The trade-off between affordability and availability

By Patricia Andrade and Ping Wang

Editor’s Note: The SCM capstone Impact of Downstream Supply Chain Dynamics on Patient Access to Oncology Medicines was authored by Patricia Andrade and Ping Wang and supervised by Dr. Jarrod Goentzel ([email protected]). For more information on the research, please contact the project supervisor.

Access to life-saving oncology medicines is a serious challenge in low- and middle-income countries (LMICs). Despite healthcare being recognized as a fundamental human right by the United Nations and the World Health Organization, many people still lack timely, acceptable, and affordable healthcare services. These barriers not only highlight economic disparities but also reflect the unequal distribution of healthcare resources across regions and countries.

Cancer treatment, especially for diseases such as breast cancer, exemplifies this problem. In high-income countries, the mortality rate for breast cancer stands at around 10%. However, in LMICs such as India and South Africa, the rates are as high as 40% and 60%, respectively. This stark contrast highlights a major factor affecting patients’ survival: the lack of access to necessary treatments. Recognizing this urgent need, a multinational pharmaceutical company has made improving access to healthcare a core part of its business strategy.

The pharmaceutical downstream supply chain is opaque

In line with its mission, the company wanted to know what was preventing LMICs from improving the accessibility of oncology medicines. How can the pharmaceutical downstream supply chain contribute to improvement? Among the factors impacting accessibility, we found that the affordability and availability of cancer medicines are heavily influenced by this complex supply chain network.

The pharmaceutical supply chain has multiple levels and numerous players. From the manufacturer to the patient, oncology medicines pass through a series of ownership transfers involving stakeholders like warehouses, wholesalers, distributors, hospitals, clinics, and pharmacies. This increases the risk of stock-outs, which impacts availability. Additionally, each player adds a markup to cover sourcing, storage, and distribution costs, inflating the price at each stage and reducing affordability.

Understanding the downstream supply chain is a crucial first step for any deeper analysis. This includes examining the movement of goods, financial transactions, information sharing, and the value added by each participant. However, transparency, or visibility of the downstream supply chain is a major challenge for the pharmaceutical industry. We are trying to address several critical questions:

• How can we best describe the sponsoring company’s downstream supply chain in an LMIC and understand the role of key stakeholders in enabling patients’ access to products?
• How can analytical modeling help stakeholders understand the structure and dynamics of the supply chain to enhance patients’ access to products?
• How can stakeholders engage in shaping the supply chain system to improve patients’ access to products?

By following a structured system dynamics approach, we mapped the complex system in a causal loop diagram (CLD) to understand the interactions qualitatively.

Affordability and availability must be balanced

Our study’s insights from the system dynamics CLD reveal complex interactions in the pharmaceutical supply chain. The CLD shows how market scale impacts medicine costs, which suggests that economies of scale enhance affordability. It also highlights the role of insurance support, indicating that better coverage reduces patients’ out-of-pocket expenses, resulting in the easing of access to treatments. The effects of market competition are also evident, with higher prices attracting competitors. This competition could introduce cheaper medicines, although intellectual property rights and regulatory delays often slow this process. Additionally, inventory management practices influenced by high treatment prices can lead to increased costs and potential stock-outs, which could reduce medicines’ availability. These dynamics provide multiple intervention points to improve access to oncology medicines.

The trade-off between affordability and availability in pharmaceuticals arises because decisions affecting medicines’ prices also impact their market availability. Higher prices can increase supply by making distribution more profitable but may reduce affordability for patients, especially in low-income areas.

Data transparency and collaboration are key to addressing the trade-off between affordability and availability. By openly sharing information and working together, stakeholders can develop strategies that balance economic incentives with patients’ needs, ultimately improving access to life-saving medicines.

Every year, approximately 80 students in the MIT Center for Transportation & Logistics’s (MIT CTL) Master of Supply Chain Management (SCM) program complete approximately 45 one-year capstone projects.

These students are early-career business professionals from multiple countries, with two to 10 years of experience in the industry. Most of the research projects are chosen, sponsored by, and carried out in collaboration with multinational corporations. Joint teams that include MIT SCM students and MIT CTL faculty work on real-world problems. In this series, they summarize a selection of the latest SCM research.

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