Points of View

Big Pharma must partner with blockchain disrupters to drive drug provenance

Jun 17, 2019 Sam Duncan

We have a serious issue with the provenance of genuine pharmaceuticals—counterfeit medications regularly appear in the market, with 10% of medical products circulating in low- and middle-income countries found to be substandard or falsified. But the problems don’t conveniently stop at international borders. In 2018, the UK seized over £2 million worth of fake medicines. If this issue continues, Big Pharma could face a major public backlash. Big Pharma tech leaders must think out of the box – having remained unphased by their competitors its time they explored blockchain startups and looked to partner, augmenting their supply chain.


There is a continued demand for provenance from pharmaceuticals, and regulators are already taking steps to provide it


The major challenge of drug provenance is something regulators are already trying to solve. China announced new regulations requiring drugs to have a unique identifier that includes specific, critical information such as which drug it is, the manufacturer, and the lot number. The US established legislation to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States, the 2013 Drug Supply Chain Security Act (DSCSA). It involves a slow rollout that requires pharmaceuticals to have developed enhanced drug supply chain security by 2023. Legislation like this has made drug traceability a strategic imperative for pharmaceutical companies.


With evolving regulatory requirements and ethical demands, pharmaceuticals must look to emerging technologies: Step forward, blockchain


Affordability is an ongoing healthcare issue, pushing big pharma to rethink technology investments to ensure they don’t transfer too high of a cost burden to consumers. With 8% of American adults already missing essential prescribed medicines because they can’t afford them, it’s key that tech leaders in the industry focus on meeting the dual aims of reducing costs as well as boosting traceability.


Blockchain presents a possible solution, allowing pharmaceutical companies to store the entire history of their drugs, from production to customer, on a blockchain, allowing near-instant tracking without the expensive storage costs. Walmart, for example, leveraged blockchain to track the origin of food, reducing a process that had taken approximately seven days to 2.2 seconds. If pharmaceutical companies apply blockchain, everybody can be certain of the authenticity of their drugs because blockchain stores all data on an immutable decentralized network, making it virtually impossible to tamper with once uploaded. Furthermore, the combination of blockchain with pharmaceuticals offers the benefit of interoperability by creating a public blockchain that makes it possible for anybody, from pharmacist to consumer, to track the origins of any drugs.


Blockchain startups are racing to supplement Big Pharma and solve major industry challenges


MediLedger: Founded in 2017, MediLedger uses blockchain technology to trace prescription medicines and prevent counterfeit drugs from entering the market, allowing pharmaceuticals to comply with DSCSA easily. One way they do this is by enabling pharmaceutical companies to keep an immutable record of all transactions on the blockchain. Each drug will be marked with a unique identifier enabling it to be traced to its origin. The record will also ensure that returned medicines are not counterfeit. If any complications were found with medications that had already been sold, MediLedger would allow clients to quickly detect which batch was affected and rapidly recall it, which could save a customer’s life.


BlockPharma: This French consumer-based startup claims 800,000 people die worldwide each year from consuming counterfeit medicine. To combat this, BlockPharma developed a blockchain solution that allows enterprises and consumers alike to trace the origin of their medicine by scanning a unique QR code on a smartphone; it immediately identifies counterfeit medications. Medications can be traced from the consumer to the laboratory because pharmaceuticals must register every transaction on the blockchain, which is immutable, allowing consumers complete confidence when using any medications.


Barriers to entry mean pharmaceuticals have historically been unphased by their competitors


Entering the pharmaceutical industry is no easy task. Huge barriers to entry range from extensive regulatory requirements to the high costs involved in producing the drugs—expensive medical professionals and clinical trials are only a small part of the cost. As a result, established operators in the industry see minimal threat from neither startups nor disruptors. Exhibit 1 shows evidence of this: life sciences lead digital complacency. The lack of competitors means that besides regulation changes, there is little need for life sciences companies to change their existing models.


Exhibit 1: Life sciences lead digital complacency



Source: HFS Research, Journey to the Digital OneOffice 2018
Sample: n=395 Enterprise Digital Leaders


Bottom Line: One million people die each year from counterfeit medicines alone. Pharmaceuticals must stop ignoring blockchain disruptors and create partnerships to enhance drug provenance.


People depend on medicines to remedy illnesses, and patients should never experience negative consequences from them. The number of deaths and counterfeit drugs in the market means there is clearly a problem, and pharmaceuticals must break the trend of being unphased by disruptors to solve it.

A new breed of disrupter is emerging, specifically around blockchain, which is looking to partner with industry leaders rather than compete with them. This presents an opportunity for incumbents to not only help improve the patient experience but also to easily and cheaply comply with regulations.

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