Counterfeit drugs are a billion-dollar industry. Could blockchain – the technology behind bitcoin – be the answer?

The market for fake drugs is booming – estimates suggest global sales in the realm of a couple of hundred billion dollars a year, where about 1 percent of all drugs in circulation in Western markets (and about 10 percent on average globally) are believed to be fake. With the globalisation and complexity of supply chains, together with the growth of the internet and online pharmacies, the shady world of black market pharmaceuticals is a top concern for the industry and health regulators.

In response to the need to secure the pharmaceutical supply chain, the US and EU have both introduced legislation that requires an electronic system to trace and authenticate medicines as they move through the distribution network. But some critics have claimed that these supply chain solutions aren’t interoperable and will, in fact, do little to prevent counterfeits and protect patients.

So, what’s the solution? In an attempt to embrace disruptive technology from outside the industry, some people have put forward the idea of blockchain, the technology more well known in the world of finance and cryptocurrencies such as bitcoin. And the more people think about blockchain and pharma, the more traction it’s gaining. Indeed, a survey by The Pistoia Alliance of 120 life sciences executives last year found that 83 percent expected blockchain to be adopted by the industry within five years.

“Blockchain technology and current applications are still in its infancy,” says Constantin Lichti, research associate at the Frankfurt School Blockchain Center, adding that the technology is only being explored in pilot projects at the moment and is still very much under investigation. But his bet is that blockchain will have a “powerful impact” on the drug supply chain. Indeed, Lichti’s colleague at the Frankfurt School Blockchain Center, Professor Philipp Sandner, believes the technology will revolutionise nearly every industry and that in pharma, in particular, it has “long-lasting disruptive potential” where it will “significantly increase security, research and efficiency on all levels”.

This might all sound exciting and impressive, but you could be excused for not knowing what blockchain is. By definition, it’s a digital, distributed transaction ledger of cryptographically secured time-stamped records. Or in layman’s terms, a time-line chain of blocks, where blocks are transaction records. The system is usually public and doesn’t reside on a central database – instead it runs on computers by volunteers around the world (in other words, it’s distributed). But importantly, and perhaps its most significant attribute when it comes to pharma and the supply chain, blockchain uses heavy-duty encryption to ensure virtual security so that each time-stamped record cannot be hacked or modified.

Besides finance, the food industry and global logistics and shipping are two sectors where interest in blockchain is high. Even in healthcare, blockchain could be used to secure electronic health records, which has piqued interest and already has IBM and the US Food and Drug Administration exploring the health data possibilities. For any industry where either data or physical goods have to change hands, blockchain could have a significant role to play.

“The core idea behind blockchain technology is to track all transactions of an asset in a distributed ledger, thus enabling the digital transfer of values – directly and without middlemen or intermediaries,” explains Lichti. “The benefits of blockchain are therefore a decentralised and transparent system that doesn’t need trusted third parties, such as banks, but establishes trust via secure and traceable transactions and an immutable IT infrastructure. Furthermore, everyone can participate in a peer-to-peer network ecosystem, allowing for faster and cost-saving dealings.”

For pharma’s supply chain then, blockchain could be a big deal. For starters the challenges around the complex nature of the supply chain and the vulnerabilities that arise when drugs transfer ownership and change hands could be mitigated through the use of blockchain, providing more visibility and oversight along the supply chain, as well as disincentivising the illicit trade in counterfeits. It would also allow improvements in tracing the distribution of medications, important in the case of diversion or for product recalls. And manufacturers would be able to keep an eye on repackaging and parallel trade. Furthermore, according to Sandner, because blockchain increases transparency, consumer trust would likely improve.

New projects

While the full benefits of blockchain in pharma will not be fully realised for some time, the technology’s potential should not be underestimated, says Dr Francisco Curbera, director of foundational technologies at IBM, adding that it is particularly well-suited as a supply chain solution. “Blockchain offers the ability to trace and query the origin of a drug (or active pharmaceutical ingredients), as well as track its progression throughout the entire supply chain. This would provide increased brand protection through prevention or rapid reaction to manufacturing defects. Blockchain-based supply chain solutions will also help monitor and manage the distribution of controlled substances and can become an important element in the fight against the opioid abuse epidemic.” Furthermore, the experience with blockchain in other industries, notably food, “have already demonstrated the potential of blockchain technology to address challenges in supply chain management”, he adds.

In a bid to take advantage of the technology’s potential and address the issues with pharma’s supply chain, a number of outfits have begun to look at blockchain-based solutions. For instance, Merck has developed a solution to fight counterfeiting by ensuring authenticity from production to delivery. A similar prototype solution has been borne out of a hackathon event and developed through the Frankfurt School Blockchain Center. Called LifeCrypter, the product aims to empower patients with an app that traces the trade history of a medicine while disincentivising the distribution of counterfeit drugs at the same time. Meanwhile, the Center for Supply Chain Studies in Chicago is currently researching how blockchain could fit with the US Drug Supply Chain Security Act (DSCSA) legislation.

That legislation, like the European Union version under the Falsified Medicines Directive, seeks to secure the supply chain through an electronic tracking system. However, the regulations don’t specify the technology solution to be used in their implementation. As a result, a group of companies spearheaded by blockchain firm Chronicled and supply chain consulting group The LinkLab, along with drug giants such as Genentech and Pfizer, have launched the MediLedger Project to explore the use of blockchain in pharma and test the feasibility of an interoperable blockchain solution to meet DSCSA regulations. In 2018 the project aims to establish a framework for pharma industry governance for a blockchain solution and drive the structure of the platform, including standards, functionality and business priorities. Also this year, it aims to provide the opportunity to test data/product ownership transfer between partner companies.

“We know the future is a system that verifies and authenticates medicine with each transaction,” the team writes on the MediLedger Project website. “Our blockchain solution will enable improved supply chain security: no illicit product can enter the trusted network, or if it tries it will be identified. Investigations and recalls will be fast and accurate. We know that the real value in industry will come with widespread adoption of blockchain technology, working on a common platform to provide true interoperable capability that never existed before.”

It will still be a good couple of years before a sufficient blockchain model is implemented and in widespread use in pharma, according to the Center for Supply Chain Studies. Sandner believes it will be closer to six years. Issues around scalability and privacy still have to be addressed, as well as the impact on smaller distributors if multiple platforms come into play between different pharma clients. Says Lichti: “The existing infrastructure and the number of users participating in the blockchain ecosystem are key success factors of an industry-wide implementation… Bringing blockchain into EU/US legislation requires first solutions that are industry-wide accepted and grounded on a clear legal framework on how the technology can be used.”

Meanwhile, the opportunities with blockchain in pharma don’t start and stop with the supply chain. There are lots of murmurings about the technology’s potential in the clinical trial space and also in regards to funding clinical development. “Due to its foundational nature, there are many ways how blockchain technology could change the pharma industry,” says Lichti. “For the moment, blockchain only seems to be a possibility, not a technology with applications carved in stone.”

But that said, both Curbera and Lichti recommend that pharma companies start looking at blockchain sooner rather than later. Curbera says it is important for pharma to understand the technology’s impact on the industry and the differentiated value blockchain-based solutions can bring to a company’s business.

In the meantime, a focus on the supply chain is where the vast majority of the industry will look to leverage the potential of blockchain in the first instance. Whether counterfeit medicines could become a thing of the past if blockchain transforms pharma’s supply chain is still one for debate, but there is no denying that blockchain is a disruptive technology and it looks like it’s here to stay.

Katrina Megget is a freelance journalist specialising in the pharmaceutical industry