Mitigating the US Drug Shortages Through Pareto-Improving Contracts

• 成果类型: Article
• 署名作者: Jia, Justin; Zhao, Hui
• 署名单位: Purdue University System; Purdue University; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12697
• 发表日期: 2017
• 页码: 1463-1480
• 关键词: drug shortage; pharmaceutical supply chain; Healthcare; Pareto improvement; Contract design

摘要

Drug shortages have been a major challenge facing the US pharmaceutical industry and government in recent years. Although the problem has drawn tremendous attention from the government and media, limited academic research has been devoted to this problem, and few solutions have been proposed based on rigorous research. This study addresses the drug shortage problem from a supply chain perspective, a key aspect missing in the literature, and proposes to mitigate shortages through drug purchase contracts. By modeling the drug supply chain, we capture the objectives of various supply chain parties, and investigate Pareto-improving contracts that mitigate drug shortages, improve drug manufacturer's and group purchasing organization (GPO)'s profits, and cut government spending and healthcare providers' costs. We explore structural properties of key supply chain decisions and the Pareto-improving contracts, and conduct scenario analysis with realistic industry data to evaluate shortage mitigation solutions. Our analysis shows that increasing drug prices only, a solution advocated by many, is not very effective in shortage mitigation. Price increases must be paired with strengthened failure-to-supply clauses (called the IPS approach) to achieve consistent and significant shortage reduction as well as Pareto improvement. Across all scenarios tested, a 30% price increase under IPS can lead to a minimum, average, and maximum shortage reduction of 25%, 53%, and 70%, respectively. Our analysis also shows the impacts of IPS on different parties in the supply chain and the impacts of various model parameters on shortage mitigation. The IPS approach rewards reliability of drug supply, which is in line with the FDA's strategic plan to reward quality, but is easier to achieve in this regulation-based industry. Interactions with the government and industry practitioners indicate that IPS also challenges the current mindset in pharmaceutical contracting.