342809 Optimal Intervention Strategies for Reducing Drug Shortages in the Presence and Absence of Flexible-By-Design Emergency Therapeutic Production Facilities
Optimal intervention strategies for reducing drug shortages in the presence and absence of flexible-by-design emergency therapeutic production facilities
Yankai Cao, Chen Wang, Michael Pishko and Carl D. Laird[a]
Because of high risk associated with uncertain demand, key pharmaceutical manufacturers of some drugs have left the market, resulting in recurring drug shortages. For example, in 2000, a manufacturer of Td vaccine discontinued production and caused a shortage of the vaccine that disrupted immunization programs until 2002. Drug shortages like this can have serious societal and economic impact. In an effort to reduce drug shortages, various strategies have been proposed to reduce the risk to pharmaceutical manufacturers and ensure production levels remain. Risks can be reduced by government intervention, such as guaranteed contract order levels, or inventory buy-back. Furthermore, existence of flexible-by-design emergency production facilities reduces the probability of a drug shortage while allowing manufacturers to mitigate risk by planning for lower production levels.
In this paper, we analyze this system and determine optimal government intervention strategies to reduce the likelihood of drug shortages in the presence and absence of emergency production facilities. The manufacturer, the market, emergency supply facilities, and government authorities are considered in the overall system model. The object function of manufacturer's decision-making model is to maximize the expected profits with constraints on profit ratio and conditional-value-at-risk of the loss. The resulting model is a linear programing problem and convex formulation can be derived from it under reasonable assumptions concerning model parameters.
For a given set of parameters, simulation results show that government intervention can reduce the financial risk to the manufacturer and maintain a certain amount of steady production. Based on the overall system model, optimal government policies can be deduced to ensure the continued production of a particular drug and increase the likelihood of meeting the uncertain product demand. Furthermore, the existence of emergency production facilities can increase the flexibility of the system and reduce the government order costs for a particular guaranteed demand.
[a] Artie McFerrin Department of Chemical Engineering, Texas A&M University, Jack E. Brown Engineering Bldg. Room 200, College Station, TX, 77843-3122
See more of this Group/Topical: Computing and Systems Technology Division