Blockchain: A Viable Solution for Supply Chain Management in the Pharma Sector

Following the hype of blockchains and their possible applications, I would like to contribute on the discussion about the role of blockchain technology in the pharmaceutical sector. My primary goal is to identify contemporary issues and propose solutions, adding to the realization of positive change in an industry, considered by many as insufficiently transparent.

Contentious topics in today’s pharmaceutical sector

Over the last years, global media has frequently criticized big pharma. Numerous voices have accused companies in the industry of improper and/or unethical behavior in their daily operations and their supply chain management.

Most of the critique is related to lack of transparency and proper coordination. A number of articles were published about the efforts of an investigation that lead to the seizure of counterfeit drugs valued at $74 million[1], and on a larger scale, an estimated annual loss of $200 billion for pharmaceutical companies due to counterfeit drugs.[2] Such developments lead to deliberations about the level of sophistication of criminal organizations and effectiveness of the global operation for counterfeit drugs. Authorities globally cannot manage the pace of developments and are unable to cope with a problem that continuously keeps growing. These are the primary problems in the supply chain management of pharmaceuticals that I believe are the primary culprits for the current sub-optimal situation:

There is a global, large scale operation of counterfeit drugs damaging the reputation of pharmaceutical companies and endangering the lives of patients.
Larger companies have accepted the fact that percentage of their shipments get lost, without further investigation. When its gone, its gone! When companies budget their operations, these losses are already pre-calculated, taken into account and tolerated.
Tracking of products is becoming more complicated, especially because of the need for availability of raw materials for the production and distribution of a final product. This is due to the simple fact that each product passes through several stations on its transportation route, before being delivered to the end consumer.
Another problem area that requires improvement is the coordination of the entire logistical body, which is in need of more space for positive innovation, due to issues like different software solutions, timezones and professional capabilities, complicating the establishment of a functioning, well-oiled corporate machine.

According to my professional observations, there is much space for improvement in the area of supply chain management. Technology presents a significant opportunity to close existing operational gaps or at least reduce their effects, allowing companies to save significant amounts of money. This would allow firms to lower selling prices thanks to the removal of inefficiencies, creating more affordable products for the public. Moreover, by decreasing supply chain management costs, small business ventures will have better foundations on which to develop and compete more successfully on an international level.

Is the blockchain a possible solution?

Recent developments in blockchain technology have created opportunities for companies from different sectors to innovate and secure their operations in order to eliminate the aforementioned problems. Being directly involved in the pharmaceutical sector, I am painfully aware of how real these issues are.

Counterfeit drugs are a growing threat to patients, due to their unregulated and unsupervised manufacturing and distribution process. Since consumers are unaware of what they are buying, they are threatened by numerous dangers, and some of them are life-threatening. Implementation of blockchain can improve the entire drug manufacturing and tracking cycle and possibly – save thousands of lives.

Well-known challenges

Large pharmaceutical companies function through complex and old-fashioned structures that outlived their utility a long time ago. Due to the inefficiency, long internal discussions and planning periods to properly invest in innovation and optimization, the current problems are hard to eliminate. Due to these time consuming and usually lacking any result actions, companies worldwide are experiencing an internal process optimization stagnation.

Use case: Supply Chain Management

Critical flaws in supply chain management are crystalizing. I am mainly referring to low transparency and traceability. Blockchain technology provides solutions that could be strongly beneficial in the endeavor to tackle these impediments. The blue ocean of application possibilities can improve the functioning of the entire pharmaceutical sector. Thanks to the blockchain, companies will be able to speed up development, testing and distribution of drugs.

The blockchain allows supply chain management to be much more flexible, transparent and secure, without affecting the most fundamental processes.

Advantages at a glance

Let me give you an example of how a blockchain can add value to supply chain management. All transactions, from the sourcing of the product to the actual sale can be transparently documented and stored without the possibility of ex-post information tampering. Once a transaction was initiated, it is stored on the blockchain and is unchangeable. As a result, a company would be able to prevent human error, logistical delays and costs.

image credit [4]

With these advantages in mind, it is interesting to see that although large companies like Visa or IBM are working on blockchain proofs-of-concept, the global pharmaceutical sector has yet to identify this opportunity.

A feasible solution

æternity, a scalable and innovative blockchain in the making, is able to address all of the above-mentioned issues. It enables a high transactional throughput and programability of complex relationships of a large number of users and thus can handle the high volume of products and information. Thanks to secure and private off-chain peer-to-peer channels, it will be able to process and track the large volume of transactions and handle the requests of the various participants in the complexity of supply chain management of pharmaceutical products.

Disruption lays before us. Centralized systems have taken us thus far but are currently in the way of progress. The future belongs to highly efficient decentralized architectures that can adapt to the needs of many industries. A flexible and efficient blockchain solution. This is æternity. Learn more by visiting the æternity website.