By Maggie Davis, Director of Government Affairs, Health Industry Distributors Association
A resilient medical supply chain empowers distributors to make sure healthcare providers have the products they need, when they need them. This requires a strategic blend of global and domestically sourced products. Realistically, there are several critical medical products which the United States does not have meaningful domestic manufacturing capacity.
Policymakers across the federal government are working to change that.
From tax incentives passed last summer to new investments from the Administration for Strategic Preparedness and Response (ASPR), the federal government is pulling every lever available to build the industrial base. This year, CMS is considering another lever: reimbursement policy.
Reimbursement policy has enormous influence over provider behavior. Hospitals operate under significant financial pressure and often must weigh product costs against constrained budgets. Because production costs tend to be higher in the United States, these dynamics often lead providers to purchase products manufactured overseas.
In 2023, CMS tried to leverage reimbursement policy to support the purchase of domestic N95 masks. This effort required hospitals to purchase domestic respirators and to track the price difference between purchasing those masks and non-domestic alternatives in order to get additional payment. Because of the administrative burden and high threshold for which products qualified, the effort was unsuccessful.
For this new effort, CMS is gathering public input to craft a workable policy for providers and reflects the realities of domestic manufacturing. Twice this year CMS requested public input on how Medicare-participating hospitals can strengthen the medical supply chain by purchasing domestic PPE and essential medicines.
First, CMS asked for feedback on ways to set up the program to minimize the administrative burden on providers while still certifying that the products purchased are made in the United States. Receiving over 150 comments from healthcare providers, distributors, and manufacturers, CMS asked for additional input in an unusual place – the Calendar Year 2027 Hospital Outpatient Prospective Payment System (OPPS) proposed rule.
Specifically, CMS requests additional feedback on creating a voluntary separate payment under the Inpatient Prospective Payment System for purchasing domestic PPE and essential medicines. The agency is also asking for feedback on calculating how best to calculate the price differential between domestic and non-domestic products, sharing potential domestic differentials for filtering facepiece respirators ($0.38/item), medical gloves ($0.05/item), and gowns ($0.82/item).
For healthcare sales professionals, the immediate impact may be limited. CMS is still gathering input and has not officially proposed a new policy. However, the agency incorporating extensive public feedback shows that they are taking the proposal seriously.
Healthcare distributors and manufacturers should expect continued federal interest in domestic production capacity for critical medical products. Future discussions may increasingly connect payment policy, procurement practices, and supply chain resilience goals. Questions once confined largely to federal preparedness programs are now emerging in some of healthcare’s most consequential reimbursement regulations.
Policymakers are committed to expanding the medical manufacturing industrial base. Now, the question is whether reimbursement policy will become one of the tools they use to achieve that goal.