Blockchain in the Pharmaceutical Value Chain

Blockchain in the Pharmaceutical Value Chain Through DynaSys Blog

Pharmaceutical manufacturers are assessing the potential of new technologies to help solve some of the more challenging issues facing the drug industry. Blockchain is one of the most talked about new technologies currently under evaluation. Blockchain is a cryptographically secure, trusted network based on the technologies that powers cryptocurrencies such as Bitcoin. These technologies are: public key cryptography, a distributed (peer to peer) network with a shared ledger, and a governing program that contains the controlling blockchain protocol.

The security and transparency that’s a core element of blockchain technology presents manufacturers with tantalizing opportunities to improve their manufacturing and supply chain operations. For example, one of the most pernicious problems affecting the global drug supply chain is that of counterfeit drugs. The World Health Organization has estimated the annual value of the global counterfeit drug market at over $200 Billion, almost 18% of the global pharmaceutical market. Blockchain technology may be well suited to help reduce the global distribution of counterfeit drugs by providing a cryptographically secure, distributed ledger open to all members of the supply chain.

How might this work? Recent regulations such as the United States’ Drug Supply Chain Security Act (DSCSA) and the European Unions’ Falsified Medicine Directive (FMD) require serialization or barcoding of drugs at a package level. Manufacturers could enter these numbers into a blockchain’s distributed ledger. As each supply chain transaction, with the serialized number, is recorded in the blockchain a secure chain of custody is established that allows the tracking of finished pharmaceuticals from producer to patient.

Smart contracts are another area where blockchain could help reduce the inefficiencies inherent in the complex healthcare value chain. Healthcare is moving away from the traditional fee-for-service model and becoming more focused on value to the patient. This will result in complex bundling of services and healthcare products between different members of the healthcare ecosystem. Reimbursement for these bundles will be based on complex rules, with each member of the bundle receiving their share based the fulfilment of defined outcomes.

By their complex nature, these common arrangements have the potential for miscommunication and mistrust between the multiple parties involved. A smart contract would provide a distributed, transparent contract where all copies are updated simultaneously upon completion of a given outcome. This could make the claims and reimbursement process more seamless as members would spend less time correcting inaccurate payments.

All payers in the healthcare ecosystem, from patients to payers are calling for increased safety, lower costs and more efficiency in how healthcare is delivered. Although blockchain is still in the early stages of evaluation, it clearly has potential to make the drug supply chain safer and the delivery of healthcare more efficient.