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Blockchain: a network to help ditch pharma's silo approach?

Pharmaceutical supply chains have been bogged down by paper-heavy documentation and a silo approach to information exchange. How far can blockchain technology go to streamlining a product’s journey from factory to patient?

Blockchain has become something of a buzzword over the last few years. This much-hyped distributed ledger technology which facilitates the chronological tracking of transactional data is making large inroads into sectors such as financial services and energy, but its potential to address vulnerabilities that exist in the pharmaceutical supply chain is still being tapped.

In a nutshell, blockchain facilitates cheaper and quicker sharing of information when business processes or product lifecycles stretch across a whole gamut of companies, allowing them to work together securely in a shared ledger without any one party being encumbered with the responsibility of sole ownership. With code and cryptology doing the audit legwork, blockchain can greatly reduce friction within the supply chain as well as the risk of theft or fraud.

The technology has inherent advantages in terms of security and transparency. A blockchain ecosystem exists across a wide network of computers, meaning hackers have no centralised data point upon which to launch an attack and no possibility of making illicit changes to data. Meanwhile, all legitimate users have complete visibility of transactions and modifications, which have been logged into neatly ordered chronological blocks.

Pharmaceutical supply chains are extremely complex; products move from lab to manufacturing facility to wholesalers in a tightly regulated environment requiring regular checks for authenticity and validation purposes.

Vulnerabilities in these vast medical supply chains have inevitably been identified, particularly amid the recent stresses and strains that the current COVID-19 pandemic have applied. Tracking and tracing of products is often executed manually via cumbersome paper-based documentation, which can lead to the introduction of counterfeit products that are difficult to pinpoint in these tangled webs of regular information exchange.

Tailor-made solution?

On the face of it, blockchain appears to be a tailor-made solution for optimising drug supply chains. However, one of the biggest criticisms that providers of any new and hyped technology have to counter is that they invent problems that don’t exist in order to sell a solution.

“You shouldn’t do blockchain ‘just to do blockchain’,” says Susanne Somerville, CEO of California-based start-up Chronicled. “You should do an evaluation of existing technologies and how problems can be solved. It should be an additional tool in the kit; just because you have a hammer, it doesn’t turn everything into a nail.”


"Blockchain should be an additional tool in the kit; just because you have a hammer, it doesn’t turn everything into a nail.” - Susanne Somerville, Chronicled


Jason Lacombe is CEO at Veratrak, which provides a blockchain software platform for the life sciences sector, which uses a workspace to track, review, sign off and approve all documentation.

He insists that the problems within pharma supply chains are very real: “What we’re seeing with our customers is there’s currently vulnerabilities and gaps in how information and data documentation is exchanged outside the four walls of organisations. So when we started looking at the problem to solve, we quickly noticed that the majority of batch documentation, or logistics-specific information, such as shipping labels, were being shared over emails, fax or post; it’s a very inefficient, unsecure and non-collaborative way of sharing those documents with your providers and your vendors.”

He adds that in order to address this evident vulnerability, the solution is to build a secure bridge outside those four walls.

Regulatory obligations

Of course, ironing out inefficiencies is not the only motivation to take blockchain seriously. Pharmaceutical regulation around drug security is evolving rapidly, with the US at the vanguard of the transformation. The country’s Drug Supply Chain Security Act (DSCSA), passed in 2013, requires manufacturers to comply with strict track and trace requirements, including unique identifiers on each unit sold. By 2023, an electronic interoperable system will be required to pass the serial number information of drug products between trading partners at all points of the supply chain.

The European Union’s Falsified Medicines Directive, which came into force in 2019, obliges manufacturers operating in the EU market to ensure their products carry a unique identifier and anti-tampering device and are to be listed in the repository system. Unlike the DSCSA, it is a ‘book-end’ approach whereby serialisation codes uploaded to the repository at the manufacturing stage are authenticated at the point of dispensing to the patient.

Lacombe is of the opinion that the way the DSCSA has been written and enforced presents a much better opportunity for utilising blockchain technology compared to the European legislation.

