Blockchain in Pharmaceuticals: Prospects in Drug Supply Chain
Blockchain is the most cutting-edge technology that has
swept a number of industries at an unprecedented rate. Bitcoin, the digital currency,
is its best known use case and has inspired its usage in different applications
ranging from financial services to energy suppliers.
A blockchain can be used to record transaction of any asset.
It is an open, distributed ledger that can record transactions between two
parties efficiently and in a verifiable and permanent way. Structurally, it is resistant
to modification of the data and facilitates secure transactions. This inherent
security and transparency of the blockchain can offer remarkable benefits in pharmaceutical
The pharmaceutical sector is mainly concerned with
manufacture and delivery of medicines/drugs. Drug Supply Chain is a weak system. Illicit handling and
manufacturing of substandard drugs has disorganized the drug markets immensely.
Blockchain and its associated advantages have the capability to address
this major pitfall of pharmaceutical sector.
Revolutionizing Healthcare sector. 3
the problem in Drug Supply Chain. 3
Blockchain is the answer?. 4
of drug distribution system and its weaknesses. 5
Medicines or Fake drug. 5
illegitimate manufacturers. 5
drug shortages. 5
drugs and gray markets. 5
of addressing the problem.. 5
to Blockchain. 7
of blockchain. 7
of Blockchain. 8
Chain Auditing. 8
Blockchain can be a solution?. 9
of using Blockchain. 10
Blockchain: Revolutionizing Healthcare sector
Blockchain has an immense potential to completely transform
economic and social systems. It has laid foundations for new business models
with reduced systemic risk and financial fraud. In early 2017, Harvard Business
School professors Marco Iansiti and Karim R. Lakhani said the blockchain is not
a disruptive technology that undercuts the cost of an existing business model,
but is a foundational technology that “has the potential to create new
foundations for our economic and social systems”.
The innovation of Blockchain has already made its way in
multiple spheres and has the capability to revolutionize different sectors,
particularly public healthcare and pharmaceuticals.
A significant amount of money is invested every year on the research,
development and manufacturing processes by pharmaceuticals. Blockchain’s inherent
transparency, security and reliability have great prospects in this
sector. At the MedCity Converge conference in Philadelphia, Merck associate
director for applied technology, Nishan Kulatilaka, stated that healthcare
could be the second-largest sector to adopt the technology, after financial
A number of applications of Blockchain in pharmaceutical
industry are being considered. However, it is ‘Drug Supply Chain’ where it
promises great prospects.
Countering the problem in Drug Supply Chain
A major threat to the supply chain is circulation of the
counterfeit medicines or the replicas. The issue of counterfeit drugs has been
growing in importance both in terms of economic cost and in risking human life,
with the supply of these counterfeit drugs coming from all over the world.
Along with taking income from consumers and drug companies, counterfeit drugs
also pose serious health hazards to patients, including death as they might
have different active ingredients or dosage level than the real drugs.
Infiltration of these substandard drugs has weakened the
entire system. The governments around the world have imposed restrictions to
counter this problem. They strongly believed that these restrictions will secure
integrity of their supply chains and put a halt to global flow of these
In 2013, US introduced the Drug Supply Chain Security Act (DSCA) for improving supply chain
security and traceability. The purpose of this act was to create an electronic
system to track and trace certain prescription drugs in the United States. This
law regulates transactions between dispensers and pharmacies and also among
manufacturers, re-packagers, wholesale distributors, third-party logistics
providers, and trading partners. Similarly, the Falsified Medicine Directive in European Union established that
pharmaceutical companies and others connected to the drug supply chain will be
required to publish their products for track and trace by February 2019.
Effective implementation of these laws could positively
affect patient care and the pharmaceutical market for many years to come.
However, disorganized drug markets, both real and on the internet, have undermined
these regulatory checks on medicines distribution.
Why Blockchain is the answer?
In the last couple of years, blockchain technology has
become an important part of this conversation. With barcode-tagged drugs
scanned and entered into secure digital blocks done with the help of
blockchain, authorized parties and even patients at the far end of the supply
chain can view the ongoing real-time record at anytime
A blockchain is a distributed, digital ledger. The ledger
records transactions in a series of blocks. The characteristics of blockchain
map onto the basic needs for reliability and integrity of a supply chain. It
can be a natural facilitator for electronic health records that are shareable
between the health organizations without impacting the security of the data for
This section will cover the following points:
Overview of drug distribution system and what is
Drugs change hands at different levels from
supplier(s) to patient(s)– Formulation, Packaging, Sale, Exports etc.
Every transaction is an opportunity for under
handing drugs and deteriorating sanity of supply chain
Who is struggling and what are the repercussions
of those lost drug footprints?
