Artificial Intelligence is instrumental in analyzing inventory management trends. It helps predict drug shortages before they happen.
In economics, a shortage happens when the demand for a product exceeds the available supply.
Drug shortages are becoming increasingly problematic in most developed countries.
In recent years, the quarterly average of drugs on shortage in the US has averaged above 170. As the graphic below shows, drug shortages remain an unsolved problem.
Although most pharmaceutical supply chain discussions have focused on supply reliability, demand disruptions are equally problematic.
The emergence of the COVID-19 pandemic in early 2020 has severely strained the US drug supply chain. Demand-wise, the need for COVID-19 therapies worldwide has increased dramatically. Shortages have limited the critical drugs available for treating COVID-19 patients.
Pharmaceutical companies and distributors have experienced increased production and supply chain costs (40%), drug shortages (20%), and records of poor service received by patients (13%).
The effects on patients and health systems
Drug shortages are also ethical and political issues, highlighting the moral imperative to respond to drug shortages as vigorously as possible.
Drug shortages impact individual patients. They also threaten health care quality and public health by creating barriers to optimal care.
Whenever no equally effective alternative therapeutic agent is available, individual patients can see their care compromised. Sometimes patients can experience unexpected side effects with alternative drugs. Furthermore, medication errors are more likely to occur when doctors and patients have to use medications they are less familiar with.
In addition to harming individual patients, drug shortages are a threat to public health.
Whenever a competitor faces stock-out situations, market demand transfers to alternative products on the shelf of healthcare manufacturers. Companies can re-position inventories to provide for this demand, and they can also increase production for the short term.
The problem with demand forecast
According to the University of Utah Drug Information Service, 12% of the shortages are attributed to demand-supply reasons. In 57% of cases, the reason for the shortage remains unknown.
National Drug Shortages: Reasons for shortages
However, our experience in the field of demand forecasts for the Pharma industry indicates that almost 20% of all shortages could be attributed to suboptimal demand forecasting.
Less accurate predictions
Companies’ ability to forecast demand declined significantly in 2020, as shown below, with the majority of companies saying that they have “lost the ability to forecast many products” given the unpredictability of both supply and demand. Three quarters say that they are “in a reactive mode and constantly expediting to meet demand.”
AI adoption for demand forecast and shortages
Pharmaceutical companies are gradually adopting AI technologies to improve demand forecasting. AI helps to collect and analyze downstream demand data from various sources in order to aggregate realistic and reasonable data and in turn, improve demand forecasts for planning the product supply network.
At Konplik, we have developed smart algorithms that combine experts’ knowledge with machine learning to obtain significantly better predictions in demand forecasting. Improving demand forecast helps reduce shortages. We will be talking about this soon.
- CIDRAP (Center for Infectious Disease Research and Policy): “Ensuring a resilient US prescription drug supply.
2. ASHP. Current Drug Shortages: Drug Shortages and Management [Website]
3. FDA. FDA Drug Shortages [Website]