Blockchain, Big Pharma, And IBM: How Is Tech Going To Affect Prescription Drug Prices?
IBM and other big-name companies are looking towards blockchain to prevent counterfeit drugs from entering the supply chain.
IBM, the tech company that is over a century old, may just be heading back to the forefront of cutting edge tech. After the company’s foray into consumer technology faded out as younger tech companies entered onto the scene, IBM is now turning to the Blockchain to rise to the top once again. It has recently been announced that the FDA is working alongside IBM to develop a blockchain-based system to track the distribution of prescription drugs and vaccinations in the U.S. But what will the integration of blockchain tech in the pharmaceutical industry mean for drug prices?
What Are IBM And Their Partners Working On?
The project is bringing together IBM, Walmart, Merck, and KPMG to work with the FDA and other stakeholders in the medication supply sector to develop a system that will protect the distribution of drugs to prevent misuse and counterfeiting. This is not IBM’s first step into the Blockchain ring, they have already worked with Walmart on the IBM Food Trust that allows the food retailer to trace certain products within the supply chain. The aim of the FDA’s network, however, is to increase the efficiency of drug distribution across the U.S. by enabling more effective and secure tracking of supply, stock, and demand.
At the moment, the IBM Food Trust is being used by Walmart to track products that can be prone to outbreaks of dangerous bacteria. The ability for the retailer to have a clear overview of where produce is located within the supply chain would make it more straightforward and effective to carry out a product recall if required and would leave less margin for any of the affected produce still ending up on consumers’ plates. The principles for the FDA’s project are similar: ensuring that supply meets demand, that drugs are being distributed safely without being removed from the supply chain for illicit reasons, and that no counterfeit drugs are entering the supply chain.
How Could Protecting The Supply Chain Affect Drug Pricing?
There have been wavering trust levels in the U.S. over recent years with regards to how drug prices are regulated. Back in 2008 Cambridge Consultants launched a blockchain-based project that mirrored the concept of the stock exchange to negotiate drug prices. That concept dealt directly with how pricing for drugs are worked out by pharmaceutical companies, but IBM’s solution is taking a different approach by providing a large amount of extra data for companies along the supply chain to adjust their pricing accordingly. As well as this extra data, added traceability means that there is less chance for drugs to be distributed maliciously.
The World Health Organization (WHO)refers to counterfeit medication as a growing threat, with an estimated global market value of $75 billion in 2009, with $30 billion of that figure directly affecting the U.S. market. In the U.S., the vast majority (around 90%) of all drugs are sold via three main wholesalers. Once counterfeit drugs enter the supply chain at the moment, there is a low chance of the perpetrators being tracked down and prosecuted. Not only does this put patients at risk, but it also costs drugs companies significant amounts of money to stay on top of the issue, a recent estimate puts the cost at an estimated $46 billion per year. Removing, or at least reducing this figure would release funds for drugs companies to fund more research into cheaper and more effective treatments for patients. However, critics of so-called Big Pharma companies may argue that the money saved through removing counterfeit drugs from the supply chain would simply go towards boosting manufacturers’ profits as opposed to reducing costs for consumers.
The Bottom Line
It is undeniable that counterfeit drugs entering the supply chain pose both major health risks and financial implications for consumers. The new technology that IBM is designing and rolling out in the sector will undoubtedly have a positive impact on the health risk that is caused by counterfeits, but questions remain over whether or not the financial gain that pharmaceutical companies will receive from reducing counterfeits in the supply chain will be felt by consumers. Whether the money saved is invested in further research, cutting costs for consumers, or boosting profits for manufacturers remains to be seen. Many consumers will be hoping this could be a step in the right direction towards reducing the costs of their monthly prescriptions.