A Multi-Agent Simulation of the Pharmaceutical Supply Chain

An MAS of the PSC was created based on a previous case study, COMPUSTAT, and FDA data. The model is initialized based on 1982 financial data with 30 manufacturers, 60 suppliers, and 60 distributors. Three types of drugs--blockbuster, average, and low-- with a seven year log-normal product life cycle are released by manufacturers based on a random function normed to FDA and Congressional Budget Office data. Each quarter distributors bid for future market share and suppliers bid based on lowest acceptable margin. Intra-class mergers and acquisitions are allowed based on assets and perceived profitability. The results follow empirically derived supply chain structure seen in our case study and previous academic studies – consolidation, decreased productivity, and decreased profitability. Implications for PSC strategy and government policy are discussed.