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.
![National Drug Shortages- Active Shortages by Quarter How do algorithms model limited rationality in decision making We often make decisions that are anything but rational, and we are imbued with beliefs that have little to do with reason and data. The game theory presents a set of axioms that players have to "satisfy" by definition to be considered "rational." This generates "rigorous" and "precise" conclusions, but they rarely correspond to what happens in the real world. This line of reasoning helps us model algorithms that anticipate other players' biddings. But any model that succeeds in real-life tendering should be informed by empirical data based on real observations, which, in real life tendering, contradict the axioms of game theory. As a result, though aware of game theory components, successful models should be ready to react to behaviors that play against mutual benefit. In our practice, AI algorithms respond to the key question: What mental steps do people take when making these decisions? Modeling these mental steps with algorithms is a very rewarding task of our application of game theory to healthcare tendering. Our algorithms profile competitors’ behaviors by systematically analyzing their decisions in the past so that they can anticipate their bidding-price for the next opportunity. The key to obtaining a profit using previously predicted prices is to constantly check and review models with respect to the results obtained. Our algorithms will be then optimized to obtain the best results from the point of view of margins, revenue, and money left on the table (the difference between the submitted bid and the lowest-priced competing bids).](https://konplik.health/wp-content/uploads/2021/03/National-Drug-Shortages-Active-Shortages-by-Quarter.png)
National Drug Shortages: Active Shortages by Quarter.
https://www.ashp.org/Drug-Shortages/Shortage-Resources/Drug-Shortages-Statistics?loginreturnUrl=SSOCheckOnly
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.
![Reasons for shortages Graph showing the reasons for Shortages](https://konplik.health/wp-content/uploads/2021/03/Reasons-for-shortages.png)
National Drug Shortages: Reasons for shortages
https://www.ashp.org/Drug-Shortages/Shortage-Resources/Drug-Shortages-Statistics?loginreturnUrl=SSOCheckOnly
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.”
![Predicting shortages Predicting shortages](https://konplik.health/wp-content/uploads/2021/03/Predicting-shortages.png)
https://go.tracelink.com/Discover-How-to-Solve-the-COVID-19-Supply-Chain-Struggle.html
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.
REFERENCES:
- CIDRAP (Center for Infectious Disease Research and Policy): “Ensuring a resilient US prescription drug supply.
https://www.cidrap.umn.edu/sites/default/files/public/downloads/cidrap-covid19-viewpoint-part6.pdf
Lipworth W, Kerridge I. Why drug shortages are an ethical issue. Australas Med J. 2013;6:556–559. [PMC free article] [PubMed] [Google Scholar]
2. ASHP. Current Drug Shortages: Drug Shortages and Management [Website]
3. FDA. FDA Drug Shortages [Website]
4. Menees SB, Vargo JJ, Bonta C, Mayo L, Jacobson BC. Drug shortages in America: what about the gastroenterologist? Gastrointest Endosc. 2013;77(4):641–5. [PubMed] [Google Scholar]
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