At its core, blockchain technology provides an indisputable and easily accessible record of events. The information in a blockchain-powered database cannot be altered once it is written, though it can be viewed by virtually anyone who has been granted the ability to access it. The technology made a name for itself by making Bitcoin a trusted and reliable currency, but what implications could it have for the medtech industry?
As healthcare costs continue to skyrocket, medical technology firms are seeing their profits plummet. One of the key factors behind the trend is health system wariness for the impracticality of significant price hikes for incremental improvements (such as seen with devices like pacemakers).
Hospitals require practicality as much as innovation, especially when it comes to the technology they use to treat patients. Their reaction has been to adopt more cutthroat bidding and contracting procedures, which is further exacerbated nationally by the consolidation of hospitals and growth of massive provider networks with centralized health system contracting management.
Blockchain cannot change the medtech industry alone. However, the potential for unquestionable data integrity and effective systems interoperability make it a valuable resource for doing so. Areas like contracts, transactions, and maintaining the records of them are where blockchain technology can be most disruptive.
How can blockchain disrupt medtech?
As a foundational technology, blockchain provides an immutable ledger of transactions that can be used to verify and validate things like smart contracts. Once the contract is established, human intermediaries — entire companies of them, in fact — can be removed from processes related to contract execution, maintenance, and management.
From your company’s perspective, this can revolutionize a product’s journey from raw material sourcing to managing vendor relationships. With blockchain, you can establish parameters and pricing, as well as use IoT-connected sensors to let equipment talk to the ledger. When sources are needed, a provider who meets the criteria can deliver them on demand — and you can skip the burdensome vendor verification and qualification process.
This isn’t just theory. Boeing has proved the power of blockchain and the IoT by using it for everything from asset management to customer transparency. Through the IoT, it can track the provenance of every individual part, from the day it was manufactured to the day it is disposed of. With blockchain, Boeing has made that data available to aircraft owners and mechanics, as well as government regulation officials.
It’s easy to imagine what this could look like for medical device companies with many business units and thousands of vendors spaced out across the globe. Medtronic, for instance, operates in more than 260 locations spread throughout 155 countries; General Electric and Johnson & Johnson are even larger. By allowing companies to perfect data integrity and interoperability, blockchain could bring much-needed practicality to the industry’s constantly evolving technology and dynamic ecosystem of suppliers.
Implementing blockchain into the medtech industry
The advantages blockchain can offer in managing vendor partnerships and raw material sourcing are manifold. A master ledger spanning the entire life of a product contains data-rich information on how to optimize the product and how to rapidly trace and rectify quality risks. It also provides a level of integrity to your vendors, partners, and regulators that has never been realized before but that is necessary for interoperability between systems.
Blockchain technology is poised to transform the world of medical technology in the next 10 to 15 years. Like Boeing, companies manufacturing and distributing pharmaceuticals and medical devices should also start experimenting with it while the opportunities for cost savings and increased efficiency are still huge. The best way to do so is to follow these steps:
1. Find people who “get it.”
Establish a formal responsibility for the topic of blockchain within your healthcare company’s executive team. Form a small think tank of cross-functional experts who “get it” to discuss your company’s best potential uses for the technology. Before experimenting with blockchain, you will need to set and clearly define the goals of its implementation.
2. Get your feet wet.
Once your goals are set, invest in an initial coin offering of a blockchain-based health tech startup. Start playing around in a live space to get familiar with how it really works and what people talk about. Start with small experiments, and think in terms of low novelty and low complexity at first (Harvard Business Review offers a great framework for initial adoption of blockchain). Like email and Bitcoin, simple, single-use applications offer the best place to start. The medical supply chain is a simpler place to start than provider- or patient-interfacing areas.
3. Prepare your ecosystem for the road ahead.
Start warming up your future ecosystems, for it’s the only way blockchain can produce results at scale. Initially, this can take the form of localized corporate networks. This is especially key and different from the Bitcoin blockchain, which is open. Pharma and medical companies will want to start with permissioned ecosystems. Even still, every vendor will need to participate willingly, with a level of transparency around pricing, quality, and terms that has never before been accessible. You must make them believers or bypass them for new vendors who are.
Medical technology margins are declining like crazy, yet healthcare costs are still spiraling uncontrollably upward. The pressure is high and oligopolies have formed on both the producer and provider sides of the market. With incumbent solutions stagnated and connected devices being increasingly more vulnerable to cyberattacks, the space is super hot for disruption. Taking control of the blockchain topic isn’t just a sexy, innovative strategy — it could very well be your company’s lifeline to the future.
About the Author:
Sandy Hathaway is a founding partner of Exit3x, and also co-founded technology startups RetentionGrid and AVARI.