The word “NFT” has become synonymous with digital art, massive payouts for small-time artists, virtual worlds, and of course, memes! However, beneath the trendy and artsy masquerade lies a treasure trove of potential, which is being exploited by the medical, pharmaceutical, and biotechnology industries. There are digital rumors along with entire paradigm shifts being initiated around the NFT marketplace that is slated to transform the way healthcare providers (HCP) and medical technology companies function. The impacts of the NFT framework, with its blockchain-powered ledger system, are said to transform everything from medical record security and data authentication to intellectual property rights management.
But, how exactly is this silent revolution occurring? How can we get a glimpse into its inner workings? For that, we need to go back to the basics.
What is NFT?
The acronym NFT stands for Non-Fungible Token, which indicates a token of value that cannot be replicated and hence, is unique. The word fungible (or fungibility) in financial terms indicates an asset or a good that can be exchanged for other assets or goods that belong to the same category or type. In other words, fungibility signifies the ability of a token of value to be substituted by another of the same value. A fundamental example is a currency that we use, be it dollars, pounds, rupees, or pesos, they are all fungible.
Under the definition, non-fungibility indicates a token, asset, or good that cannot be substituted by another of the same value owing to the fact that it is unique and hence, irreplaceable. Let’s understand these terms using a simple example. If an individual is owed $60 by another, it doesn’t matter to that particular individual whether he is paid with a $60 that is different from the original note(s) that he lent out. In fact, it won’t matter if the debt is paid back in notes of different denominations (a $10, $20, and $30 for instance) either as long as the value is fulfilled by the debtor. On the other hand, in the case of non-fungibility, if a person lends another his car, it is expected that the specific car that is owned by the former is returned rather than any other vehicle of similar value. This is because the car that was lent has its own unique value or significance to the owner which cannot be replaced by another.
The Blockchain-powered NFT Marketplace
A marketplace that deals in NFTs are built on the foundations of blockchain technology. The NFTs on these platforms are digital representations of unique and irreplaceable assets, on the blockchain, which is a public ledger that documents all transactions that occur on the platform in concern. As per the ethos and technical constitution of blockchains, all transactions that involve a particular NFT are visible to the community and are traceable to the original owner.
The fundamentals of how NFTs work can be best understood by considering them in the context of the various marketplaces that allow asset creators to make use of them. Within such a platform or marketplace, each token that is minted for a unique asset (NFT) is assigned a unique identifier. These tokens are not interchangeable with other tokens as they embody a unique value that cannot be matched or replaced by the perceived “equal” value of token denominations. Each token is also verifiably bonded with a specific owner and due to its inclusion in the ledger system, this anonymized connection being easily traceable and provable. At the same time, owing to unique identifiers attributed to each owner, anonymity is maintained while not compromising the accuracy of traceability.
As the owner of an NFT, there are certain privileges and areas of control that can be exercised. One of these is the determination of the scarcity of the unique asset, which indicates the number of such available for transactions. Each NFT crafted by the owner is also characterized by a specific identifier and hence, the owner has the opportunity to either make each tokenized asset unique in and of itself or club them together in the form of a specific number of available assets. Owing to the easy traceability and in essence, the bond between an NFT and the owner, every transaction involving the tokenized asset results in the generation of royalties that are directly payable to the owner.
The NFT-Fuelled Future of Pharma and Bio-Tech
Even though NFTs continue to be largely associated with digital art, collectibles for virtual worlds and games, unique domain names, and even some physical items and investments, there are new and unique opportunities arising for other industries. One of the most exciting ones is the potential that is emerging for pharmaceutical, medical technology, and biotechnology companies. Some of the core possibilities being envisioned for these industries through the NFT marketplace model include:
- Tokenized Prescriptions: using the unique identifier and the public ledger system that is part of NFTs, scholars, and researchers are positing that prescriptions and OTC purchases can be managed in a much more holistic and accurate manner than ever before. By tokenizing prescriptions and medical bills, tracking of products can be done seamlessly, ensuring that information such as expiration dates as well as replacements or recalls can be easily linked to both consumers as well as manufacturers through the central shared ledger. The irreplaceable quality of NFTs can ensure that patients are given the due individual attention they need by ensuring the quality of medication and alignment with actual disorders without any form of major errors.
