Research

My research focuses on healthcare/pharmaceutical (pharma) supply chains, health public policy, and innovative design of healthcare systems. I work on problems highly important for the pharma industry and the society such as Drug shortages, Illicit online pharmacy, High drug pricing and new drug reimbursement policy (e.g., outcome-based reimbursement policy), Innovative drug approval policies (accelerated approval and compliance to post-market studies), Fee-for-service contracting in pharma, distribution strategies of specialty drugs (the most important trends in pharma industry), online markets for drugs and medical devices, and telehealth. I particularly focus on the incentive issues behind many of these problems in the healthcare realm, and design mechanisms to resolve these issues and improve the efficiency of the pharma/healthcare system. My works on drug shortages has been well received by FDA and the in academic world, winning multiple academic prizes. I work with analytical models, econometrics models, and other analytics models, using proprietary and public data.

Aside from healthcare, I am generally interested in incentives and contracts, collaboration in decentralized supply chains, and information asymmetry. I am also interested in the behavioral aspects of decision making.

In addition to making contributions to the academic domain, I have engaged extensively  with government and industry to contribute to their informed decisions. Most of my healthcare research has public policy implications. I have been on FDA listening panel for drug shortages (other panelists are from MIT economics, Duke health policy, and Johns Hopkins Pharmacy). I have gone multiple times to the Department of Health and Human Services to present my research work. I have also been actively involved with the Xavier-Industry Healthcare Artificial Intelligence Consortium, serving as a co-lead for the CLS pharma sub-team in 2017-2018, and is also a member of the Academic Council for Healthcare Supply Chain Research for AHRMM (Association for Healthcare Resource & Materials Management).

The following summarizes my healthcare research pursuit:

  • Pharmaceutical supply chains
    • Drug shortages
    • Impact of information sharing in pharmaceutical supply chains
    • Fee-for-service contract design and Inventory Management
    • Outcome-based reimbursement policy
    • Distribution strategies for specialty drugs
  • Health public policy
    • Drug accelerated approval policy
    • New payment policy
    • Drug shortages
  • Innovation of healthcare systems
    • Tele-health systems
    • Online platforms
    • Personalized medicine and genomics
    • Supply chain strategies and inventory management for medical products and physician preference items

Healthcare and Pharmaceutical Supply Chains

Pharma industry is vital to US healthcare and economy and its supply chain efficiencies directly affect the quality and cost of patient care. As a highly regulated industry, many of the problems facing the industry have significant implications to government health policy. This unique industry is (1) very complex in supply chain structure with players having objectives in different domains (e.g., profit, social welfare, and spending), (2) “less” familiar with supply chain management (partly because of its nature to focus on discovery and marketing), yet (3) greatly challenged in its supply chain cost and efficiency as the healthcare industry faces dramatic pressure for cutting spending. All these provide great opportunities and timing for the supply chain and operations researchers to make an impact in this important industry to our well-being and economy. If you have the same vision, whether industry practitioner or academic researcher, I am very interested in discussing with you about potential collaboration opportunities.

I am interested in all aspects related to drugs, starting from R&D strategy, drug innovation regulations, to drug manufacturing decisions, distribution, inventory management, to challenges faced by pharmacy, insurance, medical service providers, and patients. My research also embraces both brand and generics drugs and the nature of research varies from tactical to strategic to public policy, depending on the nature of the questions.

  • Pharma distribution supply chain

My research on pharma supply chains started in 2008 with my work on the pharma distribution industry, which has appeared in Interfaces (Schwarz and Zhao 2011), the top practice journal in the OR field. This paper, based on extensive data analysis and interviews of executives in the pharmaceutical industry, documents the current situation of the pharmaceutical distribution and raises challenging questions in the pharmaceutical industry that are worth further research. Following this empirical work, Zhao, et al. (2012) compares different pharmaceutical distribution business models using mathematical models and investigates contract design under the Fee-for-Service model to achieve win-win situations in the pharmaceutical distribution industry. This paper was published in MSOM special issue on healthcare and has been used by top consultant in the pharma area for negotiation of FFS contracts.

  • Drug shortages

While the above work focuses on brand drugs, my work on the drug shortage problem, one of the most challenging problems facing the pharma industry in recent years, focuses on generic drugs. Although white papers and industry reports are ample, very limited academic literature is contributed to this problem. this research particularly takes a supply chain view and proposes to mitigate drug shortage through Pareto-improving supply chain contracts which can potentially mitigate drug shortage, while ensuring manufacturer’s and GPO’s profitability and containing government spending. My coauthor Justin Jia and I presented their work at the FDA and HHS (US department of Health and Human Services) in Washington DC in 2014. This work was a finalist for the 2015 Pierskalla Award organized by the Health Applications Society at INFORMS and the runner-up for the 2018 Ralph Gomory Best Industry Studies Paper Award by the Industry Studies Association (ISA).

In addition to the above work, I am also conducting research on specialty drug distribution strategies, drug approval regulations, online pharmacy, using AI to forecast demand for the pharma industry, and bio-pharma capacity planning. I was an invited speaker for China Pharmaceutical Executive Delegation to Purdue University in 2008, IQPC Pharmaceutical Distribution conference (a pharmaceutical industry conference) in 2011, and Xavier/FDA pharmaceutical conference in 2012, in addition to numerous academic conferences.

