Magellan Health Inc. (formerly Magellan Health Services Inc.), is an American for-profit managed health care company and subsidiary of Centene that's focused on special populations, complete pharmacy benefits and other specialty areas of healthcare. Magellan supports innovative ways of accessing better health through technology, while remaining focused on the critical personal relationships that are necessary to achieve a healthy, vibrant life. Magellan's customers include health plans and other managed care organizations, employers, labor unions, various military and governmental agencies and third-party administrators. It ranked 390 on the Fortune 500 in 2021.
We study the inventory review policy for a healthcare facility to minimize the impact of inevitable drug shortages. Usually, healthcare facilities do not rely on a single source of supply, and alternative mechanisms are present. When the primary supplier is not available, items are produced in-house or supplied through another supplier, albeit with additional cost. Our aim in this study is to determine how optimal inventory parameters are adjusted depending on the availability of the primary supplier. We show that an approximation provides trivial results, yet fails to capture the nuances therein. Our proposed Markov chain model overcomes these issues, and numerical results illustrate the significant economic impact of inventory parameter optimization. Furthermore, we simulate uncertainty scenarios and provide sensitivity analyses concerning fixed ordering cost for the secondary supplier, shortage frequency, shortage duration, and demand rates.
