Blockchain: the next frontier for pharmaceutical supply chains

What is Blockchain?

Blockchain is software that provides a digital ledger system to log and record transactions by grouping them into chronologically-ordered blocks. These blocks are linked and secured on a peer-to-peer network using cryptography technology.

As the technology is evenly distributed across a network of multiple computers, it has no centralized point of entry, giving added security from cyber threats. The system is also built to be transparent and secure; those within the chain can view the individual block transactions but cannot alter those they are not a part of, they can only add further detail.

Blockchain offers a digital ledger system to securely record transactions on a peer-to-peer network in chronologically ordered and transparent blocks

Pharmaceutical supply chains are particularly complex, requiring the input of multiple stakeholders with a number of important requirements placed upon them. Currently, the supply chain must allow multiple parties to update and share data, it must verify that such information can be trusted and it may have to interact with national and international verification systems, transport systems and regulatory bodies.

This brings a number of challenges. Naturally, having so many stakeholders able to input and change data adds complexity to the quality of the data. It is difficult to monitor and validate the correct information and secure against human error and missing documentation. Interactions are often time sensitive, yet documentation may not always be managed quickly. There is also the overall issue of manufacturers, logistics companies, wholesalers and pharmacists not being able to have complete visibility of the authenticity of a drug and the quality while it is in transit.

The pharmaceutical supply chain faces a number of challenges; numerous stakeholders with complex demands, a lack of transparency of the end-to-end process and time sensitive, but unorganized data

It is hoped that blockchain could revolutionize the pharmaceutical supply chain by enabling a simple single-use system for all stakeholders, which would give transparency, security and oversight of the end-to-end delivery of goods.

RELATED: Read our recent report on how blockchain can revoluntionize brand protection

What are the benefits of a Blockchain based supply chain?

A blockchain based supply chain has a number of benefits. Firstly, it allows for a comprehensive overview of the entire end-to-end process. The full supply chain can be managed through one piece of software. It also gives enhanced transparency between the authorized stakeholders. Each party can see the stages of the drug journey to ensure authenticity and quality.

Using blockchain all authorized stakeholders could have transparency over the end-to-end drug delivery process

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A single system also limits complexity. Once stakeholders understand how to use the platform and become comfortable with the process, they should be able to comply with ease. Human error and loss of documentation will also be significantly limited.

Another important benefit of blockchain is the added traceability and security. Using a blockchain system, products can be tracked, traced and recalled when necessary. The system itself is also under a higher level of scrutiny and protection therefore is more secure. An audit trail created through the block system is an added benefit. With all relevant information stacked and recorded chronologically, both internal and external parties can review the entire chain when necessary.

An important benefit of blockchain is the added traceability and security

In practical terms, at each stage of the process, barcodes would be scanned and recorded onto a blockchain ledger system, which in turn creates the audit trail for the drug journey. Every delivery can be tracked, with the delivery driver traced through biometric measures. Every checkpoint involving the drug can also be measured and recorded through a number of tools. Sensors can also be incorporated into the supply chain, with temperature or humidity being recorded onto the ledger system. With a drug fully tracked from creation to patient, the supply chain can become a holistic, accurate, audited and secure process.

Blockchain post serialization

A number of regulations across the world are now requiring full serialization across the pharmaceutical supply chain to allow products to be more closely tracked and limit the number of counterfeit drugs able to enter the market.

Estimates suggest that global sales for counterfeit drugs total hundreds of billion dollars per year. It is believed that between one to three percent of all drugs in circulation in Western markets are counterfeit. While in many developing countries in Asia, Africa and South America, counterfeit drugs comprise between 10% and 30% of the total medicines on sale.

Global sales for counterfeit drugs total hundreds of billions of dollars per year

Although many pharmaceutical companies are in the final stages of compliance with serialization, some are still considering the implementation of blockchain and how this could be utilized. The Centre for Supply Chain Studies has been conducting studies and trials with drug manufacturers, distributors and pharmacies since 2017 to assess how blockchain could meet the requirements of the US’s Drug Supply Chain Security Act (DSCSA).

According to Robert Celeste, founder of the organization, plugging tens of thousands of US pharmacies into a drug-tracking database is a huge challenge and blockchain is an attractive way to simplify that. He notes that "from the blockchain point of view, there is still a lot of work to be done, but it is being done in earnest".

