Medical products maker BD says inflation will persist for two years

BD, one of the world’s largest manufacturers of medical products, has said it is optimistic the pandemic is coming “under control” but warned inflationary pressures will continue for up to two years and prices are unlikely to return to pre-Covid levels.

Thomas Polen, BD chief executive, told the Financial Times prices for some raw materials such as plastics and resins had doubled and transportation costs tripled during the pandemic for the company, which supplies 45bn medical devices across 190 nations every year.

Some of these input costs would moderate over the next couple of years as extra capacity in shipping and resin manufacturing is expected to come online, but labour costs are unlikely to go backwards, he said.

“There is no such thing as escaping inflation. Every company is being impacted and we are no exception to that,” said Polen.

“We put in place plans from procurement, from our supply chain, and our own cost structure to help navigate and offset inflation and then sometimes we have to raise prices and share those increases with our customers.”

BD, which is also known as Becton, Dickinson & Company, has increased prices for some products and is taking additional steps to insulate its business from “unprecedented levels” of inflation. These include increasing shipping charges for customers and ending free shipping waivers. BD has increased prices on contract renewals that have already been submitted and improved contract compliance, according to investor presentations.

Polen said low-cost goods that are made using high levels of automation are most affected by inflation as raw materials make up most of their costs. Syringes, which sell for about 10 cents a piece and are the best deal in healthcare, could rise in price by a cent or two, he added.

Last week, the US consumer price index showed a 6.2 per cent gain in October from the previous year, its fastest increase since 1990, raising concerns about runaway inflation. Disruption to supply chains and the labour market caused by the pandemic are key factors driving prices higher, as companies struggle to meet demand fuelled by government stimulus plans.

BD is a key supplier to the healthcare sector and the world’s largest manufacturer of injection devices, such as syringes for vaccination. It is also a major supplier of Covid-19 test kits, which generated $2bn in sales in the year to end September.

Polen said the company is forecasting just $200m in Covid-test sales for 2022, due in part to positive signs that the worst of the pandemic may be over in the US. BD injection devices had delivered 1.2bn shots of the Covid-19 vaccine so far, he said.

“We are optimistic that the pandemic is getting under control, it’s hard to predict future variants obviously, but we are very optimistic on the vaccination rates continuing to increase around the world,” he said.