Tackling the U S opioid crisis using blockchain
Tackling the U. S. opioid crisis using blockchain Andrew Lee, Jen Mc. Gann, Luis Suarez, Becca Wolfe February 28, 2017
The U. S. has a severe opioid epidemic Health and social costs related to prescription opioid abuse is $55 billion each year 1 Over 650, 000 opioid prescriptions are dispensed daily 2 Patient suffers from pain 5 Patient is prescribed a Schedule II drug Prescription drug abuse crisis in the US Overdose, hospitalization, illegal sale of drug, death In 2014, 2 million Americans abused or were dependent on prescription opioids 100 million Americans suffer from chronic pain 3 No monitoring to curb addictive behavior 4 Each day, an average of 78 people die from opioid overdoses Addiction 2
Lack of technology to communicate Rx history No universal method exists to track a prescription histories across all stakeholders The Doctor • Cannot track prescription history from previous doctors • No transparency across state lines The Pharmacist • Cannot see prescriptions filled at other pharmacies • No time for due diligence for each patient The Payer • Cannot see if patient has prescription filled from another insurer • If formulary changes even slightly, will not flag system The Patient • Medication prescribed is very addictive • Easy to counterfeit a script • Can profit from selling drugs 3
Current efforts have marginal impact Lackluster regulation and monitoring is not addressing the source of the problem The Doctor • Better education on prescribing habits (CMS, HHS) • Being trained to treat the consequence (addiction) The Pharmacist • Databases available to log patient use (not mandatory and does not go across state lines) The Payer • Last year, the federal government asked for an additional $1 B of funding The Patient • Drugs come with a “black box” warning 4
Our solution A new system for tracking and monitoring prescription data across stakeholders Decentralized Prescription tracking software powered by a decentralized database built on an Ethereum private blockchain • Distributed among doctors, pharmacies, government • Transactions validated by trusted third party Smart • Each prescription creates a token for the patient to spend • Transactions enabled by Ethereum smart contracts Secure • SSN used as each patient’s unique ID • Fingerprint used to prove identity at pick-up 5
How it works Prescription data will be made available to relevant stakeholders via a private blockchain Prescription is 2 entered into a database that every doctor and pharmacy has visibility into Prescription 1 A doctor validates that the patient needs an opioid by giving a prescription 3 Prescription enables a token that is valid to be spent once in different pharmacies for specific period of time While the medicine is 5 being consumed the Doctor Token Pharmacy Patient patient is not allowed to buy another opioid Pharmacy validates that patient has a token, takes token in 4 exchange for medicine and makes entry to the database 6
Initial Focus for Datapill: Opiates and Opioids Focusing on one drug class increases feasibility of stakeholder alignment Opioids: Synthetic Pain Medications Opiates: A Natural Pain Remedy Alkaloids derived from the opium poppy • Types • Morphine – severe pain (before and after surgeries) • Codeine – milder pain, severe diaherrea • Heroin • Opium There are 48 classes of opiates/opioids listed as schedule 2 drugs. Within these classes there almost 500 branded drugs and many more generic Synthetic drugs manufactured to work in a similar way to opiates • Types • Methadone • Percocet, Percodan, Oxy. Contin (oxycodone) • Vicodin, Lorcet, Lortab (hydrocodone) • Demerol (pethidine) • Dilaudid (hydromorphone) • Duragesic (fentanyl) 7
$245 M revenue opportunity It is important to contract with the federal government to create a national blockchain Federal State mandated conversion and use of technology Cost of technology subsidized by state and federal Doctor Payer Pharmacy $45 M $183 M $17 M $1/Rx written, 10% - 25% Rx Reduction Opioid Prescriptions 1: 259 M Institutes of Health, America’s Addiction to Opioids Family Foundation, Market Share and Enrollment of Largest Three Insurers by State 3 IMS Health, National Pharmacy Market Summary $0. 25 – $0. 75 per Enrollee Total Enrollees 2: 319 M $250 - $300 annual fee per pharmacy Total Pharmacies 3: 62 K 1 National 2 Kaiser 8
Strong incentives across the healthcare ecosystem Datapill will serve as a shared source of truth across stakeholders The Doctor Government Payer 1 US • Already top priority through Opioid Initiative 1 • Cost-savings for government-run health insurance • Cost-savings as currently bearing majority of over $55 B annual cost of opioid abuse 2 Department of Health and Human Services, The Opioid Epidemic Pundit, Drug Companies, Corporate Responsibility and the Prescription Opioid Crisis 2 Triple Adoption to be state government mandated • Increased accuracy and fidelity • Transparency incentivizes ethical behavior The Pharmacist • Reduced liability, less fraudulent Rx filled • Increases efficiency of pharmacists Patient • Reduced levels of addiction • Increased convenience through electronic storage of data 9
Steps to implementation State pilot programs will begin in two years followed by gradual national rollout 1 H 2017 Secure funding 2 H 2018 1 H 2018 2 H 2017 Live tests of proof of concept begin 1 H 2019 2 H 2019 Begin pilot in Florida and California Obtain contract with federal government 1 H 2020 2 H 2020 1 H 2021 Launch in 2 -4 additional states 2 H 2021 Active in 10+ US states Build blockchain proof of concept Test and refine product Marketing/PR/training to educate stakeholders Build partnerships with state governments Expansion and continued rollout to additional states 1 US Department of Health and Human Services, The Opioid Epidemic Pundit, Drug Companies, Corporate Responsibility and the Prescription Opioid Crisis 2 Triple 10
Potential risks and mitigations Ensuring stakeholder buy-in early and conducting a gradual rollout will allow us to mitigate risks Model based on scale, adoption, and enforcement Gain buy-in from federal and state governments to ensure adoption and accountability; first-to-market is critical Roadblocks from pharma lobbyists Create public awareness around epidemic and encourage counterlobbying from payers, providers, and pharmacists Many variables to account for (losing pills, mail order, etc. ) After the proof of concept, many other functions can be built in to deal with special situations The blocks have to be written and validated in small periods of time Datapill algorithms will automate blockchain monitoring, eliminating time for due diligence by doctors and pharmacists 11
Future opportunities Plan to expand beyond opioids and to explore markets outside the U. S. International expansion: Expanding focus: All prescriptions to be tracked by Datapill Over 4 B annually Other commonly abused prescription drugs: • Depressants to treat anxiety and sleep disorders Opioids • Stimulants most often 259 M prescribed to treat ADHD prescriptions annually Prescription drug abuse is a worldwide problem • Outside of U. S. , opioid abuse most prevalent in Western Europe & Australia • Healthcare ecosystems ripe for disruption Prevalence of Opioid Use Worldwide UNODC World Drug Report 2015 12
Five-year projected cash flow Datapill is expected to start earning revenue in year 2 and turn profitable in year 3 § Years 0 – 1 will be used to contract with the government and build the Datapill infrastructure § Year 2 will begin the pilot with California and Florida while other state discussions occur 13
Our valuation Using comparable discount and growth rates for technology startups, Datapill’s fair value is estimated at $429 M § Revenue: Significant growth is not expected until year 4 once state-level discussions and implementations begin after the pilot states (FL and CA) Estimated growth rates for revenues and costs § Cost: During ramp-up and preparation for implementations, labor will be a significant cost-driver 14
Seed round ask Startup costs mostly account for labor to begin software and blockchain development $800 K § Seed funding will provide runway for one year: o o o Management (x 4) Blockchain engineer Developer Programmer Government Liaison § Investors will have opportunity to participate in subsequent funding rounds 15
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