Characterization and optimization of the pharmaceutical supply chain under uncertainty and regulatory conditions

Abstract

Supply chain management costs account for 25% to 30% of total costs in hospital expenses [Gebicki 2014]. Additionally, the costs associated with moving and handling medicines can account for 35% to 40% of the total logistics costs [McKone-Sweet 2005]. The pharmaceutical industry is one of the most challenging industries in the world, and it is estimated that medicines account for approximately 10% to 30% (sometimes as high as 60%) of global health spending [Xu 2018]. Given the inherent di erences between medicines and traditional industrial products, compared to the analysis of traditional supply chains, the analysis of pharmaceutical supply chains requires special considerations. For example, some medicines and surgical supplies must be available for use at all times [James Little 2008], and medicines have strict regulatory requirements related to the length of manufacturing time, distribution, product shelf life, and the reimbursement values that can be obtained by the government or the insurer [Almarsdóttir 2005]. In some countries, health expenses can range from 7% to 10% of the total gross domestic product, and the pharmaceutical costs take up a large portion of this total, reaching approximately 10% [Priyan 2014]. According to World Health Organization (WHO) the supply of medicines is a distribution and dispensation system to the hospitalized patient. In this system medicines are prepared in pharmaceutical services in order to guarantee the quantities correspond to the required dose in a single administration and it is labeled with the name of the patient for being administrated without any subsequent preparation. Hospitals and clinics face several problems, such as the high and variable prices of medicines, physical and monetary constraints and the medicines' expiration due to their perishability.