Graduation Semester and Year

2017

Language

English

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Industrial Engineering

Department

Industrial and Manufacturing Systems Engineering

First Advisor

Jamie Rogers

Abstract

In the past five years, there have been 5900 recalls of drugs by the U.S. Food and Drug Administration (FDA) which created distraught consumers and shareholders of pharmaceutical companies. In addition, recalls cause disruption in the supply chain mak-ing the pharmaceutical companies vulnerable to various types of risks. These risks include the potential for losing customers and investors as well as the huge financial losses from fines, penalties, lawsuits, revenue loss, market share and increased operations costs. Purpose: The purpose of this research is to study the consequences of product recall on Pharmaceutical Company. Methodology: Event study methodology was used to study the financial impact of a product recall announcement. Multiple linear regression analysis was used to study the operational and reputation risk in terms of recall class (severity), recall reason, recall size, recall scope and size of the company. An interrupted time series design and segmented linear regression models were used to study regulation risk by examining the changes in Research & Development (R&D) expense and Operational expense, following the enforcement of Drug Quality and Security Act regulatory law passed on pharmaceutical companies following a Class I recall. Findings: The findings indicate that the recall class and recall scope have significant impact on financial, operational and reputation risks compared to the reason of the recall, recall size and the size of the company. The financial and reputational risks increased with the severity of the recall but not the operational risk. Operational risk is high for most reputable companies. The enforcement of regulatory law did not have much effect on large cap companies compared to small cap companies. Practical implication: The results from this study can be utilized to quickly determine which risks will require an immediate mitigation strategy based on the characteristics of the company and severity of the recall there by reducing significant damage to the company’s reputation and financial cost.

Keywords

Drug recalls, Pharmaceutical supply chain, Risk assessment, Risk analysis

Disciplines

Engineering | Operations Research, Systems Engineering and Industrial Engineering

Comments

Degree granted by The University of Texas at Arlington

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