Essays on Biopharmaceutical Supply Chains

Download or read book Essays on Biopharmaceutical Supply Chains written by Marouen Ben Jebara and published by . This book was released on 2015 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: An emerging trend in the pharmaceutical industry is the high level of personalization of medicines that firms offer today. Such medications are expected to account for 50% of the amount spent on drugs by 2018. In conjunction with the growth of this new class of medications, firms are also continuing to serve markets for traditional (or small molecule) medications, which are often standardized or mass customized for consumer markets. Managing the diverse portfolio of medications can require different supply chain structures, specifically with respect to distribution channels. For example, the prostate cancer vaccine involves a reverse flow of raw material in the form of patient blood cells from the hospital/physician clinic to the pharmaceutical firm processing centers -- a characteristic that is often not seen with traditional medications that are dispensed at the pharmacy or hospital. This has led to a new trend in the distribution channel practices for such medication, i.e. supply chain disintermediation, where the firm engages in a direct sales model, which means that the medication is shipped directly to the patient or the administrating facility (e.g. the physician's clinic/hospital) instead of being distributed through the traditional channel of wholesalers. In summary, firms today have a choice of structuring their supply chains to have a traditional intermediated distribution channel, a direct disintermediated distribution channel, or combination thereof. However, little research exists that can guide managerial decisions with respect to the appropriate supply chain structure given the portfolio of the firm's medication offerings. The firm's choices for product portfolio and supply chain structure for distribution channels raise a critical question of `what is the most appropriate supply chain disintermediation strategy given the firm's product portfolio?' Therefore, in this dissertation, the research objective is to address this central question. In addressing this research objective, the dissertation is composed of four distinct essays. The first essay is aimed at answering the above question conceptually. It maps the evolution of the pharmaceutical product paradigm along a continuum of standardized/mass customized/mass personalized products as well as discusses the evolution of the supply chain structure in terms of disintermediation for pharmaceutical firms. Drawing on literature in operations management in the areas of mass customization and supply chain disintermediation, as well as industry practices, the study presents a framework which identifies the appropriate supply chain structure (intermediated vs. disintermediated) given the level of personalization of pharmaceutical products. Additionally, a critical characteristic of personalized (biologics) medicine is its time sensitive nature and consequent market mediation costs that make logistical design a critical issue. To understand how management science tools can guide managerial decision making, the second essay investigates this location decision problem for highly personalized products under a total disintermediation strategy assumption. Results based on the analysis of a case study are presented. In addition to the time sensitivity and consequent market mediation costs that result from the short shelf life of personalized (biologics) products, firms also face varying levels of demand uncertainty for such products, making the disintermediation strategy decisions crucial. Therefore, the third essay aims to understand the behavior of the total market mediation costs, given the level of demand variability and the firm's supply chain disintermediation strategy. An evaluative study based on a scenario approach is presented. The results from a scenario approach analysis and a large scale numerical study provide insights about the appropriate supply chain disintermediation strategy given the pharmaceutical firm's product characteristics. The results shows the dominance of demand variability in shaping the total market mediation cost. High demand variability favors intermediated distribution channels, whereas disintermediation strategy is preferred when the shortage cost ratio is high. The contrast analysis provides evidence of the area of distribution strategy indifference. Finally, recognizing that a pharmaceutical firm's choice regarding its product portfolio (standardized/mass customized/mass personalized products) and supply chain disintermediation strategy (intermediated/hybrid/disintermediated) has implications for its financial performance, the fourth essay aims to empirically assess the financial performance consequences of the fit between the firm's product portfolio and its supply chain disintermediation strategy. This essay empirically examines the relationship between disintermediation, product portfolio strategy, and financial performance. The results show that supply chain disintermediation positively impacts the firms' financial performance. Additionally, the alignment between product portfolio and supply chain disintermediation has positive effects on return on assets and gross margin. This dissertation contributes to operations management literature in terms of conceptually, analytically, and empirically assessing how a firm's choices for product personalization and supply chain disintermediation individually and collectively influence its performance. It aims to provide actionable guidelines that can help firms match their supply chain disintermediation strategy with their product portfolio characteristics.