibility of distributor fulfillment lead to uncertainty on where products where delivered. This continued uncertainty left providers with dwindling confidence in the normal supply Governor Newsom September 15, 2020 Page 4 of 9 o o IV. chain and proliferated more maverick and forward buying, as well as hoarding. This also led to a rampant gray market and many entities purchasing counterfeit products. Insufficient national strategy and plan for addressing global pandemics, including confusion regarding which federal agency was responsible. Existence of patent restrictions that impeded access to ancillary products needed for care such as viral swabs Strengthening the Healthcare Supply Chain to Address Future Pandemics To strengthen the supply chain to address future global pandemics, Premier has robust recommendations on how the existing private sector supply chain can be further enabled and augmented. Premier’s guiding principles include: • • • • • • • • Augment the existing private sector supply chain to better respond to global pandemics through diversification and transparency. The private sector supply chain is highly functioning and should be further enabled, not disrupted. Develop a cohesive and holistic national strategy for addressing global pandemics and stabilizing the US supply chain to respond to surge demand for critical medical supplies and drugs. Identify critical medical supplies and drugs needed to treat a global pandemic and associated comorbidities. This identification should occur via a public-private advisory council that includes representatives from manufacturers, GPOs, distributors, physicians, pharmacists, laboratorians, nursing homes, and others. Create upstream visibility into the supply chain to understand sources of raw materials and manufacturing facilities. This information is critical to assess vulnerabilities and prioritize what critical medical supplies and drugs should be focused on initially. Design stockpiles to create coordination rather than competition between state, local and national stockpiles. Stockpiles should be customized to meet the unique needs of various healthcare sectors, such as nursing homes. Leverage supply and demand data from GPOs, who serve as neutral, vendor agnostic, and value orientated entities to drive transparency in the supply chain and forecast demand needs. Develop a real-time national syndromic surveillance system that also includes real-time supply chain demand data so that there is a means to identify a disease threat as early as possible as well as its implications on healthcare resources. Advance payment and delivery system reforms that hold providers accountable for the health of a population, budgets and transparent outcomes. This will incent improving the health of a population, which will both improve patients’ comorbidities and attention to care management to sick patients. Acting within a budget helps reduce long-term financial pressure from rising healthcare costs. Regarding domestic manufacturing, there are five major barriers that policy proposals must address. These barriers include: 1) capacity; 2) environmental regulations; 3) labor costs; 4) availability of raw materials, and 5) historical policy decisions that advantaged offshoring. To incentivize domestic manufacturing, Premier recommends Congress consider the following policy proposals: • • Section 3101 of the CARES Act requires a report by the National Academies of Medicine (NAM) on the foreign reliance on manufacturing for critical healthcare supplies, the risk to national security, and recommendations for improving the resiliency of the supply chain. However, these recommendations are not expected to be available in the near future and, therefore, Congress should accelerate the development of this report to strengthen domestic manufacturing in the long-term. Offer 0% interest loans to manufacturers of critical medical supplies and drugs to incentivize increasing domestic manufacturing capacity. (for example – investing in automation to offset labor costs) Governor Newsom September 15, 2020 Page 5 of 9 • • • Offer tax incentives to manufacturers of critical medical supplies and drugs to incentivize increasing domestic manufacturing capacity, similar to incentives provided during the 1980’s and 1990’s to incentivize manufacturing in Puerto Rico. Ensure there is at least: o One domestic supplier of the final form, ancillary products and raw materials for critical medical supplies and drugs. o Three global suppliers of the final form, ancillary products and raw materials for critical medical supplies and drugs. Global suppliers