Assessment of supply chain risk key to improving medicine access

A four-year research project by INSEAD and five other institutions sheds light on how understanding medical criticality, supply chain risk and their interactions could help us better address drug shortages.

FONTAINEBLEAU, France, SINGAPORE and SAN FRANCISCO, July 18, 2024 /PRNewswire/ -- Drug shortages are becoming an increasing problem in Europe and other parts of the world. When pharmacists in France walked out of their counters en masse and marched into the streets on 30 May, it was not just over their compensation and prospects, but a concern with wider implications for the public – the unreliable supply of drugs. In the Netherlands, the estimated annual total cost of drug shortages was about EUR220 million in 2023. In England, pharmacists have warned that drug shortages are at such critical levels that patients are at risk of immediate harm and even death.

While Covid-19 shone the spotlight on drug shortages, it's a structural issue that exists even in the absence of demand and supply shocks. Yet most shortages are managed reactively, without accounting for the importance of supply chain risk. There needs to be a simple way to think about the differences between drugs and how that would lead to different interventions in addressing shortages.

As a path to resolving these issues, Luk Van Wassenhove, Emeritus Professor of Technology and Operations Management and Iman Parsa, postdoctoral researcher at the Humanitarian Research Group at INSEAD, together with researchers* from Tilburg University, BI Norwegian Business School, Norwegian Institute of Public Health, Lancaster University and the Rotterdam School of Management embarked on a four-year project to study drug shortages in six European countries.

Under the "Measures for Improved Availability of Medicines and Vaccines" (MIA#): funded by the Research Council of Norway, an analysis of Belgium, France, Norway, Sweden, The Netherlands and the UK led to the development of the Risk/Criticality Matrix (RCM).

It represents a pragmatic framework for classifying drugs and guiding decision-making through a two-dimensional matrix: Supply chain risk (e.g. exported vs. locally produced drug) vs. medical criticality (e.g. blood thinners vs. erectile dysfunction drug).

Refer to the Figure: Risk/Criticality Classification Matrix developed under the Measures for Improved Availability of Medicines and Vaccines (MIA) project.  

Drug supply chains involve many stakeholders with potentially vastly different perspectives, incentives and objectives. The simple, visual matrix is a powerful tool to align diverse stakeholders – particularly policy makers and international organisations – to consider how medical criticality and supply chain risk interact dynamically.

Taking into consideration the context, regulations and costs, the tool can help them to determine the most appropriate intervention that is affordable, and which will not jeopardise patient care.

The Risk/Criticality Classification Matrix is a first step in a continuous improvement loop that ensures interventions stay effective and aligned as conditions change, such as when a pandemic strikes or when a brand-name drug becomes generic.

Ultimately, a systems approach is needed to tackle the chronic drug shortage issue, exacerbated by the complexity and sometimes opaqueness of drug supply chains. An evidence-based approach that aligns stakeholders and brings clarity might eventually heal medical supply chains of their structural woes.

*Collaborators of the projects are: Thomas Breugem, Tilburg University; Iman Parsa and Luk Van Wassenhove, INSEAD; Kim van Oorschot and Marianne Jahre, BI Norwegian Business School; Christine Oline Årdal, Norwegian Institute of Public Health; Nonhlanhla Dube and Kostas Selviaridis, Lancaster University; and Harwin de Vries and Stef Lemmens, the Rotterdam School of Management.

^#More information on the MIA project: https://www.bi.edu/research/centres-groups-and-other-initiatives/mia/the-mia-project/

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SOURCE INSEAD