Extended Producer Responsibility for Pharmaceuticals

Abstract

We investigate the effectiveness of Extended Producer Responsibility (EPR)-based policies in addressing the pharmaceutical overage problem from an operational perspective. We posit that the consumable and perishable nature of pharmaceuticals allow for a narrow set of policy options. In particular, there are primarily two viable policies to operaxtionalize EPR for pharmaceuticals; (i) Source Reduction (SR), i.e., a form of fee imposed on producers for their sales to limit the amount of dispensed pharmaceuticals (as implemented in British Columbia and Portugal), or (ii) End-of-Pipe Control (EC) where producers establish and operate programs for collecting unused pharmaceuticals (as in Hungary and Belgium). We show that the pharmaceutical context may imply stronger preference for adopting the EC policy (over SR) when compared to other product categories for which EPR is prevalent. More specifically, we show EC works better for pharmaceuticals with (i) high social and environmental externalities; (ii) high collection costs (e.g. stringent collection requirements or standards); and (iii) moderate treatment impacts from usage. This suggests that the characteristics of specific to the pharmaceutical supply chain determine the effectiveness of EPR implementations for pharmaceuticals. Furthermore, we investigate the perspectives of pharmaceutical stakeholders on the policy choice to understand possible tensions and accordingly inform the policy-making. We find that aligning stakeholder preferences for effective EPR-based policy can be significantly harder in the pharmaceutical context when compared to other product categories. In sum, these results collectively suggest that the characteristics of the pharmaceutical supply chain and the associated dynamics within need to be carefully analyzed before undertaking any EPR-based policy decision.

Keywords: Extended Producer Responsibility, Unused pharmaceuticals, Production fee, Social welfare