Publications and research papers in this area:

Book Chapters

  • Invited chapter on “Healthcare Supply Chains”, 2018. Handbook of Healthcare Analytics: Theoretical Minimum for Conducting 21st Century Research on Healthcare Operations. Edited by Sridhar Tayur and Tinglong Dai. Published by John Wiley & Sons. Pang,
  • Invited chapter on “Supply Chain Optimization in Healthcare”, 2016. Advances and Trends in Optimization with Engineering Applications, edited by T. Terlaky, M. Anjos, and S. Ahmed, Published by SIAM.

Journal articles

  • Jia, J., H. Zhao. 2019. Reflection on “Mitigating the U.S. Drug Shortages through Pareto-Improving Contracts”. Production and Operations Management. Forthcoming.
  • Xu, L., H. Zhao, N. Petruzzi. 2019. “Inducing Compliance with Post-market Study for Drugs under FDA’s Accelerated Approval Pathway”. Manufacturing and Services Operations Management. Forthcoming.
  • Z. Jia and H. Zhao, 2017, “Mitigating The US Drug Shortages: Contract Design and Operational Strategies”. Production and Operations Management.
  • B. Zeng, H. Zhao, and M. Lawley, 2013. “The Impact of
    Overbooking on Primary Care Patient No-show”, IIE Transactions on Healthcare Systems Engineering. 3, 147-170. Featured in the Industrial Engineers Magazine in Oct. 2013.
  • H. Zhao, C. Xiong, S. Gavirneni, and A. Fein. 2012. “Fee-For-Service Contracts in Pharmaceutical Distribution Supply Chains: Design, Analysis, and Management”. M&SOM. 14(4):685-699
  • L. Schwarz and H. Zhao. 2011. “The Unexpected Impact of Information-Sharing on US”. Interfaces. Jul./Aug. 41:354-364
  • H. Okajima, S. Xu, and H. Zhao, “Dynamic Dual Capacity Sourcing for New Ethical Drugs”.

Collaboration in decentralized supply chains and Information Asymmetry

Dr. Zhao’s interests in this area originated from her work with the heavy machine and automotive industry, which exposed her to numerous challenges faced by the industry in managing supply chains. Of her particular interests was the earnest endeavor of the decentralized parties in collaboration to provide customer-centric solutions in the distribution system. However, the nature of decentralization in the supply chain makes even the most natural collaboration (such as inventory sharing) complex and challenging as each independent party seeks to maximize his own profit instead of the system profit. In her research, she proposes and analyzes different strategies to induce collaboration and coordination in decentralized supply chains. In particular, Zhao, et al. (2005) and Zhao, et al. (2006), and Zhao, et al. (2008), are the first to address inventory sharing and rationing issues in decentralized supply chains. Recognizing that in addition to maximizing profits, there is also strong behavioral aspect in sharing, Zhao and her coauthors have also started to study inventory sharing from decision makers’ human behavior perspective and obtained very insightful results.

While working on collaboration among decentralized parties, she found information asymmetry a big hurdle for collaboration in decentralized supply chains. This motivated another stream of her work – information asymmetry and information sharing in decentralized supply chains.

This was first incorporated into her work on inventory sharing, leading to the development of the first coordination mechanism considering asymmetric information (Yan and Zhao 2010 and 2011). Then, recognizing the importance of information asymmetry in outsourcing decisions, she also studied supplier selection strategies with quality information asymmetry (Yan, et. al. 2009). Later, she incorporated information asymmetry into hedge fund industry for contract design (Zhao, et al. 2011), a work that is on the interface of operations management and finance.

Research papers in this area:

  • H. Zhao, L. Xu, E. Siemsen. 2016. “Behavioral Inventory Sharing”. Under review.
  • X. Yan, H. Zhao, and K. Tang, 2015. “Requirement or Promise? An Analysis of First-Mover Advantage in Quality Contracting”. Production and Operations Management. 24 (6), 917–933.
  • X. Yan and H. Zhao, 2015. “Inventory Collaborations and Coordination among n-Independent Retailers with Asymmetry Demand Information”. European Journal of Operational Research. 243(2). June. 576–587.
  • X. Yan and H. Zhao. 2011. “Decentralized Inventory Sharing with Asymmetric Information”. Operations Research. 59(6). 1528-1538
  • H. Zhao and A. Bisi, 2010, “Optimal Operating Policies in A Commodity Trading Market with the Manufacturer’s Presence”, Naval Research Logistics, 57(2), 127-148.
  • H. Zhao, J.K. Ryan, V. Deshpande, 2008, “Optimal Dynamic Production and Inventory Transshipment Policies for Multi-Location Make-to-Stock Systems”, Operations Research, 56 (2), 400-410
  • H. Zhao, V. Deshpande, and J. K., Ryan, 2006, “An Analysis of Emergency Transshipment in Decentralized Dealer Networks”, Naval Research Logistics, Vol. 53, 547-567.
  • H. Zhao, V. Deshpande, J.K. Ryan, 2005, “Inventory Sharing and Rationing in Decentralized Dealer Networks”, Management Science, 51(4), 531-547.
  • H. Zhao, X. Zhang, F. Pan, and K. Tang, . 2011.“The Impact of Competition on Manager Compensation: Theory and Evidence in Hedge Funds”, In preparation for submission.