Blockchain: Everything you need to know about how this tech will change the cold chain
We share industry use cases, what is necessary in a proof of concept and whether the industry thinks Blockchain is really necessary
In this short guide, we aim to answer some of the key questions we are seeing from our Pharma Logistics IQ community.
What is blockchain?
Blockchain technology is a secure way to log and record transactions. Once recorded, these “blocks” are then logged on a peer to peer network, within a chronological “chain”. This network can be limited to a secure number of stakeholders, with each record secure from being tampered with by anyone else within the group. This offers a secure, auditable record that is immutable as a single source of truth.
Why should pharmaceutical companies adopt blockchain technology?
Pharmaceutical supply chains are particularly complex. They transport high value products, navigating complicated routes and large stakeholder networks, while also maintaining strict product controls.
Due to their high value, pharmaceutical products are a key target of counterfeiting networks. This growing risk is estimated to cost the industry $200 billion dollars in lost revenue each year. However, the greatest impact is felt on the patient side, with the World Health Organization estimating that more than 1 million deaths annually are attributed to counterfeit medicines.
Counterfeit medicines are estimated to cost the industry $200 billion dollars in lost revenue each year
Regulations such as the US’s Drug Supply Chain Security Act (DSCSA) and the European Falsified Medicines Directive (FMD) have led to progress in the track and trace of products, now requiring serialization across the supply chain. But many companies still lack full visibility, leaving them unable to fully ensure the safety and efficacy of their product throughout the entire supply cycle.
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Catapult argued recently that “blockchain reduces the risk of fraud, improves transparency and therefore increases trust”. For a pharmaceutical supply chain, blockchain can offer product protection by providing a transparent, traceable and secure logistics record.
How can blockchain be used in the temperature controlled supply chain?
The current system within pharmaceutical logistics allows multiple stakeholders to input and change data as they see fit, which can cast doubt on the quality of data collected. It can be difficult to monitor and validate that the correct information has been inputted, at the correct time, in the correct way. Open communication between all necessary parties is also a challenge, leaving each stakeholder with visibility only on their aspect, not on the full journey of the product.
It is hoped that blockchain could revolutionize this process by providing a simple, single use system to enable collaboration and build comprehensive, secure recordings of the end to end delivery of goods.
Blockchain can offer a collaborative, comprehensive and secure recording of the end to end delivery
In practical terms, at each stage of the process, product barcodes can be scanned and recorded onto a blockchain ledger. The product can then be tracked through each stage of delivery, relevant checkpoints and through different modes of transit to offer a full audit trail for the entire journey.
Stakeholders can provide necessary information in a chronological chain and build upon each others additions securely. Sensors can be incorporated into the blockchain recordings, tracking temperature, humidity and any tampering. This can allow for any deviations or issues of counterfeiting to be easily investigated or corrected in real time, where possible. With a drug fully tracked from distribution to patient, the supply chain can become a holistic, accurate, audited and secure process.
What are the latest industry developments in blockchain adoption?
The most recent advancement in the pharmaceutical industry’s adoption of blockchain was seen in January 2019. China’s District Food and Drug Administration announced their partnership with a local blockchain firm, Prime Chain Network, to combat fake and expired prescription drugs. In recent years, China has faced a number of high profile issues with counterfeit drugs, such as in 2008 when infant powdered milk was laced with melamine.
China’s FDA have partnered with a local blockchain firm to combat fake and expired prescription drugs
Prior to this, key industry developments emerged as pharma companies started to face the serialization challenge. Since 2017, the Centre for Supply Chain Studies has been conducting trials with drug manufacturers, distributors and pharmacies to assess how blockchain could help companies meet the DSCSA requirements. Blockchain was seen as an attractive way to simplify the challenge of plugging in tens of thousands of US pharmacies to a drug tracking database.
Chronicled Inc and LinkLab also announced their blockchain solution in 2017, the MediLedger Project. They formed a working group with Roche, Pfizer, McKesson, Genentech and other industry leaders to define industry requirements for a blockchain pilot. Their aim was to discover what was needed for both a prototype system and for an industry operating model. The industry-wide collaboration aims to deliver a complete saleable return system by 2019. In the second working group of the project expanded the number of stakeholders within the group, including high profile distributors, and aimed to wide the remit of drugs in the trial and test verifications for returns.
