From Stuffing to Streamlining: Pharmaceutical Distribution

17 Pages Posted: 30 Apr 2019 Last revised: 10 Nov 2021

See all articles by Douglas J. Thomas

Douglas J. Thomas

University of Virginia - Darden School of Business

Hui Zhao

University of Virginia - Darden School of Business

Stephen E. Maiden

University of Virginia - Darden School of Business

Gerry Yemen

University of Virginia - Darden School of Business

Abstract

This case uses the streamlining of pharmaceutical distribution to explore supply-chain coordination. For years, supply-chain inventory information had been opaque. Then in the early 2000s, pharmaceutical manufacturers and distributors were forced to shift from investment buying to inventory service agreements. Information sharing among channel partners regarding customer demand and inventories was believed to lead to better decision-making, improved inventory turns, and ultimately, better profit margins. The case material provides data for students to assess the impact of shifting away from investment buying.

Excerpt

UVA-F-1859

Apr. 22, 2019

From Stuffing to Streamlining: Pharmaceutical Distribution

One of my greatest priorities is to reduce the price of prescription drugs. In many other countries, these drugs cost far less than what we pay in the United States. That is why I have directed my administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down.

—President Donald Trump

During the summer of 2018, Melissa Monaco, the COO of a major North American pharmaceutical company, was preparing for a board meeting about whether the company should move forward with an annual price hike for brand-name drugs. In light of the Trump administration's pressure to keep prices the same and the president's Twitter flogging of the runaway manufacturer prices in January 2017, which sent stock prices downward, many in the industry were concerned about raising prices in 2018.

. . .

Keywords: supply-chain management, excess inventory, variability, supply-chain strategy, incentive alignment, pharmaceutical industry

Suggested Citation

Thomas, Douglas J. and Zhao, Hui and Maiden, Stephen E. and Yemen, Gerry, From Stuffing to Streamlining: Pharmaceutical Distribution. Darden Case No. UVA-F-1859, Available at SSRN: https://ssrn.com/abstract=3378932 or http://dx.doi.org/10.2139/ssrn.3378932

Douglas J. Thomas (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Hui Zhao

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Stephen E. Maiden

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Gerry Yemen

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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