How blockchain is shaping Pharma 4.0

Blockchain and trust.  

The key word in the world of commerce is "trust." Without trust in the brand, consumers would never buy the product, nor would companies finalize a supply agreement. Globalization and e-commerce on the one hand have greatly expanded the commercial horizons of companies, but on the other they have not immediately been able to provide a substitute for the personal relationship between seller and buyer, between supplier and principal, capable of generating the trust that is essential to business. This is precisely where blockchain comes in.

What is blockchain  

The blockchain in fact, is nothing more than a "decentralized" database or distributed on hundreds of computers (nodes) that communicate with each other through peer-to-peer technology. Each computer has an exact copy of the entire database, synchronized in real time with the one present on all other nodes of the network.

Each proposed change to the database must be approved by all computers in the network, and only when the continuity and integrity of the previous changes has been verified, the new one is entered into the database. This creates a continuous and verified sequence of information, chained to each other, that is able to prevent any alteration of data.

Another feature of the blockchain is that it is completely decentralized, therefore devoid of a central authority that can turn the tables and decide what to change or not. The data chain recorded in this way is immutable, shared between the parties of the blockchain so that everyone can verify it and, precisely because of this, it is able to offer each party the trust we were talking about without the need for intermediaries and additional costs.

To give you an image of how a blockchain works, imagine a group of people, each with a huge ledger that is the same as everyone else's, and who agree from time to time on what can or cannot be written on this ledger.

The principle of operation just described also has another enormous advantage: data redundancy. If even one of these books were lost or altered, the copy held by all the others could easily solve the problem by locating the missing or altered data. If realizing controls of this type with traditional tools is unthinkable if not with a huge expenditure of time and energy, not so in the computer world, where information travels at the speed of light.

The strengths of blockchain, therefore, are:  

  • Veracity (transactions are certified by an immense network of computers)
  • Transparency (transactions are publicly accessible, like public acts drawn up by a notary)
  • Independence (through decentralization no one exercises a power able to influence or modify the transactions recorded therein)
  • Security (data recorded on the blockchain is protected by advanced cryptography systems and cannot be lost due to its redundancy)

Together these elements provide a perfect and secure traceability of every transaction or agreement recorded in the database, so that none of this data can be modified, deleted, altered or considered invalid.

Traceability and storage two essential elements  

Anything of value, whether tangible or intangible, can be tracked and exchanged on a Blockchain network, thereby reducing risk and cutting costs for all involved parts, and there is no doubt that it is precisely in the pharmaceutical sector, where product and process certification plays an essential role, that it can play a disruptive role.

In most developed countries, there are agencies in place to verify that the drug being marketed does exactly what it is intended to do.  However, in low- and middle-income countries (but worrying figures are also being reported in advanced countries due to the ease with which medicines can be purchased online), trade in counterfeit medicines, which escape the scrutiny of qualified agencies, is on the rise.

WHO estimates that one in ten medical products in low- and middle-income countries is substandard or counterfeit, and that 1% of medicinal products in circulation on Western markets are fake.

But this is not just a problem in less developed countries. In an increasingly globalized economy, pharmaceutical supply chains are increasingly complex, involving countries from all over the world.  Drugs manufactured in one country may be packaged in a second country and distributed and marketed in yet another country, making it more difficult to conduct proper controls on the supply chain.

Although the pharmaceutical industry has invested billions in defensive measures, so far the efforts have only slowed rather than stopped counterfeiters. According to PwC, a network that provides strategic business and legal advice, the most common anti-counterfeiting tactics only stop half of the counterfeit drugs at great harm to public health and the economy.

This is compounded by another, sometimes even more insidious problem. The raw materials used in the preparation of medicines, but also supplements and cosmetic products, very often come from non-EU countries where there are no reliable control agencies that can certify the absolute quality of the raw material purchased.

This forces pharmaceutical companies to carry out additional checks once the raw material is imported or, in the best case, to always turn to the same trusted non-EU supplier who has proven reliability and safety not only on the economic side but also, and above all, on the technical and scientific side.

It goes without saying that a tool that is able to certify the quality of the raw materials used and the preparation techniques, but also the path of the product in the supply chain, is able not only to improve the efficiency of the supply chain but also to reduce costs by promoting competition.

How blockchain can help  

The implications of blockchain in the pharma supply chain are many. The most immediate concerns the possibility of combating counterfeiting by ensuring continuity between drug production and delivery.

A drug, for example, through the use of RFID or NFC devices integrated in the primary packaging, can be followed step by step in its path from the manufacturing company to its destination, and each step would be recorded in an immutable way in the blockchain so that no counterfeit is possible, even if the secondary packaging, should be replicated.

The steps, thanks to the use of RFID and NFC standards could also be easily verified by anyone, even by the end user, who through modern smartphones that are, almost all, equipped with an NFC reader, would be able to reconstruct the entire supply chain.

As mentioned, combating counterfeiting of drugs in addition to having important implications for public health, also has important direct and indirect economic implications.

Pharmaceutical companies in fact periodically have to deal with a high number of returned drugs. This happens because of overstocking by wholesalers that can reach up to 2-3% of the drugs marketed globally, with a value of between 7 and 10 billion dollars.

Many of these drugs are then, after the appropriate controls, put back on the market, but not before having verified and eliminated the presence of counterfeit products.

In the EU, this is the job of the European Medicines Agency, but when it is necessary to work with other countries, where a centralized regulatory body is lacking, it can become extremely complicated for companies.

Through blockchain, pharmaceutical manufacturers can easily record the serial number of the packaging on blockchain in a fully automated manner and verify the return of that particular product.

Another interesting use case involves product storage. Modern RFID and NFC chips are able to evaluate any physical stress suffered by the product during transport, such as high temperature, humidity, etc. and record this data at any time and in an immutable way in a blockchain. Operators would then only have to verify, downstream, the correct preservation of the product, deciding on its eventual disposal if the recorded data should prove negative.

These are just some of the applications of blockchain in the Pharma industry, but there are many others such as inventory and overstock management, drug compliance, clinical trials etc.. In short, we are at the beginning of a real revolution in the industry and some of the horizons that this new technology is opening remain to be discovered.