Since 2009, when an unknown person or group of people under the name Satoshi Nakamoto released Bitcoin, Blockchain, the underlying technology behind this incredibly successful cryptocurrency, has found numerous applications across many different industries, including the management of pharmaceutical supply chains.
Better Supply Chain Management Needed
The global pharmaceutical market is valued at well over $1 trillion, and it continues to grow at a compound rate of over 5 percent per annum. But despite the growth, the pharmaceutical industry is struggling to overcome many difficult challenges that are threatening the lives of thousands and costing both taxpayers and private organizations billions of dollars each year.
According to PricewaterhouseCoopers (PwC), counterfeit drugs is a $163 billion to $217 billion business. In September 2016, WCO and the International Institute for Research Against Counterfeit Medicines (IRACM) seized 113 million illicit and potentially dangerous pharmaceutical products in Africa. “The number of seizures made in joint IRACM-WCO operations has now reached dramatic proportions, with almost 900 million counterfeit and illicit medicines seized at the borders of the continent,” stated WCO.
The Drug Supply Chain Security Act (DSCSA) has been implemented to fight the counterfeit drug problem. It requires all drugs delivered to patients to have a traceable technology element, which would allow regulators to trace the drugs back to the manufacturer.
This traceable technology element could be a simple barcode, but it could also be an immutable, Blockchain-based digital signature, which would make it possible to monitor the drugs through the long supply chain process: from manufacturers to distributors to repackagers to wholesalers to pharmacies and hospitals.
Blockchain Technology in Pharma
To solve the current inefficiencies of the pharmaceutical supply chain and address the counterfeit drug problem, the following areas need to be addressed:
“Once you start tagging drugs with an immutable audit trail, you can do what was impossible before,” said Josh Greenbaum, Principal of Enterprise Applications Consulting (EAC). “It’s fairly easy to game a national database of prescriptions, providers, and patients. But making the drugs traceable provides a much more comprehensive view of what each party is doing with the opioids. Blockchain adds the full distribution picture, and could be tremendously valuable in exposing leaks.”
Public Versus Private Blockchains
For Blockchain to help pharmaceutical companies with their supply chain problems, it is necessary to first overcome major regulatory issues as well as data privacy concerns. While the former is a matter of acceptance and legislature and depends mostly on the ability of politicians and pharmaceutical watchdogs to embrace new technologies, the latter is both a matter of public opinion and operational considerations.
The most popular implementation of Blockchain technology, Bitcoin’s blockchain, is public. Most other popular blockchains, such as Ethereum’s blockchain, are also public. Public blockchains execute a consensus protocol to ensure a common, unambiguous ordering of transactions and blocks across geographically distributed nodes. Public blockchains are open, allowing anyone to join and participate in the network.
Because of their open and decentralized nature, no single network member controls the information which is on the blockchain or the underlying rules of the blockchain. The security of public blockchains comes from their openness, with every network member being able to see everything happening on the blockchain. Consequently, public blockchains offer very limited privacy, which is best illustrated by the fact that Bitcoin is no longer considered to be anonymous.
Perhaps the biggest drawback of public blockchains is the enormous amount of computational power required for network members to stay in sync by solving a resource-intensive cryptographic problem called a proof of work. For example, Bitcoin’s blockchain, which is the largest public blockchain in the world, consumes as much electricity as Oman, a nation of almost 4.5 million people.
According to computer programmer Vitalik Buterin, founder of Ethereum, private blockchains differ from public blockchains in several crucial aspects. As the name suggests, a private blockchain is controlled by a single consortium or company that can easily change its rules and place restrictions on who is allowed to participate in the network. Once an entity is allowed to join the network, it can play a role in maintaining it in a decentralized manner.
Because of their restricted nature, private blockchains offer better privacy, which is something that the global pharmaceutical market can appreciate. In October 2017, the Institute of Electrical and Electronics Engineers (IEEE) Standards Association released its first benchmarking report, The State of Blockchain Adoption in the Pharmaceutical Supply Chain, which reflects insights from 300 executives, including pharmaceutical manufacturers, distributors, and retail pharmacies, and dispensaries, based on their concerns about and opinions of the technology.
“In response to questions about who should pay for and own blockchain implementations, most respondents suggest that pharmaceutical manufacturers should be responsible for implementing blockchain and believe that they should also own the data that would be placed in that blockchain,” the report stated.
Furthermore, private blockchains can operate more efficiently, without requiring the same huge amounts of computational power as public blockchains do, which is also a reason why they have been preferred by the finance sector.
While both public and private blockchains provide certain guarantees on the immutability of the ledger, even when some participants are faulty or malicious, by requiring each participant to maintain a replica of a shared append-only ledger of digitally signed transactions, it seems that the pharmaceutical market is leaning toward the higher privacy and better operational efficiency of private blockchains.
“Now that barriers are better understood, IEEE is developing a strategic plan that includes standards development, as well as education and awareness programs, to allow the industry to move closer to adopting the technology,” concluded the IEEE report. Once the industry develops the necessary standards for Blockchain adoption in the pharmaceutical supply chain, nothing will stand in the way of pharmaceutical companies embracing the benefits of Blockchain technology, whether public or private.