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AHA: Tariffs on Chinese Goods Will Impact Hospital Supply Chain

The Trump Administration’s tariffs on medical equipment and supplies imported from China will increase hospital supply chain costs by $160 million a year.

Hospital supply chain

Source: Thinkstock

By Jacqueline LaPointe

- The American Hospital Association (AHA) recently opposed the Trump Administration’s tariffs on medical equipment and products imported from China, arguing the tariffs would impact the hospital supply chain.

“The imposition of these tariffs will increase the cost of providing healthcare to all Americans, hitting vulnerable communities, such as rural communities that can least afford higher costs, especially hard,” AHA wrote to Commerce Secretary Wilbur Ross.

The Trump Administration recently finalized the second round of tariffs on Chinese products. The administration directed the Office of the United States Trade Representative (USTR) in August 2018 to impose an additional 25 percent tariff on approximately $16 billion worth of imports from China.

The recent tariffs followed the first tranche of tariffs on $34 billion of imported from China. The USTR implemented the first round in July 2018.

The Trump Administration intends for the new trade policies to protect American intellectual property and foster the American economy.

However, healthcare industry groups are saying the tariffs could impact the hospital supply chain by making it more expensive for hospitals and health systems to purchase medical equipment and supplies.

Healthcare organizations across the nation buy supplies and equipment from China. And the new trade policies with the country will impact a number of healthcare-specific items, including but not limited to:

  • Parts of certain medical, surgical or laboratory sterilizers, nesoi (not elsewhere specified or included)
  • Ultrasonic scanning electro-diagnostic apparatus used in medical, surgical, dental or veterinary sciences
  • Magnetic resonance imaging electro-diagnostic apparatus used in medical, surgical, dental or veterinary sciences
  • Scintigraphic electro-diagnostic apparatus used in medical, surgical, dental or veterinary sciences
  • Ultraviolet or infrared ray apparatus used in medical, surgical, dental or veterinary sciences, and parts and accessories thereof
  • Optical instruments and appliances nesoi, used in medical, surgical, dental or veterinary sciences, and parts and accessories thereof

The recent round of tariffs is slated to increase hospital supply chain costs for medical equipment and supplies by at least $160 million a year, according to the Association for Health Care Resource & Materials Management. The organization is an AHA professional membership group.

The millions of dollars in additional healthcare supply chain costs also not include the added construction expenses for hospitals and health systems, the AHA pointed out. Hospitals and health systems are likely to face higher construction costs for steel or when acquiring major appliances because of the tariffs.

The American Action Forum (AAF), a self-described center-right non-profit organization, also reported in July 2018 that the first and second round of tariffs will impact almost $1.8 billion of medical imports annually. And if import levels remain the same, medical equipment prices would rise by about $400 million nationwide.

Higher hospital supply chain costs could lead to higher consumer healthcare costs, the organization warned.

“Both medical practitioners and consumers of medical services can expect to shoulder the burden of these costs,” the AAF explained. “To the extent that providers face an increased cost in acquiring medical equipment, they will try to recoup those costs through higher prices to patients.”

In light of higher hospital supply chain costs, the AHA recently urged the Trump Administration to “find alternatives to tariffs and to work with stakeholders to consider the impact of potential trade actions.”

Exempting medical imaging products and components from the tariff policies could be an alternative, the Medical Imaging and Technology Alliance (MITA) recently recommended.

“These tariffs on imaging products or their components will harm the American medical technology sector’s ability to stay competitive and will adversely affect the US economy in ways that could compromise patient access to care,” Patrick Hope, Executive Director of MITA, told the Administration in July 2018.

For example, the tariffs are slated to cost American device makers over $138 million in 2018. The taxes would most likely stop the companies from investing in research and development, as well as prompt the companies to reduce their US-based workforce over the next two years, MITA reported referencing a survey.

“Though the Administration has stated that it will implement an exemption process, we have not yet seen any information about how or when it will do so. Policymakers should act quickly to ensure that patient access to innovative life-saving technology is not compromised,” the alliance stressed.

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