“Counterfeit medicine tracking and tracing is not the best use case idea for blockchain in Europe,” he says. “It’s very hard from a technological standpoint to connect the digital with the physical, the idea of trying to track counterfeit products and then aggregating that. Blockchain’s part of the solution but it’s not the only solution; there are a lot more steps that need to be taken for the industry to digitise and also do a better job securing the physical world before you can put a blockchain solution on top of that.”


“Counterfeit medicine tracking and tracing is not the best use case idea for blockchain in Europe,” he says. “It’s very hard from a technological standpoint to connect the digital with the physical, the idea of trying to track counterfeit products and then aggregating that" - Jason Lacombe, Veratrak


One provision of the DSCSA it that all prescription medicines returned to distributors must have a unique product identifier verified with the manufacturer before being made available for resale.

The MediLedger Network (launched in 2017 initially as the MediLedger Project) brought together pharmaceutical manufacturers and wholesalers into a working group to explore how blockchain could meet the DSCSA track and trace 2023 deadline. The consortium includes Gilead, Pfizer, Genentech and Bayer among others, with Chronicled supplying the underlying blockchain technology.

Somerville at Chronicled says MediLedger is set up as a set of distributed notes run either by the companies themselves or by solutions providers on behalf of their customers and offers a Product Verification System to meet the demands of the DSCSA product identifier provision.

“It allows manufacturers to submit their product item numbers along with a company prefix identifier and a verification endpoint -- an IP address where their database is located -- to the blockchain,” she explains, adding that all these individual products act like phone numbers.

“This allows a wholesaler to upload that entire industry phonebook and they can scan a barcode in their warehouse which goes to a look-up directory; it will route the message, check if the forward data elements are there and if they’re authentic and answer back in less than a second,” she says.

Another blockchain solution MediLedger provides is a mechanism to process disputed chargeback claims between pharmaceutical manufacturers and distributors caused by uncoordinated business rules and a misalignment of customer and contract data between trading partners.

Drugs in the US are sold to wholesalers at list price, but hospitals can negotiate better prices through entities like group purchasing organisations (GPOs), in which case the wholesaler will ask the manufacturer to reimburse the difference, known as a chargeback. The process can be lengthy and sticky.

“This requires everyone to update their systems independently in silos all the time with changes in datasets of prices, changes in what GPO the hospital belongs to, what contracts they are eligible for and so on,” says Somerville. “Every manufacturer defines eligibility differently, so we’ve created the ability for companies to sit in a secure network together and share the common information about identifiers for hospitals and dispensers. We can put rule enforcement on every exchange of data, and we can use secure peer-to-peer messaging to allow these companies to know immediately if the data or transaction they’re transmitting doesn’t meet the rules of their trading partner.”

Slow to digitize

Lacombe believes that while the pharma sector has been notoriously slow to digitize, many companies in the life sciences space are now sufficiently educated on the technology capabilities of blockchain. With the ongoing pandemic motivating companies to embrace remote working and try out new technologies, it seems like an opportune moment for blockchain providers to pick some low-hanging fruit from the pharma sector.

He says that at the end of the first quarter – when the pandemic was at its height – Veratrak usage among customers was up 300%: “Traditionally, it is quality teams, supply chain teams and artwork management teams using Veratrak but with COVID, we started to see companies using the platform outside of these core use cases; procurement teams sending out quotes and doing purchase order information because their hands were forced to do this.”

Whether the industry is still scratching the surface when it comes to realising the potential of blockchain to optimise supply chain management or whether most viable use cases have been identified is still a matter of debate.

Lacombe says that it will likely be a case of gradual steps in the right direction rather than a revolution: “First of all, the pharma industry as a whole needs to take a great leap forward so it can digitise; you can’t introduce a blockchain solution until it has moved off paper-based processes. Once we’ve done that, there will be a big push for better connecting physical to digital such as the use of sensors, and ultimately once we get there, we will really start to see some of the value you can get from a blockchain solution.”

Somerville likens the relationship between a blockchain node and a pharma enterprise to that between a smartphone and their owner: “In an area of life sciences and healthcare that so desperately needs transformation, it creates the ability to connect and to communicate directly peer-to-peer without requiring all the point-to-point integrations of the past. That’s going to be exciting and as data gets connected in this way, we are going to explore and find new ways to do business because the data simply wasn’t connected before.”

TAGS: Innovations
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