Is blockchain the right technology for the pharma supply chain?

Female pharma workerDrug counterfeiting is a well-recognized and documented problem that affects human lives, but also the reputation and ROI of the pharma industry. In the US, the FDA stepped in and enforced the Drug Supply Chain Security Act to protect consumers from counterfeit drugs. Internationally, there is the Global Traceability Standard for Healthcare (GTSH) that defines the process standard, explaining and establishing the minimum requirements for all stakeholders involved in the healthcare supply chain internationally. Yet, the full implementation of global traceability standards as a cohesive solution is still a work in progress. Blockchain can prove to be an all-encompassing, world-wide solution that will seamlessly save lives and dollars in the future.

The World Health Organization (WHO) estimates that 10% of medicines in low- and middle-income countries are counterfeit. Developing countries suffer the brunt of this and the most tragic casualties are children. For example, WHO reports that in Africa more than 100,000 lives are lost annually due to counterfeit drugs.

Shockingly, counterfeit malaria drugs contributed to the deaths of over 100,000 children across Africa in only one year, prompting Ghanaian entrepreneur Bright Simons to invent MPedigree, a solution that allows customers to verify the veracity of the drugs they purchase by calling a toll-free number to check a random 12-digit scratch code imprinted on the medicine bottle.

Counterfeit medicines also directly affect the bottom line of pharma companies, as well as their reputation. The World Customs Organization estimates that the counterfeit medicine business takes a toll on the global pharmaceutical market, estimated at an US$75 to $200 billion annually.

To add to this significant material loss, the highly publicized losses of human lives cause significant reputational damage to the pharma industry. For example, the 2017 Reputation Institute’s annual survey – Global Pharma RepTrak – indicated that only 44% of the respondents surveyed viewed pharma in a good light. The institute qualified this statistic by observing that, even though the reputation of some large companies is on the rise, the majority of pharma companies still need to pose themselves the question of how to maintain a positive reputation.

The FDA protects US customers through the Drug Supply Chain Security Act
The FDA reacted to this widely spread international problem by enforcing the Drug Supply Chain Security Act (DSCSA). The act requires manufacturers and other supply chain parties to build and implement an electronic system that will precisely identify and track the origin of prescription drugs in the United States. Passed in 2013, the act has a deadline for full implementation by 2023.

What is blockchain? blockchain iconBlockchain can be used to secure both internal and multi-party supply chains. Activities are registered as linked "blocks" and are mapped and recorded as a chronological "chain." All parties have access to chain of activities and status, but they cannot alter activities for which they are not responsible or even their own activity once it has been entered. In this way, blockchain forces transparency, consistency and trust across all participants.The promise blockchain holds for the future drug supply chain While costly now, blockchain can be the next technological light bulb to revolutionize the future. For the pharma industry, it could mean securing the much needed trust between all parties that have an interest in the integrity of the drug supply chain — pharma companies, manufacturers, trading partners, pharmacies, patients — with the added benefit of re-enforcing compliance with regulatory bodies into the mix.

“The complexity of the supply chain continues to increase, putting more pressure on manufacturers as well as on the entire ecosystem that ensures the delivery of a product to patients,” said George Serafin, Healthcare and Life Sciences Industry Leader at Grant Thornton.

Drug traceability through the supply chain poses the challenge of keeping track of a multitude of transactions performed by a multitude of partners. The sheer amount of data constitutes a challenge, even if all or some of the partners have electronic connections to trace and keep track of drug progression through the supply chain.

An example of cryptocurrency for pharma: The BlockRx™ Token by iSolve bitcoiniSolve offers a blockchain solution to solve the drug traceability and security of the supply chain problem, while at the same time enabling previously disconnected parties to share their data and collaborate — e.g. supplier, manufacturer, wholesaler, pharmacy, and patient. While this will increase patient safety, long-term this solution could also incentivize patients to share their information, establishing a safe and direct access to patients for pharma.

iSolve just launched the BlockRx token. The token is similar to a cryptocurrency; yet, it is also different. Unlike other cryptocurrencies — for instance bitcoin — the BlockRx token will have no value outside the system in which it is used, but would have to be translated into a different cryptocurrency.

The information on the chain will be provided only to “trusted participants,” and in order to become one, parties will need the BlockRx token. Pharma companies and patients will first need to purchase tokens, but can earn tokens as well, later on in the implementation. The token ensures the security of the supply chain because it is the means through which data is accessed. There are smart contracts built into the chain that will define trusted parties and levels of data access, but beyond that, without the token, there is no access.

As the blockchain grows, trade partners can use the tokens earned, or can purchase additional tokens, to incentivize their downstream partners and patients to share their data. In this way, the token serves in the creation of a data economy. On the one hand, for pharma, this data economy can help offset the financial burden of remaining compliant with regulatory requirements; on the other, for patients, it can help patients offset their medical costs, as the value of the token increases long-term.
Blockchain can offer an elegant solution to this problem. As George Serafin emphasizes, “Blockchain is a very promising technology that can offer several advantages to pharma:
  1. Supply chain integrity, facilitated by a closed ledger system in an ecosystem that enables trusted exchanges between parties, with the added benefit that this ecosystem offers an audit trail that satisfies regulatory requirements.
  2. Ease of use between smart contracts that can be applied across the entire value chain, whether in a clinical trial, in the supply chain, or in a commercial healthcare space.
  3. An automated approach eliminating the need for a cutting out the “middle man” within the contract management process.
  4. Further opportunities related, for instance, to patient safety or to clinical trials.”

What is blockchain and how does it work? 
Most commonly referred to as an electronic ledger, blockchain can securely record transactions between several parties, in a chronological order. The video below shows you at a glance how blockchain transactions work.

“Early pharma adopters of blockchain technology will have the advantage of adopting an end-to-end solution. This will solve many high stakes issues for pharma that individual software solutions developed internally won’t be able to,” says Dr. Robert Panetta, Director of Pharmaceutical Solutions at iSolve. “Among the long-term benefits are regulatory compliance, data security, and the advantages of cryptocurrency, which will incentivize all participants — from manufacturers to patients — to share their data,” Dr. Panetta added.

Costs and benefits of blockchain technology Blockchain technology is just at its beginning and companies are still on the fence in terms of adoption. Some drawbacks might be:
  1. Investments already made in other technologies that would ensure traceability and satisfy DSCSA
  2. The uncertainty of ROI for investing in blockchain since the technology is so new
  3. Costly implementation with limited short-term benefits until large-scale adoption occurs

“There is one direct route by which pharma companies can offset the cost of implementing a blockchain solution and that is cryptocurrency tokens. From manufacturers, to trade partners, or patients, all blockchain participants will be able to monetize their data through tokens,” Dr. Panetta explained.

Long-term vision
There are clear long-term benefits to adopting blockchain for pharma. Companies should take steps to plan for educating themselves on blockchain, evaluate a technology platform and explore whether a business case is practical.

Only the future will tell whether blockchain will be revolutionary and realize its potential. The current reality though is that blockchain technology is adaptable and infiltrating at a steady pace several industries, moving outside its initial application in financial services. It remains to be seen whether it will accelerate in its pharma applicability next.


George SerafinGeorge Serafin
Healthcare and Life Sciences Industry Leader
T +1 732 516 5580

Lisa WalkushLisa Walkush
National Sector Leader for Life Sciences
T +1 215 814 4000

Brad PedrowBrad Pedrow
Life Sciences Supply Chain Leader
T +1 215 814 4063