Journal of Cleaner Production 383 (2023) 135474
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Journal of Cleaner Production
journal homepage: www.elsevier.com/locate/jclepro
Closed-loop supply chain inventory model in the pharmaceutical industry
toward a circular economy
Victor Suhandi a, b, Ping-Shun Chen a, *
a
Department of Industrial and Systems Engineering, Chung Yuan Christian University, Chung Li District, Taoyuan City, 320314, Taiwan, ROC
b
Department of Industrial Engineering, Universitas Kristen Maranatha, Bandung, Indonesia
A R T I C L E I N F O A B S T R A C T
Handling Editor: Cecilia Maria Villas Bôas de The closed-loop supply chain inventory model is essential in the pharmaceutical industry because it promotes
Almeida 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
Keywords: supply chain can draw on the principles of the circular economy, which is concerned with the adverse effects
Pharmacy inventory management
of using new materials for environmentally harmful manufacturing processes. Re-dispensing or recycling unused
Circular economy
drugs, is one application of the principle of the circular economy. Pharmacies can collect, inspect, and resell
Closed-loop supply chain
Drug recycling drugs. Pharmacies incur high inventory costs related to expensive medications and need efficient inventory
Environmental sustainability 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.
1. Introduction environment. Drug waste has become a significant environmental
problem (Nepal et al., 2020; Zuccato et al., 2000). The active substances
Closed-loop supply chain (CLSC) inventory management is impor in drugs can cause environmental damage, so drug waste must be
tant in the pharmaceutical industry. Several industries have adopted handled differently from household waste (Luo et al., 2021). Nipa et al.
CLSC to contribute to environmental sustainability (Bhatia et al., 2022). (2017) reviewed the literature on the disposal of unused drugs in South
In addition, inventory management for CLSC has supported economic and Southeast Asia, where only about 10% of unused medications are
sustainability (Jauhari et al., 2021; Yoo and Cheong, 2021). Inventory returned to the dispensing pharmacies. A survey in Indonesia found that
management needs to consider the role of reuse, recycling, and rema 82.1% of participants disposed of unused drugs in the trash (Insani et al.,
nufacturing in addition to the use of new materials to meet consumer 2020). The financial burden for patients is also a concern for the gov
demand, especially in the pharmaceutical industry, where such man ernment (Kearney et al., 2021). The Kaiser Family Foundation surveyed
agement has a large environmental and social impact (Sazvar et al., 1146 American adults online and by telephone in 2021 (Kirzinger et al.,
2022). 2021) and found that it was difficult for them to obtain healthcare.
In the pharmaceutical industry, the problem of drug waste is a The CLSC applies the principles of the circular economy (CE) by
challenge that requires serious attention. Many medicines are unused for considering the three aspects of sustainability. The organizations that
some reason (Law et al., 2015), then discarded and released into the implement them gain economic, environmental, and social benefits
* Corresponding author.
E-mail addresses: victorsuhandi@yahoo.com (V. Suhandi), pingshun@cycu.edu.tw (P.-S. Chen).
https://doi.org/10.1016/j.jclepro.2022.135474
Received 26 February 2022; Received in revised form 31 October 2022; Accepted 30 November 2022
Available online 5 December 2022
0959-6526/© 2022 Elsevier Ltd. All rights reserved.
