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How Pharmaceutical Blockchain Technology Challenges Can Be Overcome

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By Ed Lamb, DrugPatentWatch Writer

Pilot projects are underway, but regulatory and stakeholder buy-in concerns remain

When pharmaceutical supply chain stakeholders met recently to discuss applications for blockchain technology, they agreed that the same basic tools used to manage Bitcoin represented the keys to complying with FDA mandates to prevent drug counterfeiting and adulteration. Surprisingly, they also came to a meeting of the minds over the major challenges to implementing blockchain for pharmaceutical transactions and on a basic industry approach for solving those problems.

Other blockchain applications have been proposed and piloted, but meeting the requirements of the 2013 Drug Supply Chain Security Act is seen as the most practical and beneficial. The law sets a 2022 deadline for launching an electronic, interoperable system that lets manufacturers, wholesalers, retailers, health care facilities and health care providers identify and trace prescription drugs.

The regulators and manufacturing, wholesale, pharmacy and health system executives who took part in the Pharma Supply Blockchain Forum foresee having working components of such a system that relies on blockchain technology in place by the end of 2019. Achieving that vision will require, in the words of a summary prepared by the convening Institute of Electrical and Electronics Engineers Standards Association, “effective collaboration and harmonization with multiple trading partners and regulatory agencies.”

Introducing Blockchain

The single biggest challenge to ensuring widespread adoption of blockchain technology exists in explaining how the technology operates. As Investopedia states, “most consumers simply do not understand the extremely complicated concept of blockchain technology. In order to overcome this challenge, companies will need to find ways to precisely explain what they do in easily understandable language — and how they intend to deal with issues like secure online transactions and consumer privacy.”

The group gathered for the IEEE-SA forum did not suffer from such benightedness. For the purpose of understanding how they perceive the potential of blockchain technology, it should suffice to know that “blockchain” describes a particular use of digital ledger technology. A new “page” — a block — in an item’s ledger gets generated each time the item transfers from one person or place to another. The older blocks cannot be altered, and the contents of each new block must be verified by participants in the chain.

For a batch of pharmaceuticals, blocks in a chain could start with the sources for the active pharmaceutical ingredients and excipients. New blocks could represent shipping, wholesale and retail contracts. At the provider and patient end, blocks could include prescription orders and administration calendars.

As described in an earlier DrugPatentWatch article, creation of such a detailed, visible and verifiable supply chain record promises to greatly reduce the sale and use of counterfeit medications. And with proper coding, contracts included in the chain could execute automatically when specific information is added. For instance, acknowledge of receipt of a shipment could trigger the electronic transfer of funds from the recipient to the sender.

While high-profile hacks of Bitcoin accounts have shown that blockchain cryptography is not foolproof, the information is highly secure. Faking a chemical assay or bill of lading for a pharmaceutical batch would certainly be more difficult than what most drug counterfeiters do right now.

Plotting a Path Forward

Securing data is, of course, an ongoing problem with no final solution. Other roadblocks that will need to be cleared repeatedly include

• Making blockchain technology compliant with existing regulations, especially HIPAA;
• Writing new regulations to allow innovative uses blockchain technology;
• Overcoming late adopters’ resistance based on lack of understanding and mistrust; and
• Ensuring administrative costs are shared reasonably.

These and other challenges to using blockchain in the pharmaceutical supply chain stem from what the authors of the IEEE-SA forum report call the intercontinental, fragmented and siloed nature of the medication production and sales industries.

Regardless of what else happens with blockchain, the digital ledger technology proposed for identifying, tracing and verifying products and transactions must interface seamlessly with existing databases and software. The stakeholders convened by the IEEE-SA accepted that reality as a given and went on to list three other primary challenges:

• Who will pay for the blockchain technology?
• Who “owns” the data on the blockchain?
• How to get buy-in from key users and decision-makers to implement?

Those baseline questions were used to create a survey that was sent to executives at drug manufacturers, wholesalers and pharmacies and health care facilities. Respondents’ identities were verified to produce a pool of 300 completed surveys that were returned by roughly equal numbers of individual from each group of participants in the pharmaceutical supply chain.

Respondents all agreed that drug manufacturers should own their data and pay the majority of costs for putting blockchain technology in place. They also agreed that “uncertainty of compliance with the FDA when utilizing blockchain, the visibility of the data, and trusting the partner’s ability to view company information in an autonomous system” would slow blockchain rollout.

Manufacturers cited network integration as their greatest concern. The other survey respondents pointed to doubts over whether all necessary parties would buy into using blockchain.

Despite these worries, 20 percent of respondents indicated that their organizations were developing or conducting blockchain pilot projects. As those efforts take shape and yield lessons on how to build, scale, regulate, fund and secure blockchains for pharmaceuticals, many more conversations like the one organized by the IEEE-SA need to occur.

As the group’s State of Blockchain Adoption on the Pharmaceutical Supply Chain Industry Study concludes, “There is a need for more education for industry stakeholders (business executives, enterprise data managers, regulators, etc.) at multiple levels — from baseline introduction to advanced principals and understanding.”

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