Select issues in designing license contracts of strategic alliances in the pharmaceutical supply chain.

Pharmaceutical products play an important role in the human life and improvement of patients. There are many types of medicine for which the supply chain networks have been spread around the world. This extensive application and communication in the logistic of pharmaceutical products entail efficient management and coordination of involved partners. Also, many organizations including private and public organizations as well as financial and insurance companies implement the functions of pharmaceutical services in health systems. Effective management of the partners’ relationships in a coordinated and integrated manner requires cooperative strategies. Furthermore, the evaluation of these strategies requires consideration of different aspects of cooperation, the participatory capabilities of partners, and necessary incentives facilitating their participation. In this thesis, the establishment of a strategic alliance, between producers of the new and patented pharmaceutical products by the cooperation of main producers or licensor of medicines by local manufacturers, distributors, pharmacies as well as local government are studied. In this regard, pricing of the patented medicines and valuing the license contract are taken into account by regarding different settings and assumptions surrounded the pharmaceutical supply chain. The problems under consideration can be specifically categorized as profit distribution problems in strategic alliances, especially when the alliance is formed with the participation of international partners. As described later, pricing decisions and mechanisms play a crucial role in identifying cooperative profits. Hence, after providing a deep analysis of the pricing mechanisms of the different pharmaceutical products, the cooperative game theory is utilized to address the profit split decisions of the partners under consideration. In doing so, it is attempted to distribute the profits fairly to partners and provide incentives for the participation of them to so-called coordinate them.

The thesis is organized into four sections. The first section discusses a general license contract in the context of an international joint venture where the pricing mechanism of pharmaceutical products is similar to many other products and no special control by the regulatory bodies limits it. In this context, the medicinal raw materials and some medicinal compounds that are supplied in bulk could be mentioned. The results of this section provide managerial insights that could be extended to other special structures of pharmaceutical products and facilitate the extraction of solutions in more complex problems.

The complex model of an alliance firm considering the financing issue, the demand and market uncertainty, the competitive pricing mechanism in an oligopoly market, the tax and depreciation issues as well as the possibility of the alliance liquidation is studied in the second section. Also, based on the results of the general model of the license contract in the first section, an innovative algorithm based on dynamic programming is proposed to extract the solution of this multi-period stochastic model.

In the third section, the patented medicines are investigated through the establishment of a local manufacturer under a license contract from the main manufacturer. For the patented medicines, also known as branded medicines, the reference-based pricing mechanism is explored. The mechanism is nowadays the most applicable mechanism in many countries as well as the country under study. However, to account for the capabilities of the partners in the cooperative alliance consisting of the main local and main manufacturers as well as the government who affords most of the pharmaceutical-related cost of the patients through franchises themes, the cooperative game theory approach is used to modify the price of medicines produced now domestically. We regard this approach as an innovative pharmaceutical pricing agreement that plays the role of coordinator of partners by ensuring proper distribution of cooperative surplus to them.

The final section focuses on the deterioration of pharmaceutical products and the effects that a cooperative alliance similar to the one introduced in the third section has on the reduction of this phenomenon. Indeed, we introduce the domestic production of patented medicines as an efficient strategy that could significantly reduce the deterioration of medicines as one of the most worrying challenges of the pharmaceutical supply chain.

For all models discussed in the sections of the thesis, first, the surrounded assumptions of the problem are clarified deeply, and after developing the mathematical models of the problems, the ways for obtaining optimal solutions are explained in detail. Also, the results of the proposed models are compared with the evidence in real-world problems for validation purposes. The thesis ends with managerial insights, conclusions, and future works opportunities in the final section.