Blockchain Adoption for Generic Drugs in the Medicine Supply Chain with Consumers’ Risk-Aversion: A Game-Theoretic Model Within Chinese Legal Framework

Abstract

Background: Blockchain is expected to mitigate consumers’ risk-aversion and quality uncertainty about generic drugs in medicine supply chains. This study investigates the effect of blockchain adoption for disclosing the quality information of generic drugs that compete with original drugs in the market and proposes legal measures accordingly. Methods: We employ a game-theoretic model to analyze a medicine supply chain including a generic drug manufacturer, an original drug manufacturer, and a retailer. We examine when should the supply chain members adopt blockchain for generic drugs and how blockchain affects the medicine supply chain. Results: Our results show that the quality information of generic drugs determines how blockchain adoption affects the price and sales quantity of generic and original drugs. Moreover, we observe that the generic drugs manufacturer and the retailer decide to adopt blockchain only if consumers’ risk-aversion degree is sufficiently low. Also, a low risk-aversion degree can lead to higher whole supply chain’s profitability with blockchain adoption, and generate a win-win-win situation of blockchain adoption for the consumers, the generic drug manufacturer, and the retailer. Conclusion: To mitigate consumers’ risk aversion, the law should safeguard consumer rights. Blockchain adoption can benefit the medicine supply chain and consumers under certain conditions. However, it also requires the coordination of supply chain members’ benefits and the disclosure of quality information.