Increasing Trust in the Pharma Value Chain using Blockchain Technology

Blockchain infrastructures and distributed ledger technologies are very well known as the technological pillars of crypto-assets and cryptocurrencies like Bitcoin, Ethereum, Cardano, and Dogecoin. In recent years the popularity of these cryptocurrencies has been skyrocketing as it enables novel decentralized approaches to payments and other financial services, i.e., they enable financial transactions without traditional banks. In 2021, the total market value of crypto assets has exceeded 1 trillion dollars for the first time in history. Nevertheless, the value of blockchain technology is not limited to providing support for decentralized finance services. Rather, blockchains are also deployed and used in many other industries like manufacturing, energy, healthcare, and supply chain management. These deployments are motivated by the decentralized nature of blockchain technologies, which obviates the need for controlling and managing business transactions through some trusted third party.

One of the most popular applications of blockchain technology beyond cryptocurrencies is its use for tracking and tracing transactions in the manufacturing chain. Specifically, blockchain technologies enable the decentralization of the manufacturing chain by offering distributed, secure, and reliable ways for tracking and tracing products, processes, and transactions. These benefits are very relevant for complex supply chains, where there is no effective way for centralized actors to track, trace and manage transactions. A prominent example of such a supply chain can be found in the pharmaceutical industry. This industry is highly regulated as it manages a variety of products that are made available in different countries and are subject to different laws and conditions.

Benefits of Blockchain Technology for the Pharma Supply Chain

The deployment and use of blockchain technology in the pharma supply chain is motivated by the following benefits of distributed ledger technologies:

• Cyber-Security and Data Protection: Blockchains are distributed and have no single points of failure. In case a blockchain node goes down they continue to operate. As such they are less susceptible to cyber-security attacks. Likewise, they can better protect the sensitive data that are exchanged across the pharmaceuticals chain.
• Data Provenance and Transparency: Distributed ledger technologies and blockchain developments offer full transparency to the pharma chain participants. This facilitates auditing and fosters trusted relationships across the various supply chain actors. Moreover, blockchains are excellent for tracking and tracing industrial data across the supply chain. Specifically, they enable the implementation of resilient and trusted data provenance systems, leveraging the tamper-proof properties of blockchain technology i.e., the fact that the ledger cannot be changed. This facilitates the process of tracking goods and services in a reliable way.
• Fight fraud and theft with provenance authentication: The tamper-proof properties of blockchain solutions also enable the implementation of fraud detection and counterfeiting applications. For instance, they ease the detection of potential fraudulent actions based on access to an immutable record of transactions in the blockchain. Moreover, when using a blockchain, manufacturers, retailers, regulatory authorities, and other stakeholders can very easily spot fake drugs by accessing end-to-end information about them. Hence, blockchains facilitate pharmacies to ensure that the products on their shelves are authentic.
• Regulatory Compliance: Along with fraud detection, regulatory authorities can process the blockchain ledger to audit the transactions’ compliance to applicable laws and regulations. For instance, they can check whether pricing constraints are met and whether general practitioners adhere to their prescription limits. Likewise, other national or regional constraints can be checked on specific segments of the supply chain where they apply.
• Cold Chain Management: Pharma blockchains can be also enhanced with value-added services such as cold chain management services. The latter is key towards auditing and ensuring the quality of temperature-sensitive drugs. In this direction, blockchain services are augmented with functionalities for managing and tracing temperature information across the different locations where the drugs are transported. Likewise, smart contracts for spotting and reporting temperature and other quality-related violations can be implemented.

Deployment Examples and Persisting Challenges

Acknowledging the benefits of distributed ledger technologies for the pharma chain, many companies have implemented, deployed and experimented with blockchain systems. As a prominent example, back in 2019, several pharma companies participated in FDA’s Drug Supply Chain Security Act (DSCSA) pilot. The pilot implemented blockchain-based tracking, tracing, and verification for pharma products. Security and interoperability requirements were validated during the pilot implementation and operation. The results of the pilot were positive, as the blockchain systems were proven capable of meeting the requirements of the DSCSA.

As another example, the PharmaLedger project in Europe demonstrated the management of patients’ electronic medical records using blockchain technologies. As part of the project, pharmaceutical companies used the blockchain to provide accurate and up-to-date information about their products. Patients were able to access this information as part of their medical records and prescriptions. The project demonstrated the benefits of a decentralized and fully digital process. It was sponsored by the Innovative Medicines Initiative (IMI) and proved the benefits of blockchain technology for accurate and trusted information sharing between pharma companies and patients.

Despite the benefits of blockchain technology for the pharma chain, there is still a lack of very large-scale implementations. Most projects are either small scale or at a pilot stage. This is because of the performance limitations of blockchain technology, the lack of experience in blockchain application development, but mainly due to that there is no easy way to transition from conventional centralized and paper-based platforms to decentralized blockchain-based ones. Moving from a centralized model to a decentralized paradigm requires not only a technology shift but also a change of processes and of the overall culture of supply chain participants. These are some of the barriers that inhibit the adoption of distributed ledger technology at scale.

Overall, blockchain technologies and applications provide excellent use cases for pharmaceutical companies, including use cases that boost security, increase automation, and save costs. Moreover, the blockchain use cases for the pharma chains are relevant to all stakeholders, including pharmaceutical manufacturers, retailers, pharmacies, patients, regulatory authorities, and other supply chain actors. Blockchain’s potential in the pharma industry is nowadays proven, yet several adoption barriers persist. In this landscape, technology companies and high-tech startups should look for innovation opportunities at this space. At the same time, other business actors of the pharma industry and the pharma supply chain should gradually prepare to adopt more decentralized, yet more reliable and secure processes.