Extended Producer Responsibility for Pharmaceuticals

Abstract

Problem definition: We investigate the effectiveness of different extended producer responsibility (EPR) implementation models for pharmaceuticals. In particular, we study two viable and prevalent models: (1) source reduction (SR), where a form of fee on sale is imposed on producers, and (2) end-of-pipe control (EC), where producers are made responsible for the collection of unused pharmaceuticals. Academic/practical relevance: The existing literature on EPR implementation models has focused primarily on nonconsumable products (e.g., electronics), whereas there is limited research on the effectiveness of different EPR implementation models for pharmaceuticals used in practice. We aim to fill this gap in this study. Methodology: We develop a game-theoretic model to characterize the equilibrium strategies of different stakeholders under both the SR and EC models and compare the resulting producer profit, environmental/social impact, and total welfare. Results: In contrast to the nonconsumable contexts where the SR model is shown to maximize total welfare, the EC model leads to a higher total welfare for certain categories of pharmaceuticals because of its effectiveness in eliminating overprescription. Moreover, we characterize conditions under which stakeholder (e.g., producer, environmental/social advocacy groups) preferences toward EPR implementation model choices are (mis-)aligned. We further show that limiting the social planner’s budget surplus under SR can eliminate the preference misalignment but leads to a loss of total welfare. Managerial implications: (1) Policymakers should be cautious about directly applying preferred EPR models from other product categories to the pharmaceutical setting. (2) The EC model maximizes the objectives of all stakeholders for a salient category of pharmaceuticals with high health benefits, high collection costs, and high environmental/social costs. (3) Policymakers should give thought to differentiating EPR implementation models across pharmaceutical categories. (4) It is important to carefully quantify the health impact of the pharmaceuticals and the operational cost parameters to inform policymaking.

The spillover effects of online tourism platforms on sustainable development

“…Hence, is essentially the same as the scenario with a classic for‐profit operation problem that only pursues profitability; is the scenario with a firm that seeks to maximise overall social welfare, which is the sum of the firm's profit and consumer surplus. The mixed objective formulation in problem (P) has been commonly adopted in the literature that considers multiple objectives, such as profitability and social/environmental responsibilities (see, e.g., Baron et al, 2021; Alev et al, 2022), and long‐and short‐term benefits (see, e.g., Calmon et al, 2022).…”

Fast Fashion, Charities, and the Circular Economy: Challenges for Operations Management

“…EPR exists for waste electrical and electronic equipment, batteries, packaging, and vehicles in developed countries such as EU member states (European Commission 2019). EPR has already been investigated by researchers in sectors such as durable products (Alev et al 2020, Huang et al 2019, electronic waste (Atasu and Subramanian 2012), and pharmaceuticals (Alev et al 2021). EPR on textile items, which is the focus of this research, is also under investigation in some countries (House of Commons 2019).…”

“…2019), electronic waste (Atasu and Subramanian 2012), and pharmaceuticals (Alev et al. 2021). EPR on textile items, which is the focus of this research, is also under investigation in some countries (House of Commons 2019).…”