Digitalization of supply chains is a transformational force that will allow companies to achieve profitable growth and operational excellence through leveraging automation and analytics. Companies who implement technology-driven supply chain practices can meet consumer needs in a more expeditious and efficient manner. Pharmaceuticals (“Pharma”) is one industry that has embraced digitalization as it has faced growing challenges from increased complexities, price and cost pressures, and personalized medicines . Specifically, the “Internet of Things” (“IoT”) is one critical element within digitalization that makes smooth supply chain information transmission possible . IoT is broadly defined as a network of internet-connected objects able to collect and exchange data using embedded sensors . Sensors throughout the supply chain can transmit critical information and provide real-time insights across the entire value chain. The potential for IoT is enormous, including reducing lead times down to days rather than weeks or months . Research estimates that by 2020, there will be 50 billion connected devices, and in five years, 80% of companies are expected to utilize IoT in their digitized supply chains in some form .
Pfizer, one of the world’s largest pharma companies, is one such corporation that has been looking at innovative opportunities to digitalize its supply chain over the next few years using IoT. For instance, Pfizer was one of the first pharma companies to utilize radio-frequency identification (“RFID”) tagging to reduce counterfeiting of its drugs. A few years ago, Pfizer added RFID labels to all its Viagra bottles that allows distributors to verify the product’s authenticity . RFID tagging and product serialization allows for better control over material flow and ensure patient safety by reducing prevalence counterfeit. Having a highly orchestrated supply network that guarantees full end-to-end visibility is also crucial to a seamless supply of medicines which save patient lives and help Pfizer continually improve its processes.
More recently, in 2016 Pfizer announced a first-of-its-kind research collaboration with IBM called Project Blue Sky to employ monitoring tools that enable clinicians to deliver higher quality care to patients with Parkinson’s disease . Through smart spoons fitted with sensors for instance, Pfizer can detect tremors which are symptomatic of Parkinson’s and alert clinicians of patient behaviors . One of the main issues with Parkinson’s treatment today is that it’s highly reliant on patient anecdotes which often can be subjective or inaccurate. Utilization of scanners and motion sensors allows for real-time data which can greatly enhance anecdotal information received from patients, enabling researchers and clinicians to have a better idea of how a patient is responding to medicine and how the disease is progressing. Ultimately, Pfizer intends to use this project as catalyst for treatment of other degenerative diseases and to show how new treatments can improve daily wellbeing.
While Pfizer has clearly been at the forefront of using IoT for supply chain management and drug development, it should invest in mitigating several risk factors that are unique to the pharma industry. One challenge in adoption of IoT is the vast number of different electronic systems which makes seamless information flow difficult both internally and externally across stakeholders. To fully take advantage of all that IoT has to offer, Pfizer should invest in increasing data interoperability of its own enterprise resource planning (“ERP”) systems with those of others in its supply chain. Many smaller pharma companies are adopting cloud-based ERP software whose single-instance, multi-tenant functionality allows for easier data interoperability .
Another key concern in this industry is regulatory risk particularly around patient information. Traditionally, the pharma industry has been much more heavily regulated than other sectors. Because of this, access to point of sale (“PoS”) information has been systematically limited by legal constraints such as need for protecting sensitive customer information . Given the vast amounts of data that implementing IoT would continue to generate, ensuring secure flows of sensitive data is a critical requirement for Pfizer. Recently, the US FDA just announced a new digital health certification pilot program to help regulate new technologies such as IoT . In order to stay ahead of regulatory changes, Pfizer should aim to be a participant in these pilot programs and be a trailblazer in the pharma industry in terms of information cybersecurity.
While the advantages of investing in IoT are apparent, several questions are key to understanding its momentum and rate of adoption. What roles will future regulation have in the healthcare sector? For instance will privacy laws like HIPAA become relaxed over time that may unleash further opportunities for IoT? Will pharma companies be equipped to analyze and protect the vast amounts of data collected through RFID tags, sensors, and patient monitors? How will companies quantify the ROI impact of investing in IoT technologies and measure various benefits such as increased innovation, better visibility, and cost reductions?
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