Benefits of addressing the problem
Overview of drug distribution system and its
Counterfeit Medicines or Fake drug
Marking illegitimate manufacturers
Artificial drug shortages
Diverted drugs and gray markets
Benefits of addressing the problem
As per the definition given by WHO – “A counterfeit
medicine is one which is deliberately and fraudulently mislabeled with respect
to identity and/or source. Counterfeiting can apply to both branded and generic
products and counterfeit products may include products with the correct
ingredients or with the wrong ingredients, without active ingredients, with
insufficient active ingredient or with fake packaging. These drugs are produced
and sold through different channels such as government and private hospitals,
pharmacies or other legitimate or illegitimate distributors. Licensed
distributors, pharmacists, health care providers or patients might not be able
to detect or differentiate between counterfeit and genuine medicines.
Drug counterfeiting has become worldwide market generating
multi billion dollars of revenue. According to the Center for Medicine in the
Public Interest, $75 billion was generated alone in the year 2010. In 2008, the
World Customs Organization, reporting on data collected from 121 countries,
found that 65% of the total of counterfeit shipments detected accounted for
some 241 million pieces seized globally. Some common counterfeited drugs in
Nigeria are anti-malarial, pain killers and antibiotics. In what was termed as
a ‘shocking development’, the reports identified online sales to the public of
counterfeit versions of lifesaving prescription drugs for illnesses such as
cancer and cardiovascular diseases.
Centralization is another big problem in the field of
pharmaceuticals as a fully centralized system might suffer from a lack of
flexibility, which is required when goods and services to be procured are
complex and involve, other than cost considerations, quality and value aspects,
too. As a result of this, assessing which system is preferable is not an easy
task: many economic variables act simultaneously on the procurement system and
could interact in contrasting ways. In the case of centralization, there is a
central body who is in charge of handling the purchasing activity (select contractors,
negotiate prices and conditions, make purchasing decision) for end-users (i.e.
local units). It’s been all quiet on the electronic pedigree front of
late. ePedigree, a conventional solution
for counterfeit drugs has the drawback of being centralized and costly and
still prone to hacking risks. It has taken a back seat to the national health
care debates and the economy. And with national pedigree laws foundering in
Congress, it appears that drug manufacturers are taking a breather and
contemplating 2015, when California’s pedigree mandate takes effect.
Then comes the Regulation Compliance which adds to the list
of problems. Changes in regulations by leading bodies such as US Food and Drug
Administration (USFDA) and the European Medicines Agency (EMA) have increased
the importance of regulatory compliance management for drug manufacturers.
Pharma companies across the world are required to change their compliance
practices to comply with changes in regulations and stringent anti-corruption
laws. The US FDA oversees regulatory activity across the globe forcing pharma
& life sciences companies to identify quality issues before they impact the
production. In the US and European markets, companies have become increasingly
cautious about regulatory compliance. However, the situation in Asian market
and India in particular is not encouraging. Increased regulation, concerns over
data integrity have only contributed to the compliance challenges facing the
industry. US, DSCSA regulations require completing item level and lot level
traceability for each pharma entity registered in states by November,2017. Post
this a stable solution to maintain the trail would be required.
Channel of Trade Violation comes out to be equally
problematic for the pharmaceutical industry. More stringent licensing
requirements can improve the wholesale system, but drugs will still need to
move from the factory to the vendor, passing through many hands before reaching
the patient. With every transaction on the chain, there is a risk of the drug
supply’s being compromised like at places where the distribution chain breaks
down and medicines depart from documented chain of custody. Drugs that leave
the proper distribution system are called diverted drugs; the markets that
trade diverted drugs, or more generally, markets that trade with little
authorized oversight, are called gray markets. Drug diversion is the means
through which medicines approved for sale in one country are sold in others,
where they may not be registered. One of the instances of drug diversion is
seen to be practiced in Africa. Medicines that are produced at subsidized rates
for African countries are routed back to states to be sold illegally. And once
a medicine leaves the responsible chain of custody, there is no way to ensure
that it has been properly stored.
These major problems, if not taken care of, could pose a
significant danger to public health in both developing and developed countries
as they can either directly kill the person or give false assurance that a
life-threatening disease is being treated while it’s not and hence kill the
person indirectly. Hence, finding solutions to these is of utmost importance
for the continuous growth and development of the countries.
Introduction to Blockchain
Blockchain is a digital ledger that creates an unchangeable
record of transactions, each one time-stamped and linked to the previous one.
These digital record or transactions are in form of a block of encrypted data.
Each transaction in a thread is called a block. A block
typically contains link to previous block, a timestamp and a transaction data.
