Price Cap Models in Pharmaceutical Online-to-Offline Supply Chains

This paper builds Pharmaceutical Manufacturer Stackelberg, Pharmacy Stackelberg and Nash game models with and without price cap regulation. The optimal pricing, performance and social welfare are derived and compared in three different power structures to find out how price cap regulation and power structures affect the drug supply chain. More power over other supply chain members always allows the pharmaceutical manufacturer to obtain more profits. However, the pharmacy cannot always benefit from its dominant position in the market with changes in the wholesale price cap. Additionally, the balanced market structure may harm social welfare under certain conditions. Another interesting finding is that the restricted wholesale price cap deeply affects the financial performance and social welfare in the manufacturer-dominated and pharmacy-dominated markets. The research results can provide important management insights, which will be beneficial to the government to design smart price-limiting policies that take into account the power relationships of the supply chain.

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“…The government imposes a wholesale price cap on the pharmaceutical manufacturer, and we set the wholesale price cap as 𝑤̄. [22,36,37]:…”

Section: Model Descriptionsmentioning

confidence: 99%

Pricing Problems in the Pharmaceutical Supply Chain with Mixed Channel: A Power Perspective

et al. 2022

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“…Sarkar et al [20] investigated joint inventory and pricing policy for an online-to-offline closed-loop supply chain. Zheng et al [21] investigated how the price cap regulations affect the firms' pricing in an online-to-offline supply chain. Li et al [8] focused on pricing and new product design strategies in O2O supply chain considering the impacts of online consumer reviews.…”

Section: Operations Management In Online-to-offline Supply Chainmentioning

confidence: 99%

Pricing and Channel Coordination in Online-to-Offline Supply Chain Considering Corporate Environmental Responsibility and Lateral Inventory Transshipment

et al. 2021

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In this study, we investigate pricing policy and coordination conditions in an online-to-offline supply chain considering corporate environmental responsibility and lateral inventory transshipment. First, we provide demand functions to capture effects of price, corporate environmental responsibility level, and preference degree of the consumer to online channel. Then, we build profit functions and develop three joint pricing and corporate environmental responsibility-level decision models for centralized decision (Scenario CD), retailer Stackelberg game (Scenario RS), and manufacturer Stackelberg game (Scenario MS). Furthermore, we determine the optimal decision policies by solving developed models, and conduct sensitivity analysis of significant factors. Finally, we use a revenue-sharing contract to realize supply chain coordination and find coordination conditions for Scenario RS and MS, and further show the impacts of revenue-sharing rate and investment cost sensitivity on the conditions using numerical studies. We find that optimal joint decision policies can be affected by significant factors to a varying degree. In certain conditions, the revenue-sharing contract can coordinate online-to-offline supply chains considering corporate environmental responsibility and lateral inventory transshipment. Our study proposes a new decision problem, constructs new joint decision models, determines new optimal joint policies, conducts new coordination analysis, and thus contributes to the research on supply chain operations considering corporate environmental responsibility and lateral inventory transshipment.

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Pricing of medical services and channel selection strategies for pharmaceutical supply chain under the zero‐markup drug policy

Li,

Kong

et al. 2024

Manage Decis Econ

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This paper studies the channel strategies of drug suppliers in the drug supply chain under the zero‐plus drug pricing policy. With the popularity of e‐commerce and online shopping, supply chain firms have begun considering expanding their business to online channels. In this paper, we construct a game model to explore the impact of the pharmaceutical supply chain's development of online channels on supply chain members. We conclude that under the zero profits policy, increasing the public hospital's public welfare level will increase the price of drugs, decrease the price of medical services, and reduce the overall cost of patients. In addition, the greater the sensitivity of medical services, the lower the likelihood that a drug supplier will open an online pharmacy, and the lower the level of public good, the greater the likelihood that a drug supplier will open an online pharmacy. In addition, under certain conditions, patients can receive a higher level of medical service and spend less on healthcare under a dual‐channel strategy. Finally, under a dual‐channel strategy, an appropriate profit‐sharing mechanism can eliminate instability in the pharmaceutical supply chain.

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Price Cap Models in Pharmaceutical Online-to-Offline Supply Chains

Cited by 3 publications

References 36 publications

Pricing Problems in the Pharmaceutical Supply Chain with Mixed Channel: A Power Perspective

Pricing Problems in the Pharmaceutical Supply Chain with Mixed Channel: A Power Perspective

Pricing and Channel Coordination in Online-to-Offline Supply Chain Considering Corporate Environmental Responsibility and Lateral Inventory Transshipment

Pricing of medical services and channel selection strategies for pharmaceutical supply chain under the zero‐markup drug policy

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