• Nick Roquefort-Villeneuve

Blockchain and The Drug Supply Chain Integrity

Ah… this good old and magical 14-millimeter-long, four-sided, blue pill that’s about to make you feel like a twenty-year old again, full of energy, stamina… Well, isn’t it the effect this rhomboid is supposed to have on your body and your brain? But… what’s going on? It’s only been minutes, and it already feels like hours. Suddenly filled with anxiety, you grab your smartphone to google “when does the effect start?” Okay, let’s wait a bit longer… What? Still nothing? Nada! Niente! Time to rush to your phone again and ask Siri, “How do I really know the effect has started?” All that to hear Susan Bennett (yep, she’s Siri’s voice) answer, “This is about you, not me.” If only you hadn’t bought those magical little pills online, on some Canadian website that’s mysteriously hosted by a Chinese Internet provider… at a fraction of the price you would have been charged at Walgreens or CVS. But all that is now left is a piece of counterfeit drug you can have actually use as a sweetener in your coffee tomorrow morning.


If you sum up the money that is lost to counterfeit drugs and the consequences those drugs have on the wellbeing of individuals who ingest them, the total cost amounted to $200 billions last year. How can Blockchain bring a solution to the problem of counterfeit drugs by providing authentication at all stages of the drug supply chain? And can this technology be applied to counter the proliferation of counterfeit products in general, whose imports were worth about half a trillion dollars last year, or approximatively 2.5% of global imports?


Yes, Blockchain Can Help the Legit Market


Blockchain records transactions in a decentralized, immutable, and transparent system. Decentralized because control over the ledger isn’t exercised by a single person or entity, immutable because once the data is written inside the Blockchain it cannot be overwritten, and transparent because all stakeholders can access the same information at the same time. Alright, that sounds much better than a (cloud) system that is centralized, where control is exercised by a handful of individuals or a single entity, where the data stored can be overwritten and/or deleted by those who have control, and where individuals or entities that access the system have no indication regarding the pertinence and validity of the information they extract or view. Still, in what fashion can a Blockchain network truly help validate the integrity of the drug supply chain?


Supply chain and logistics companies are already working on integrating Blockchain technology to their operations. The idea is to leverage tools such as IoT sensors and other GPS and bar code scanners to automate the collection, storage and validation of the information that pertains to a specific SKU (stock keeping unit) in order to trace its journey from production to delivery to the client. Applied to the pharmaceutical industry, a Blockchain network’s distributed ledger can be used to track pharmaceutical raw material and finished products from manufacturers to end-users. Each participant would have its one node in the network with full on access to the same immutable information. Who should those participants be? Among many others, the producer who ships batches of raw material to the pharmaceutical company, the company that manufactures packaging for the pills, the pharmaceutical company that produces the drugs, the drugs distributor, and the retailer.


Blockchain and Drugs Supply Chain: Example


What follows is a potential high-level scenario that would ensure the integrity of drugs supply chain thanks to Blockchain.


(1) The code bar associated to a batch of raw material is scanned. The reference number is sent to the Blockchain. A smart contract that consists in associating a unique authentication key or hash to the reference number is executed. The hash is recorded in the Blockchain.


(2) The pills that are produced out of the same batch of raw material are scanned and their reference number recorded in the Blockchain; via the execution of a smart contract, they are assigned the same hash as previously, itself stored in the Blockchain.


(3) The reference numbers of the packaging in which the pills are placed are scanned and stored in the Blockchain. This action triggers the execution of a smart contract that assigns the same authentication code to all the packages.


(4) Packages with a similar hash are placed inside a box that contains a bar code. The latter is scanned, and its reference number is pushed to the Blockchain before being assigned the same authentication code via the execution of a smart contract.


(5) The box is shipped to the drugs wholesaler. GPS and bar code scanning track the merchandise. Each time a bar code is scanned or a GPS signal is detected, the information is sent to the Blockchain, which triggers a smart contract that assigns the same hash to each action, and so on… The last stage being a bar code scanned at the pharmacy as a customer purchases the meds. The information is sent to the Blockchain, which triggers a smart contract and assigns to the operation the initial hash.


Traceability from the producer of raw material to the end-user is irrefutable, thanks to the immutability aspect of the Blockchain network that stores all the data pertaining to the process. This is a very simple model that can be applied to any supply chain activity.


Blockchain and Drugs Supply Chain: Challenges


The very essence of the counterfeit industry is that it bypasses all forms of verification systems that regulators put in place. Counterfeit merchandises are exchanged under the counter through parallel brick-and-mortal networks and over the Internet. The same phenomenon naturally applies to counterfeit drugs. Blockchain will not help eradicate counterfeit drugs as long as they remain available via those channels and as long as individuals continue to buy them. The rationale behind an individual’s choice to risk buying a box of little blue pills online is purely economic. It does not necessitate a prescription hence a (potentially embarrassing) visit to a doctor (and probably paying medical insurance every month), and the knockoff med is sold at a discount.


As I often times say, Blockchain is not for everybody. The implementation of a Blockchain network requires much computer resources, which in turn need heavy financing. Also, there is a level of complexity that increases as the volume of participants involved grows. Does each business partner have the proper IT resources to manage their own network node? If not, what are the financial ramifications on the peers that do? Consequently, at the end of the day who should bear the cost of implementing and maintaining the network? The “wealthy ones,” aka the pharmaceutical manufacturers? Furthermore, do Big Pharma’s truly have a choice but to provide such financing? In 2013, the Drug Supply Chain Security Act (DSCSA) was passed, and it requires that “each pharmaceutical packet be traceable to its point of origin by an electronic and interoperable system by 2023.” Pharmaceutical companies will certainly need to explore the utilization of Blockchain technology in supply chain operations to streamline processes in order to make them more efficient and cost-effective, so they can meet this new level of compliance. The same DSCSA rule also applies to manufacturers, repackagers, wholesale distributors, dispensers and third-party logistics providers. Other stakeholders in the chain may indeed not have much of a choice either.


Finally, there are countries where there is little if no regulation at all. In impoverished countries, the absence of regulations and the little access to technologies prevent authorities from controlling the quality and the origin of imported meds. How many times have you heard in the news about corrupt wholesalers purposely selling counterfeit drugs to African countries, taking advantage of the fact that developing IT resources locally is either prohibitive financially or simply not a political priority? In more developed nations, red tape and administrative dysfunctions or misalignment can also be a limitation to the implementation of Blockchain for drugs supply chain. As an example, in 2015 the Chinese equivalent of the FDA had planned of establishing an electronic drug tracing system, but it met the strong opposition from pharmacists, who argued that scanning medicine and uploading the information into the system would incur high financial and time costs for them and ultimately greatly cut their profit margins. In addition, the Chinese FDA required that pharmacists trace all medicine, while hospitals (that sell approximately 80 percent of total medicine) didn’t have to comply. So, the entire project was abandoned.


To Conclude: Is Blockchain for Drugs Supply Chain Feasible?


A Blockchain network acts as a peer-to-peer network, where the immutable information is shared among all participants in full transparency. The one great benefit of Blockchain for drugs supply chain is that it allows all stakeholders to verify the authenticity of the transactions stored inside the ledger. As a result, this technology can certainly help prevent counterfeit meds or drugs shipped by unofficial sources from entering the pharmaceutical supply chain. The reality is also that there’s a cost associated to implementing and running this technology, which for most part remains unregulated to this day. After all, the latter may actually be the biggest hurdle at the moment.



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