should be from geographically diverse regions. Incentivize the domestic farming/cultivation of raw materials needed for critical medical supplies and drugs o For example: cotton for PPE and swabs, pigs for Heparin, poppy for sedatives, etc. Regarding the Strategic National Stockpile (SNS), Premier strongly supports the vision of the Administration to augment the SNS to better respond to global pandemics by enabling public-private partnerships. However, to develop a truly cohesive and holistic national strategy for addressing future global pandemics and stabilizing the U.S. supply chain to respond to surge demand for essential medical supplies and drugs, Premier believes that it is critical to take a slightly broader approach to creating a true end-to-end supply chain solution that is transparent, diverse, and reliable. In addition, it is critical to not only focus on the quantity on hand for critical supplies, but also focus on the time to inventory and ensuring the U.S. has contractual relationships established, including contingency and redundancy plans, to ramp up production expeditiously and efficiently upon identification of need. The SNS is the supply chain of last resort for health systems, alternate site providers, and first responders. Therefore, the SNS must be built by providers for providers. The SNS must also leverage analytics and insights to assist providers in the delivery of care during global pandemics that is in the best interest of patients and ensure access to the right supplies at the right time. Premier’s vision for the next generation SNS includes the following elements that can be accomplished via a publicprivate partnership: • • • • • • • The SNS should adopt a hub-and-spoke model where the national stockpile serves as the hub and state and local stockpiles serve as the spokes. A hub-and-spoke model, coupled with federal stockpiling requirements, will create harmonization and interoperability amongst stockpiles. The SNS should maintain a minimum of a 90-day supply of critical medical supplies and drugs based upon surge demand from hot spots such as New York, Washington, Detroit, etc. The current process for accessing the SNS is cumbersome and state specific. Working alongside private sector partners, the Administration should create a streamlined and efficient process for accessing drugs from the SNS. The SNS should work proactively with GPOs to forecast demand and increase capacity/supply to avoid shortages. The SNS should work with GPOs to rotate soon-to-expire stock out of the SNS and into health systems at a discounted rate. This rotation is supposed to occur, but GPOs can make this happen and will ensure the SNS is continuously stocked with in-date products and allow the SNS to recoup some of their expenses associated with purchase of these products. The SNS should be transparent regarding distribution of supplies and drugs from the SNS. The SNS should provide, at minimum, a detailed monthly report of what supplies were distributed to where and in what quantities. During a public health emergency, reporting should occur weekly. The SNS, as well as state and local stockpiles, should be encouraged to purchase off GPO contracts to help aggregate purchasing volume and keep prices competitive. Governor Newsom September 15, 2020 Page 6 of 9 • • • V. The SNS should work to ensure that critical medical supplies and drugs are located as close to the delivery of care as possible. This includes exploring opportunities to leverage health system warehouses in major metropolitan areas or in rural areas. Create a customized stockpile for nursing homes with appropriate supplies, drugs and other needs. Include health systems or regional buying groups as potential stockpile operators. These organizations would be responsible for managing the stockpile for the providers in a region. This would allow an efficient means to rotate inventory and assure accountability for the stockpile. Conclusion In closing, Premier appreciates the opportunity to submit comments as gubernatorial signature on AB-2537 Personal Protective Equipment: Health Care Employees is considered. Given concerns with the fragility of the healthcare supply chain, Premier requests a veto on AB-2537. Premier looks forward to working with California and other stakeholders to develop a cohesive and holistic national strategy for addressing global pandemics and stabilizing the US supply chain to respond to surge demand for critical medical supplies and drugs. If you have any questions regarding our comments or need more information, please contact Soumi Saha, Vice President of Advocacy, at