【Time】15:00-16:00, June 30, 2015 (Tuesday)  

【Venue】 North 510, Shunde Bldg. 

【Title】  Understanding Pharmaceutical Supply Chains through Supply Chain Contracts 

【Speaker】Dr. Hui Zhao  

【Host】Dr. Yang Zhang  

【Abstract】Although pharmaceutical (pharma) industry is vital to the U.S. economy and its supply chain efficiencies directly affect the quality and cost of health care, pharma supply chains have been largely under-researched. In this talk, I plan to discuss the essence of two of my research projects on pharmaceutical supply chains to give the audience a good understanding of the US pharma industry. The first one is about Fee-for-service (FFS) contracts for brand drugs and the second one about mitigating the US drug shortages currently facing the government and the industry. 

Fee-for-service (FFS) contracts, first introduced in 2004, dramatically changed the way the pharmaceutical distribution supply chains are designed, managed, and operated. Before this, drug distributors reply on inventory speculation as a major revenue source. In spite of its widespread popularity, the industry has never reached consensus on the effectiveness of FFS contracts and there has always existed contentions in contract parameter negotiation. Through supply chain modeling, we show the impact of FFS on the supply chain and each player of the supply chain, capture the range of the Pareto-improving contract parameters, and propose simple yet effective heuristic for computing them. We also demonstrate that supply chain transparency facilitated by the FFS contracts can significantly reduce the manufacturer’s supply–demand mismatch costs. Our results have been used for real negotiation of FFS contracts to improve the efficiency of pharmaceutical distribution supply chains, thus have the potential of reducing the healthcare costs that are such a big burden on the U.S. economy.

【Bio】 Dr. Hui Zhao is an Associate Professor of Supply Chain Management at the Smeal College of Business at the Penn State University. Her research focuses on collaboration in decentralized supply chains, information sharing, and supply chain contracting. Most of her recent work has been in the area of pharmaceutical and healthcare supply chains. As one of the early researchers into the pharmaceutical supply chain area, Zhao has conducted extensive research including Fee-for-service contracts and information sharing in pharmaceutical distribution, capacity planning and outsourcing for pharmaceutical manufacturing, drug shortage, drug innovation policy/regulations, and specialty drugs investment and distribution strategies. She has also worked with top pharmaceutical companies and pharmaceutical analytics company.

Prior to joining the faculty of Smeal, Zhao had been on faculty with Krannert School of Management at Purdue University for a number of years. She has worked with companies like Caterpillar, Proctor and Gamble, AmerisourceBurgen, IntegriChain, and the Technical Assistance Program of Purdue University. She is a member of INFORMS, MSOM, POMS, and IIE.

 All interested are welcome!