IBM Improves Its Pedigree

On Thursday, IBM (NYSE: IBM  ) announced the launch of its ePedigree system to use radio frequency identification (RFID) technology to track medications from the time they are manufactured and through the supply chain system until they reach the customer.

The news is noteworthy for IBM investors because the system could represent a lucrative new source of revenue for Big Blue. According to RNCOS, a research and consulting firm, it has been estimated that the pharmaceutical industry lost $30 billion due to counterfeit drugs in 2005.

In the following years, it is unlikely that that figure has gotten any smaller. In spite of the pharmaceutical industry's efforts to stem counterfeits through the use of holograms and watermarks, counterfeiters have met the challenge and have been able to produce forgeries of those defenses as well. ePedigree, because it allows manufacturers to monitor their product continuously, will offer a more formidable barrier for counterfeiters to overcome.

Big Blue has indicated that it intends to invest over $250 million in RFID technology over the coming years, and the ePedigree system could offer a very fast payback on this investment. I say this because companies such as Pfizer (NYSE: PFE  ) , which produces Viagra, a drug that is widely counterfeited, have already been using RFID technology in a wide-scale pilot project since 2005.

Preventing the illegal reproduction of popular drugs may, however, represent just the tip of the iceberg. Several states, including California, are planning the implementation of mandates requiring that pharmaceutical companies begin verifying the pedigree of all drugs in order to better track expiration dates as well as have the necessary information to locate drugs in the event of a recall.

As these regulations are rolled out, demand for IBM's ePedigree system could soar. To this end, in response to California's impending 2009 mandate, Cardinal Health (NYSE: CAH  ) -- an $81 billion global provider of pharmaceutical products -- has announced that later this fall it intends to outfit its Sacramento distribution facility with RFID.

By no means does IBM have this field all to itself. Hewlett-Packard (NYSE: HPQ  ) , Motorola (NYSE: MOT  ) , and Lockheed Martin (NYSE: LMT  ) are also making big investments in RFID technology, but few companies will be able to match Big Blue's ability to integrate RFID tags, computer systems, and software into a single easy-to-use comprehensive system. To my mind, ePedigree offers yet another reason to be bullish on IBM.

Interested in reading more about IBM? Check out these articles:

Pfizer is anInside Value recommendation.

Fool contributor Jack Uldrich owns stock in IBM. The Fool has a strict disclosure policy.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 533729, ~/Articles/ArticleHandler.aspx, 10/23/2016 2:43:38 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:01 PM
IBM $149.63 Down -1.89 -1.25%
IBM CAPS Rating: ****
CAH $75.15 Down -0.43 -0.57%
Cardinal Health CAPS Rating: ****
HPQ $13.80 Down -0.30 -2.13%
HP CAPS Rating: ***
LMT $230.52 Down -1.31 -0.57%
Lockheed Martin CAPS Rating: ****
MSI $73.62 Up +0.05 +0.07%
Motorola Solutions CAPS Rating: ***
PFE $32.18 Down -0.36 -1.11%
Pfizer CAPS Rating: ****