Blockchain is best known as the technology behind Bitcoin, but it also has deep potential in the $13 billion supply chain market.

Pharmaceutical supplies can be perishable, fragile, and very expensive. Yet, keeping track of them as they move along the supply chain from manufacturing to use isn’t always a transparent process.

Thousands of people and companies interact with the supplies, whether a freight forwarder, customs inspector or truck driver, all working together to send materials around the world.

Hovering over the supplies, or expecting these disparate parties to integrate into a seamless system is impossible, but there is a way to keep an eye on pharmaceutical supplies as they travel thanks to a combination of new sensor technology and the use of blockchain.

What is Blockchain?

Blockchain is best known as the technology behind Bitcoin and related cryptocurrencies, but blockchain has a deep well of potential that has only begun to be tapped by industries like banking, and that includes the $13 billion supply chain market.

At its core, blockchain is a digital account book. Each block is chained together in a sequence that serves as a digital record. What makes the technology useful for pharmaceutical and other supply chains is a combination of security, independence from central authority, and its use of semi-autonomous smart contracts.

For those involved in the pharmaceutical supply chain, those three legs support the kind of supply chain system that pharmaceutical shipments, sometimes worth tens of millions of dollars and traveling through high-risk areas, need.

Underlying the various software aspects of the blockchain-backed pharmaceutical supply system are high-tech sensors and internet connected devices that make the system even more self-regulating. Sensors can not only track location but keep track of all kinds of external environmental factors that are especially crucial for pharmaceutical supplies.

Shock or temperature changes can be measured along the way, avoiding nasty surprises at the end of the journey. The same blockchain technology can be utilized by hospitals to verify what medication they are using and in what dosage, with a far better rate of accuracy than manual systems.

Secure Serialization of Every Block

Every miniature digital ledger created is encrypted and mathematically unbreakable—time-stamped and created with a cryptographic signature key that cannot be counterfeited. Once a data block is in the chain, it cannot be altered or removed.

So, with each transfer of goods, another block is added to the chain, and if there are amendments or changes to schedules and routes, new blocks are added so the history of the change is preserved. The data cannot be changed or moved, which makes auditing easy and ensures a level of integrity that is impossible in other circumstances without a heavy investment of time and money. 

Unlike a physical chain though, the blockchains aren’t tied to any one spot. There’s no central authority that the information must go through, and transactions don’t require a middleman institution.

Decentralized Data Tracking

In standard pharmaceutical material tracking systems, all the data goes through a centralized system in order to coordinate new information. The nature of blockchain eliminates the need for integration.

When the manufacturer creates the first block in the chain, it gets passed into the cloud, where any authorized user can add to the chain, keeping track of the materials and updating or altering plans as needed. Since there’s no central server that can go down, the data never become inaccessible.

It also eliminates the need, and cost, of a middleman service vendor to coordinate the movement of data. That resilience, combined with blockchain’s security strength, makes it utterly reliable compared to other methods of tracking pharmaceutical supplies. And the blockchain can partially manage itself at the same time.

Semi-Autonomous Smart Contracts

Blockchains aren’t simply a recording of data. They are capable of holding instructions, known as a “smart contract,” which allows it to carry out a set of instructions when predetermined conditions are met. For example, when a shipment from a pharmaceutical supplier arrives at its destination, a smart contract could issue a “Proof of Delivery.”

The Proof of Delivery smart contract would issue an EDI214 X1NS to a VAN for forwarding to the shipper and carrier, triggering the already established, trusted, and integrated invoicing and payments process. This serves to effectively streamline existing processes and remove a source of delay.

A similar Goods Receipt smart contract could trigger a second process once the customer adds a “Verification of Goods Receipt” block to the serialized blockchain.

Another smart contract could be used to automatically send out the payment to the manufacturer upon receiving the Verification of Goods Receipt. The payment itself could use blockchain technology and Bitcoin, or use an existing system, to pay the appropriate amount of money to the supplier.

No banks or third parties need to be involved nor would they require a portion of the payment. And, because of the individual and unchangeable blocks in the blockchain, it would be impossible for anyone to intercept or otherwise steal the money in between the buyer and the seller.

Blockchains are the most secure environment to run smart contracts. They have the secure, reliable infrastructure to deploy and execute smart contracts—and in the process will redefine contract management for supply chains.

Blockchain Starts Now

Blockchain technology is far from universally accepted right now, but the trend is pointing in that direction. Open source projects are already creating systems for different industries and the value of this kind of transparent, detailed oversight is very obvious when it comes to pharmaceutical supply chains.

As these efforts create standards for the technology, it will just be a matter of time until blockchain and the connected technologies will become a best practice. Early adopters will benefit from the competitive advantage blockchain and distributed ledger technology offers. And the winners will be those that form the first links in the industry’s new chain.

About the Author
Jim Haughwout is the CTO of Savi Technology, a provider of big data/machine learning analytic solutions, supply chain management software, and sensor technology. His twenty-five years of work in sensors, data, and electronic commerce include 15 years building technology for several high-security, regulated industries, including the Intelligence Community, biopharma, healthcare, and financial services.

This story can also be found in the January/February 2018 issue of  Pharmaceutical Processing.

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