soumi_saha@premierinc.com or 732-266-5472. Sincerely, Blair Childs Senior Vice President of Public Affairs Premier Inc. cc: Katie Wheeler Mathews, Director of the Washington DC Office Stuart Thompson, Legislative Deputy Governor Newsom September 15, 2020 Page 7 of 9 Appendix A: Reflections and Recommendations on Preparing for the Next Surge or Pandemic June Elements That Have Worked Well: N'InIJIeness and ingenuity ofthe private sectortoan?cipate 31d identify needs as well as respond quickly to ?ll gaps. Formation ofthe Private Sector Supply Chain lEorditzion to pot?de a ccord'ns?ied and coldlcia?re response Sharing of datathataccounted I'orbod'l supply and demo-1d ?om neutral. vendor agnostic. and vsiue orientated entities Heglatcry ?exbl'rties 31d waivlers From FDA. WE. mud BUG d'Iatwere delivered mpidty T'Inely and regular access 113 government leaders and openness to input Elements That Led to the lltlurrent Situation: In spite of efforts tocmnterthe trend try sane. afo-wsforthe pastEEIr yeast]: mmufachr'rg o?shoreasameinsto reduce coststo offset-decreasing reinhursement Ernerg'ng econom'es more totaIIe greater env'rcnmertal regrtatoryristis Lage popdatjons oflovr?cost labor a Incentives provided byo?'ler nations manufacttr'ng 1D 111e'r rna'tets Lacl: of cemaliaed upstream vishl'rty into supply chain todeten'nine source lira-Ir materials and Fnished goods. This resulted in a laclt of understanding of Foreign reliance on mamtactIr'ng. aid impact as export hens and rrmutactu'hg shutdormswere Urnecedented dune-1d both gobdty 31d nationalythatled to an int-dame in the supply vs demand inclease in surge denundfor N95 maskst Exportbans and manufacturing shutdowns globally Insuf?cient surplies "n the EMS and cuntersome process for accessing supplies inthe stockpile. More reactive mm vs a proactive woam bythe govemmentatthe outset. F'roductwas not silo-satedtoti're 'hot spots'becaIse there-Has nothIear identi?cations ofthem late. annented approach to securing supply {pr'hlate sectorvs Fedeial vs states} led to increase in prices as mlliple en?tia competed Forthe same inverrtoryind out-bid one mother Lacl: of clearvisibil'rtyofdisutbutor ?rt?lln'IerIt lead to uncerla'rlt'y on where pro-ductsv?lere delivered. ?this continued uncerta'nty Ie? pruriders with con?dence in the normal supply Eha'nEI'Id proliferated aswellashoad'ng. 'I11isilsoledtoa Ianqsart gIay market and mallyentjties purchasing comterfeit products. Insu?tcient nationi sIJ'Hegy and plan forarlriess'ng global patrlernics. including regarding federd agency-Has responshle. Existence of accesstoanclauy products needed form such asv'nl swabs Governor Newsom September 15, 2020 Page 8 of 9 Gcals Augment the exist'ng private sectcr supply their to better respond to ?che! pandemics throt?l direrstiation and tlansparency. The private sector is highly functioning atd should be further enabled. not disrwted. Develop a cohesive and hclistic national stiategy for addressing global patdemics and stabilizing the US. supply their to respond to surge demand for critical medical supplies and drugs. Identify critical medical supplies and drugs needed to treat a gicbal patdemic and associated ocmor?cidities. This identi?caticn should c-cctI via a public-private adviscry omncil that includes representatives from matufactrlers. distributors. physicians. phannacisls. laboratcriats. and cthers. Ensu'e dtere is rnarufactrl'hg and raw material sources and assure adequate diversi?catiort of the supply tha'n dtese anducts. Create upstream visibility intc the supply tha'n tc understand scurces materials and matufaclur'rq; facilities. This infcn'nation is critical to assess vulneraalilies and prioritize what tritical medical srqiplies and thugs should be fouised on 'Ititially. Design stockpiles tc create rather that cor'rqi-etiticn between state. local and national stockpiles. Leverage supply and dematd data from who serve as neutnl. vendornamostic. and vale-crierrtaed entitiesto drive transpaency in the and forecast demand needs. Develop a real?tine national survelance system that inthdes supply chain data sc that there is a real-tine meats to identify a disease dtreat as early as as as its implications on healthcare rescuces. Advance payment and delivery system dtat hold prcviders healdt cfa populaticn. budgets and transpaerrt outcomes This will boast improving the health cf a populaticn. t?tich lwill both patients? ccmorbidities and attenticntc care sicl-t patients. ?cting within a budget he?is rerhce Icng?term ?nancial pressure ?'om ris'ng costs. Barriers to: Domestic Manufacturing: Capacity Emr'lclinental regulations Labor costs Avalainlity