83% of life sciences executives believe blockchain will be adopted by the industry within five years
The industry has been largely positive about the potential of blockchain within the cold chain. In a survey by Pistoia Alliance of 120 life sciences executives, 83% expected blockchain to be adopted by the industry within five years.
How do you build a proof of concept for the development of blockchain?
Developing a production-ready blockchain product is complex from a user experience, engineering and operational point of view. Prior to implementing a blockchain solution, it is important to create a proof of concept to understand how this technology will integrate with your current processes and technology and how your stakeholders will adapt to these changes.
A Blockchain proof of concept should aim to discover and clearly validate the added value the technology can bring to your supply chain
A proof-of-concept should aim to discover and validate the added value blockchain can add to your temperature controlled supply chain. It should also evaluate whether blockchain technology is really the right solution to meet your objectives or if other technology should be explored. Your proof-of-concept should also give better insight into how long a full scale adoption will take and at what cost.
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Microsoft recently discussed their efforts to accelerate the enterprise adoption of blockchain technologies. They said that their customers and partners estimate the time and costs for developing a blockchain proof of concept can take 8-12 weeks and cost as much as $300,000. Microsoft found that much of the time in the proof-of-concept phase was being spent on developing code and building capabilities surrounding the blockchain. Working with a provider who can offer this framework can allow more time to be focused on the specifics of the project. By quickly understanding the viability of a proof of concept, both time and resources can be saved by not pursuing a less impactful project.
What does the industry think the future of blockchain is within pharma logistics?
Throughout 2018, the core focus of many discussions of Blockchain revolved around cyptocurrency. However, this year many are turning their attention to the industry use cases of Blockchain. Speaking to forbes, David Post, Managing Director at IBM Blockchain Ventures said they “have a high degree of confidence that 2019 will be the year that enterprise blockchain networks - especially those addressing strategic industry use cases - will begin to emerge at scale”. In regards to compelling concepts, he specifically mentioned the supply chain.
“2019 will be the year that enterprise blockchain networks – especially those addressing strategic industry use cases – will begin to emerge at scale”
Linda Pawczuk, principal at Deloitte Consulting echoed this opinion, noting that “as we head into 2019, [the] supply chain continues to be one of the largest enterprise applications for the technology”. She referenced a recent survey of executives, in which Deloitte found that 53% have ongoing supply chain use cases for blockchain, with pharmaceutical companies and logistics providers looking to utilize the technology to improve their logistics network visibility.
Find out how McKesson and Microsoft are utilizing blockchain at the Blockchain for Business Online Summit. View the agenda here
Also speaking to Forbes, Brian Lio, CEO of research and advisory firm Smith + Cowen said that many companies are now recognizing the risk that comes with falling behind in this space. He believes that “companies are understanding they need to build their front lines, to understand the power this technology offers, so they can start to prepare”.
What impact will blockchain really have on supply chains?
Insight from Braden Perry, Litigation, Regulatory and Government Investigations Attorney, Novel and Emerging Technology, Kennyhertz Perry LLC
Blockchain in industry, like blockchain technology itself, is in its infancy, but on the peak of rapid expansion.
Businesses that see the potential and are proactive in their adoption will likely be the frontrunners in innovation and ahead of the curve when the benefits are fully realized. Blockchain offers opportunities efficiencies in transparency and cost-cutting, with a few high-profile applications taking hold. When the regulatory landscape evolves with the technology, more businesses will be likely to follow.
Companies who are proactive in the use of blockchain will likely reap benefits in ways we can imagine and in likely unimagined areas
Most pharma companies would benefit from some aspect of blockchain technology, from the supply of products, fair pricing, efficient supply and improved product tracking. It will also enable pharmacies or medicinal producers to do real-time management of their production and storage.
Blockchain has vast potential. Companies looking to innovate and are proactive in its uses will likely reap benefits in ways we can imagine and in likely unimagined areas. As the regulatory framework progresses with innovation, companies will benefit. But that regulatory framework will likely lag the innovation, and frustrate those willing to adopt new technology. The regulatory treatment is unclear for many uses of blockchain and virtual currency technology. Until the regulatory structure is clear, many companies will be hesitant to use the technology to innovate their business processes.