Structurally, it is resistant to modification and allows either an open or
controlled set of users to participate in the electronic ledger. For use as a
distributed ledger, a blockchain is typically managed by a peer-to-peer network
collectively adhering to a protocol for validating new blocks. Once recorded,
the data in any given block cannot be altered without the alteration of all
subsequent blocks. Blockchain can only be updated by agreement between
participants in the system. An entered data can never be erased. The blockchain
contains a true and verifiable record of each and every transaction ever made
in that system.
“Blockchain can fundamentally transform businesses by
eliminating inefficiencies, speeding up transactions and enabling innovative
new business models,” said IBM Research China director Dr Xiaowei Shen. “The
Yijian Blockchain Technology Application System we’ve built with Hejia is a
great showcase of this capability.”
Evolution of blockchain
The first blockchain was conceptualized in 2008 by an
anonymous person or group known as Satoshi Nakamoto and implemented in 2009 as
a core component of bitcoin. The invention of the blockchain for bitcoin made
it the first digital currency to solve the double spending problem without the
need of a trusted authority or central server. Blockchain served as the public ledger for all
transactions on the network. The bitcoin design has been the inspiration for
other applications. The market cap of bitcoin now hovers between $10–$20
billion dollars, and is used by millions of people for payments, including a
large and growing remittances market.
This was followed by realization that the underlying
technology that operated bitcoin – Blockchain could be separated from the
currency and used for all kinds of other inter-organizational applications.
Smart contract, embodied in a second-generation blockchain
system, called Ethereum transformed computer programs directly into blockchain
that allowed financial instruments, like loans or bonds, to be represented,
rather than only the cash-like tokens of the bitcoin.
Current generation blockchains are secured by “proof of
work,” in which the group with the largest total computing power makes the
decisions. These groups are called “miners” and operate vast data centres to
provide this security, in exchange for cryptocurrency payments.
A major innovation on the horizon is blockchain scaling.
Currently, every computer in the network processes every transaction. This is
slow. A scaled blockchain will accelerate the process, without compromising
security, by figuring out how many computers are necessary to validate each
transaction and dividing up the work efficiently. A scaled blockchain is
expected to be fast enough to power the internet of things and go head-to-head
with the major payment middlemen (VISA and SWIFT) of the banking world.
Applications of Blockchain
Blockchain promises to bring significant efficiencies to
global supply chains, financial transactions, asset ledgers and decentralized
social networking. Blockchain technology can be integrated into multiple areas.
Supply Chain Auditing
Prospects of Blockchain in pharmaceuticals
Details of solution
New economic system
Benefits of using Blockchain
Improved supply chain security and traceability
More visibility and control
Reduce systemic risk and financial fraud
Identifying the bad fishes…
How Blockchain can be a solution?
A secure, transparent and well-functioning supply chain is
mandatory for the companies like pharmaceuticals which is spending billions on
research and development. The decentralized ledger technology, or blockchain,
is a viable option for the highly complex pharmaceutical industry. The
blockchain could fix number of records of all transactions, visible (with
details such as location, data, quality, price) to all involved entities, hence
tampering of records is minimized. Besides making the supply chain secure,
transparent, verifiable and decentralized, blockchain technology can help
reduce costs involved in tracing problems areas and plug loopholes in the
supply of genuine medicines.
As such, there can be vulnerabilities in-built in the drug
supply chain at various points where ownership of these drugs is transferred on
to patients, and pharma manufacturers and other stakeholders have lesser
visibility to track the authenticity of products. Blockchain could be of
significance here, with barcode-tagged drugs scanned and entered into secure
digital blocks whenever they change hands. These ongoing real-time records
could be viewed anytime by authorized parties and even patients at the far end
of the supply chain.
In coming future, blockchain technologies could potentially
underpin a wide range of pharma industry functions, both inside and outside of
the supply chain. Drug developers running clinical trials might be able to
share clinical data and medical samples more securely and simply, while in
healthcare, vaccine registries could be more easily set up and relied upon. And
while blockchain underpins the digital currencies demanded in ransomware
attacks, the technology could also play a role in securing sensitive industry
data from malicious attack.
However, the drug supply chain represents the most obvious
candidate for improvement with blockchain, which could lead to a drug supply
system that is more secure, more efficient and less expensive to operate in. As
such it could have an impact on drug prices for patients and health systems. If
the project meets its goals, everyone from drug makers to wholesalers to
hospitals will be recording drug deliveries on a blockchain. What this means in
practice is that, at each step of the distribution process, a network of
computers will vouch for the provenance and authenticity of a drug shipment
Advantages of using Blockchain in Drug Supply
This section will cover the following points:
Summary of issue
Highlights of the proposed solution
Finally, conclude that the use of Blockchain promises to
bring significant efficiencies to global supply chains.
Blockchain can transform supply chains, industries and