- Medical Records as NFTs: the transparency that blockchain-powered NFTs offer can be a powerful means to ensure that healthcare providers and practitioners are verified and authenticated. By linking aspects such as educational background, qualifications, and professional experience with healthcare practitioners and organizations, NFTs offer a highly unsusceptible and invulnerable source of verifiable information that is available to the patients. At the same time, patient records such as medical history and other such facets can be tokenized as NFTs to ensure complete security while also maintaining authenticity. As patients themselves are the owners of such information, they can choose third parties to share these details with based on the public ledger, which also provides insights into medical practitioner authenticity.
- Intellectual Property: when it comes to biotechnology companies and pharmaceutical organizations, new formulae, unique medical innovations, and experimental treatments are all fundamental forms of intellectual property that are generated consistently. Tokenization of intellectual property as NFTs allow them to be maintained securely, minimizing the potential of tampering or plagiarizing as they are directly and easily traceable back to the owner. NFTs also allow for easy transferability of assets such as intellectual property in cases of mergers and acquisitions.
NFT Pioneers in Medicine and Pharma – Aimedis
Even though speculation might offer glimpses into the potential of NFTs for pharmaceutical and biotechnology companies, the best way to understand it is through an actual example. Aimedis is the first and possibly, the only platform today that is using NFTs to incentivize and decentralize healthcare. The company has come up with its own dedicated NFT-based platform known as the DataXChange marketplace. Some of the core benefits that have been envisioned through this NFT-based platform of Aimedis are as follows:
- Exchanging Clinical Trial Data: owing to the sheer dependence of pharmaceutical and scientific organizations on clinical trials to generate data surrounding new drugs, mechanisms of treatment, and other aspects, data exchange in this domain is a fundamental requirement. The DataXChange marketplace connects professional data providers in the field with pharmaceutical/medical/bio-technology companies by allowing them to transfer information in the form of tokenized NFTs. This ensures that the data being transferred is authenticated by the public ledger, is traceable to the original owner, and is also free from the potential for manipulation.
- Medical Insurance Management: theDataXChange platforms allow patient records and prescriptions to be tokenized, thereby allowing pharmacies and hospitals to exchange secure and transparent NFTs with insurance companies in case of claims. The NFT-based prescriptions also make it easy to transfer crucial data directly from the physician to the insurance companies in case of discrepancies or doubts. At the same time, the potential for tampering is reduced due to the authentication by various parties involved in the upkeep of the public ledger around the NFTs.
- Combining Research and Treatment: the NFT-based public ledger offered by the DataXChange platform not only stores patient data in terms of previous prescriptions, medical history, and other information, it can also be connected with the research database of medical organizations/hospitals/pharmaceuticals. This allows medical practitioners to contrast, compare and align future prescriptions and treatments not only based on the medical background of the patient but also by analyzing core research data such as drug-drug interactions, antibiotic tolerance levels, and latest studies on co-morbidities and their influence. In other words, the public ledger-based system of NFTs allows hospitals and medical practitioners to assimilate information from various sources, thereby enabling them to provide holistic solutions that are based on the latest developments.
Aimedis is working on leveraging the potency of anonymized sharing of data on the part of patients in the medical database, which in turn can be used by insurance as well as pharmaceutical companies. Because the NFTs (medical data, history, allergies, etc) of a patient are under his/her control, they can choose whether or not to share the same with medical institutions, practitioners, or research agencies. If and when they decide to share the NFTs, a unique transaction ID is generated on the public ledger whenever an exchange of this data happens, which is visible to all the parties involved with the same. The Aimedis model also involves paying the patients every time they share an NFT of their own data to practitioners and institutions, in their own unique currency/token known as AIMx which can then be used to purchase medication or treatment.
In essence, it is clear that an anonymous data-sharing platform that tokenizes information and converts them into unique and irreplaceable units that are easily traceable back to the original owner, which has a considerable degree of benefits for the medical and biotechnology sectors. However, with the increasing concerns regarding crypto-currency systems that run on the blockchain, specifically arising due to energy management issues and potential legal complications, the road to integration might not be a smooth one. As platforms like Aimedis emerge, it is clear that more entities will take the plunge into this new and secure domain of information transfer, especially as data leaks continue to compromise the lives of patients as well as the intellectual property of medical organizations across the globe.
When it comes to NFTs, the taxation of such intangible and unique assets which saw their birth only recently in the digital domain is complex, to say the least. In most cases, NFTs are considered as assets and taxed accordingly. However, in the case of the owners, NFTs are slated to be considered as non-capital assets, while those who purchase in trade in them will be liable for their transient ownership of the same NFTs to be taxed as capital assets. In any case, due to the complexity involved in the NFT taxation realm, you must have an entity like the USA and India CFO guiding you along the way.