Continuity and change in the drug supply chain: actors, actions, and aversions

The pharmaceutical or drug supply chain is the means through which prescription medicines are manufactured, stocked, and delivered to consumers. How the complexity and fragmentation of this supply chain shape or reshape the decisions and courses of action as well as risk aversions of its actors (stakeholders) is the question we address in reviewing recent literature presented at the 2021 AEA-ASSA economics convention. In doing so, we identify key aspects or dimensions of the supply chain that remain unexplored or under-explored in the empirical literature.

All original research relevant to the pharmaceutical supply chain were selected from the AEA-ASSA convention panel sessions. Empirical evidence was thematically identified, and the theoretical and practical implications of findings on firm and stakeholder decision-making were analyzed.

Stakeholder choices and risks in the action steps or stages of the supply chain are conditioned or framed by variables that are less prominent and seldom documented in the empirical literature. These include firm ownership and marketing, the provider's IT system, pricing and discounts negotiated by pharmacy benefit managers (PBMs), health insurance coverage, employer plan sponsorship, and hassle costs of drug prescribing and monitoring. On the other hand, prominent and well documented policy initiatives, like international reference pricing and renationalization or "decoupling" from global value chains, can have unintended effects on supply chain actors and end-users, including reverse redistribution. The continuing and changing multi-dimensional character of the supply chain adds to its complexity and fragmentation.

Organizational, operational, and value-adding measures to overhaul the drug supply chain and make it perform better have been proposed in the surveyed literature and elsewhere. Yet, aspects of the supply chain that bear a direct impact on firm short-term financial success typically assume precedence in evaluations of performance and effectiveness. Whether and to what extent the drug supply chain will change to cope and adapt to the major challenges and upheavals it currently faces are lingering questions.