Closed-loop supply chain inventory model in the pharmaceutical industry toward a circular economy

The closed-loop supply chain inventory model is essential in the pharmaceutical industry because it promotes environmental, social, and economic sustainability. Many unused drugs are discarded, damaging the environ-ment. At the same time some patients find it difficult to obtain expensive prescription drugs. The closed-loop supply chain can draw on the principles of the circular economy, which is concerned with the adverse effects of using new materials for environmentally harmful manufacturing processes. Re-dispensing or recycling unused drugs, is one application of the principle of the circular economy. Pharmacies can collect, inspect, and resell drugs. Pharmacies incur high inventory costs related to expensive medications and need efficient inventory management. This study focuses on the recycling of drugs to lighten the economic burden on patients in achieving social sustainability, and to prevent the waste of unused medications in achieving environmental sustainability. This study considers the impact of government incentives on patient demand for recycled and new drugs. In addition, pharmacies' optimal inventory decisions and government subsidies benefit the pharmacies in achieving economic sustainability. This environmental, social, and economic sustainability are pillars of the circular economy. This study determines the impact of inventory, incentives, and subsidy-related decisions on total benefits and costs by considering patients' willingness to use recycled drugs. The integrated pharmacy inventory and government decision model is presented in a non-linear programming model and uses the generalized reduced gradient. The results show the feasibility of the drug recycling program. The theoretical implications involve patients' willingness to use recycled drugs and the practical implications by examining the role of non-profit pharmacies in achieving maximum environmental and social benefits.

Automated summary

The closed-loop supply chain inventory model is crucial in the pharmaceutical industry as it promotes environmental, social, and economic sustainability. Unused drugs damage the environment while some patients struggle to access expensive prescription drugs. By applying the principles of the circular economy, the closed-loop supply chain can recycle unused drugs and reduce waste. This study focuses on the impact of government incentives on patient demand for recycled drugs and pharmacies' inventory decisions to achieve economic sustainability.