ofmw materials istcrical policy decisicns that advantaged Incentivize Dcrmestic Manufacturing: Section 31D1 cafthe CARES Act requires a report by dte l-laticnal Academies of Medicine on the foreign reliance on critical heathcae supplies. the rislt to natiortal security. and reccmmendatians for 'Inproving the resiliency tn? the supply chain. chever. these reccmmendaticns ae not expected to be available in the near ?nure and. therefore. lCongress acceleratethe develcpment ofthis report to su'ertg?'ten domestic manufactu'rlg it me long-term- Diferm'l. interestloats to manufacturers cfcritical med ical supplies and drugs to incentivize increasing domestic manLrt'actJIing mpacity. Iffcr example 'Iwest'ng in altomaticn tc offset labor costs} Difertair incentives to manufactners of tritical medical srqiplies and rings to incentiviae increasing domestic manufactu'ing capacity. sinilarto incentives provided during the lgElEl's aid to incentiviae manufactn'hg in Puertc Ftico. Ensu'e dtere is atieast: lCine dcrnestic suppliercf the ?nal fcrm. ancillary products atd raw materials for critical medical supplies and drugs. Three global supplers cf the ancillary p'oducts and raw materias for critical medical supplies and drugs. Global suppliers should be from geographically diverse regions. lncentiuize dte dcrnestic I'amigrcullivaticn of raw materials needed for critical medical supplies and rings For erranple: cctIon for and swabs. pigsfor Hepa'n. sedatives. etc. Governor Newsom September 15, 2020 Page 9 of 9 Strategic Haliunal Stockpile: The SNE- should maintain a m'n'rnum ofa 90-day supply ofcritical medical supplies and dams based upon suge demand from hot spots such as New Detroit. etc. The crl'rerrt process for accessing Lhe EMS is aid state speci?c. Working akongside privatesector partners the Arininistration should create a streamth and ef?cient process For accessing the ENS. The SME- should worit proaothrely with EPDs to forecast demand and increase avoid shortages- The SNE- should worit with GPOs to rotate so-on-to?eirplre stock out cfthe EMS and kits: health systems at a discounted rate. This rotation is stpposed to occur. but GPGs can make this happen and wil ensure the EMS- is continously stocked with in-dere products aid allow the EMS to recoup some of their expenses assoc'ated with purchase ot'diese products. The SNE- should be transparent regarding distrlaution of sqoplies and thugs from the EMS. The 3H5 should provide. at minimum. a detaled nutrithly supplies were distrhuted to nhere and in what quanti?es. During a pt?ic health emergency. reporting should occur weekly The 3N5. asivel as state and local stockpiles, should he encouraged contracts to heir- aggregate volume and Iteep prices competitive. The SNE- should worit to ensure that critical medical supplies and arelocated as close to the delivery of cue as posshle. This includes et-pkoling opportun tiesto leverage heath system waehouses 'n ma'or metropolitan areas or 'n rural areas. Create a customized stooltpile for nursing homes with appropriate supplies. drugs and other needs. Include health systems orregional louying goups as potential stockpile operators. These organizations would be responshle for managing the stockpile for the providers in a region. This world allow an ef?cient meats torotate inventory and assue accouttahilityfor the stockpile. Environment? Regulations: EPA should reassess requirements spec?ctc the manufacturing ot'ctitical med ical supplies and and provide clear guidaic-e on the remiements needed Provide tart credits or incentives formanufacturers to upgade Facilitiestc meet EPA rem'rements to begin domestic manufacturing of Eriticd medical supplies and drugs EPA should provide clear guidaice on Lhe use of ethylene oxide [Et?i For sterl'zation of medicd ies- In 2019. several states to-ok attion against isnlities and closed them. CWID. Illinois and permitted faclities to reopen. This was critical to avoid additiond shortages of PPE and other medical supplies the to a lack of sterilization capacity. fricving forward. it is critical that EPA defne what is required for steriization wih Evil and provide an opportunity for sterilizers tottomply with the new requirements. Regulatory Ftefurm: Review and assess the regulatory reforms. waivers and guidance docunents undertaken during the pandemic and determine whidi ofdiose shorld loe ma'ntained so asto retain greater regulatory nimbleness. Surveillance and Andy-tic Infrastructure: Invest 'n a robust. real time HIT 'nfrastructurethatnill provide hospital and postnaoute care erveillance that is also connected to- real time resource demand data.