Studies are being conducted to asses how blockchain could meet the requirements of the US’s DSCSA

Constantin Lichti from the Frankfurt School Blockchain Center agrees that "blockchain technology and current applications are still in [their] infancy" as the technology is only being explored in pilot projects. Although, he does believe that blockchain will go on to have a "powerful impact" on the drug supply chain.

A survey by the Pistoia Alliance of 120 life sciences executives in 2017 supported this belief, with 83 percent of respondents expecting blockchain to be adopted by the industry within five years.

83 percent expect blockchain to be adopted by the industry within five years

Dr Francisco Curbera, director of foundational technologies at IBM, hints that it might not be a long wait for the technology to be utilized as the experience with blockchain in other industries, particularly food, "have already demonstrated the potential of blockchain technology to address challenges in supply chain management".

Read more: Part 1 of our serialized guide to serialization

Spotlight on MediLedger

Following the announcement of the DSCSA, the FDA openly called for pilot projects that would address the three main challenges of the legislation; establishing a product identifier, quality barcodes and achieving interoperability.

In Septmeber, 2017 Chronicled Inc and the LinkLab LLC announced The MediLedger Project bringing a blockchain solution for the pharmaceutical industry focused on compliance with the DSCSA. The MediLedger Project aims to leverage blockchain’s capabilities to create an interoperable system in which multiple parties, including manufacturers, wholesale distributors, hospitals and pharmacies can register, verify and transfer pharmaceutical products with absolute trust in their authenticity and provenance.

The MediLedger Project aims to leverage blockchain’s capabilities to create an interoperable, standardized system accessible for the industry

On their website they state "our blockchain solution will enable improved supply chain security: no illicit product can enter the trusted network, or if it tries it will be identified. Investigations and recalls will [then] be fast and accurate".

The project formed a working group of pharmaceutical industry leaders, including Genentech, a member of the Roche Group, Pfizer, AmerisourceBergen and McKesson Corporation. This group defined the industry requirements for the blockchain pilot, both for a prototype system and for an industry operating model.

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A second working group has now been developed of pharmaceutical industry stakeholders to evaluate blockchain use cases for financial transactions

A second working group has now been developed of pharmaceutical industry stakeholders to evaluate blockchain use cases for financial transactions. Dale Danilewitz, CIO of AmerisourceBergen, told The Wall Street Journal, that the next phase of the project would expand the drugs and devices in the trial and also test verifications for returns from hospitals. The project’s goal is to deliver a complete saleable return system by the end of 2018.

"These are competitors, sitting in a room, trying to advance technology for a business need"

Speaking to the project, Eric Garvin, one of the co-founders, emphasized that this was an industry-wide collaborative initiative. He noted that "these are companies that are competitors, sitting in a room, trying to advance technology for a business need". Garvin believes the strength of the project lies in the industry’s support for it and the focus on becoming an open architecture to be used and adopted by other service providers. When speaking to Supply Chain Dive, he mentioned that Cardinal Health was set to join the project, which would mean all three major pharmaceutical distributors in the US would be collaborating on the project.

A replacement system or an augmented system?

Arun Ghost, blockchain leader at KPMG makes the argument that at this stage of development a blockchain solution will not necessarily displace existing software, but instead will augment it.

He believes that "with blockchain you can now get to a much lower grain of detail". For an industry with a number of sophisticated drugs, such as biologics which are expensive to develop and require specific methods of transport, this granular detail can give an added layer of security and insight. If there is a failure in the supply chain, which impacts the drug, through blockchain and a broader Internet of Things system, you can pinpoint the exact issue, potentially in real time and address it.

A blockchain solution will not necessarily displace existing software, but instead will augment it

As Ghosh notes "the recall on a biologic is hundreds of millions of dollars compared with a generic”. In these instances, the insight gained from a holistic, blockchain based system could have a huge impact.

What is the next frontier for the supply chain?

Blockchain is still within an innovative phase, being tested and developed in pilot programs. However, with success being seen across other industries and regulations requiring greater connectivity and oversight for the pharmaceutical supply, it may not be long until blockchain becomes a fundamental part of the supply chain.

As the blockchain software MediLedger Project recognize though "the real value in the industry will come with widespread adoption of blockchain technology, working on a common platform to provide true interoperable capability that never existed before”.