One finding: competition among many generic drug producers does not ensure distributed risk and greater reliability, but rather makes supply chains more vulnerable.

Drug shortages: Not a new phenomenon

Pharmacies, doctors and those affected have been sounding the alarm for many months: various children's medicines such as fever juices are in short supply and the supply situation is tense. While health policymakers want to introduce laws to remedy the situation, the KLU has been looking into the background to the drug shortage since the beginning of 2021 and has now published its research results.

Prof. Dr. Kai Hoberg, Professor of Supply Chain and Operations Strategy at Kühne Logistics University (KLU), and his co-authors Prof. Dr. David Francas (Worms University) and Stephan Mohr (Frankfurt School of Finance and Management) prepared the study “On the Drivers of Drug Shortages: Empirical Evidence from Germany”. The scientists wanted to use this to investigate the bottleneck situations for medicines in Germany - the fourth largest pharmaceutical market after the USA, China and Japan.

To do this, they used data from the Federal Institute for Drugs and Medical Devices ( BfArM ), which documents corresponding bottlenecks. Data from the period from 2017 to 2019 served as the basis - deliberately excluding the pandemic years as a special influence. With this and other sources such as sales and data on the patent situation and reporting obligations in Germany, they created a statistical model in order to be able to identify accumulation points.

Competition, dosage form and reporting deadlines as critical indicators

Patented products that are manufactured by only one manufacturer are therefore less likely to be affected by shortages than drugs that have lost patent protection and are manufactured as generics by many suppliers. “As soon as there is a competitive situation, individual companies are forced to become more efficient. “Even small disruptions lead to bottlenecks more quickly because there is less capacity and inventory in reserve,” says Hoberg, describing this result.

“As soon as there is a competitive situation, individual companies are forced to become more efficient. Even small disruptions lead to bottlenecks more quickly because there is less capacity and inventory in reserve.”

Prof. Dr. Kai Hoberg, Kühne Logistics University (KLU)

Another finding of the authors: The susceptibility to delivery problems correlates with the dosage form of the respective medication, as individual application methods are more complex and therefore more vulnerable. Specifically, the production process for injected medications proved to be the most complex. Accordingly, the risk of contamination or other disruptions that can lead to bottlenecks is higher. Medicines whose demand is variable are also vulnerable.

Furthermore, it was analyzed when pharmaceutical companies, which are obliged to report BfArM Surprisingly, bottlenecks were often reported six to eight weeks after the market had already reached the bottleneck. “Everyone involved was surprised by this information,” reports Hoberg, who believes a stricter reporting deadline policy is necessary.

Early warning systems and more transparency as solutions

In this context, the question is often discussed as to whether higher prices could avoid shortages of medicines - a question that Hoberg clearly denies: "This strategy only means a redistribution of the problem: it increases the companies' priorities to the German market, but then The medicine is missing in another European country.” Rather, Hoberg sees a promising approach in a more differentiated incentive, which is linked to resilience measures as a condition, which in turn guarantee production in the long term and reduce risks.

The scientists see the next necessary, very practical steps as establishing an early warning system and increasing transparency along the entire supply chain, which so far only lies with the manufacturers. “Transparency alone does not solve the problem of bottlenecks, but it is necessary in order to develop adequate resilience measures for companies on this basis,” sums up Hoberg.

Original publication:
Francas, D., Mohr, S. and Hoberg, K. (2023), “On the drivers of drug shortages: empirical evidence from Germany”, International Journal of Operations & Production Management, Vol. ahead-of-print No .  ahead of print.

Source:

German health portal
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