Why the Industry Is Moving Toward Blockchain Technology

Why the Industry Is Moving Toward Blockchain Technology

December 06, 2019PAP-Q4-19-NI-007

Given that blockchain technology allows the secure creation
and sharing of time-stamped records among numerous parties in real time, it isn’t surprising that it might be of interest for improving the pharmaceutical supply chain. Pharmaceutical companies aren’t stopping there, though. Blockchain technology is being explored for drug discovery, clinical trials and much more.

What Is Blockchain Technology?

Blockchain technology has its origins in the field of cryptocurrency and was originally used to establish Bitcoin, the first viable digital currency. A distributed ledger technology (DLT), blockchain enables proof of ownership and the transfer of ownership from one entity to another without using a bank.1 Today, it is used for many different applications in many industries because it offers a unique combination of features not possible with other digital technologies.

Those features include the creation of permanent, immutable, signed and time-stamped records of ownership of assets of various types, identities, transactions and contractual commitments that can be shared among all members of a business ecosystem in near real time.2 The records are stored on dozens to thousands of computers around the world.

Authorizations can be assigned to specific types of information by specific members. Most importantly, blockchains are “essentially unhackable” for anyone without authorized access. That is because once a record has been added to the “chain,” the data cannot be altered or deleted, because new blocks can only be added to the end of the chain.3

In addition to this high level of security, blockchain technology enables supply chain transparency.2 Everyone in the supply chain can access the same data as soon as it is created. The sources of data and records are also more clearly identified and can be readily traced, significantly decreasing the time it takes to identify problems in the supply chain and increasing the ability to manage quality and inventory flows.

Business transactions can also be accelerated when blockchain technology is combined with “smart contracts” and the Internet of Things (IoT).2 For international transactions, the time it takes to transfer ownership of goods can be reduced from 10 days to 10 minutes.

There are many potential uses for blockchain technology in the pharmaceutical industry, including facilitating patient, physician, payer and pharma company access to medical records; prescription sharing, enhancement of the supply chain, tracking and reporting of clinical trial data, provider credentialing, quality-of-care tracking, drug pricing strategy tracking and adverse event tracking and evaluation.3 The primary use for blockchain in the pharma industry, according to KPMG analyst Arun Ghosh, is to serve as a “ledger of truth” for sharing complex information with regulators, pharmacy benefit managers, contract manufacturers, physicians, patients, academic researchers and R&D collaborators, among others.4 In 2018, Accenture estimated that, in the life sciences, blockchain technology could provide a $3 billion opportunity by 2025.5

Focus on Enhancing the Pharmaceutical Supply Chain

Given the ability of blockchain technology to enable secure and rapid transactions around the world, much of the efforts in the pharmaceutical industry to leverage its capabilities are focused around improving the supply chain.

One of the biggest benefits of blockchain technology is the ability to create an auditable trail and establish drug provenance across the entire supply chain. A survey conducted by Pistoia Alliance revealed that nearly 70% of pharmaceutical and life science leaders believe blockchain will have the greatest impact in this area.1

With a decentralized blockchain solution, both manufacturers and their clients would be able to independently verify the quality and point of origin of drugs quickly and securely.6

Transparency and security are two other key benefits of blockchain technology for members of the pharmaceutical supply chain. All of the stakeholders involved in the supply chain must be able to share and update data while also being assured the data is timely and accurate.7 With blockchain technology, the entire supply chain can be managed with one piece of software that is shared between authorized stakeholders. In addition to drug manufacturers and their suppliers, payers, providers, pharmacies, and patients can access the data and see when it is updated in near real time.4

With blockchain technology, these issues can be avoided because the entire supply chain can be managed with one piece of software that is shared between authorized stakeholders. In addition to drug manufacturers and their suppliers, payers, providers, pharmacies, and patients can access the data and see when it is updated in near real-time.4

Blockchain technology also has the potential to help prevent diversion, counterfeiting and tampering, because drug products can be tracked from the time they are produced until the time they reach patients. Any attempts to change records will be visible to all parties immediately.4

As importantly, recalls are much simpler.4,6 The product can be readily traced back to the manufacturer and associated with a production batch, allowing identification of other potentially problematic products and where they had been shipped.

A Note about Blockchain and Serialization

Blockchain technology will play a pivotal role in the industry’s ability to comply with various serialization regulations around the world, including the 2013 U.S. Drug Supply Chain Security Act (DSCSA) and the EU Falsified Medicines Directive 2011/62/EU (FMD). Serialization involves the unique identification of every drug product at the level of individual units, as well as in aggregated packaging units. Information on the product, its manufacture (location, date, batch number, etc.), logistics route, and so on, must be shared with all supply chain partners involved in the delivery of the drug to the patient. The intent is to make it possible to trace products back through the supply chain to their point of origin.

The transparency and security of blockchain technology is ideally suited to enabling serialization, not only because it enables data sharing, but also because the records are unchangeable, which facilitates regulatory auditing.8,9

The hope is that one day blockchain technology will facilitate the management of patient data across providers, including different insurers and even research organizations.

Applications in R&D 

The benefits of blockchain technology are not limited to supply chain transparency, traceability and security. It also has the potential to improve the drug discovery and development process through collaborations between industry and academia, various philanthropic groups and other organizations, as well as between companies via licensing and other arrangements.10

The ability to transfer data across a wide network would greatly facilitate all activities across the entire R&D cycle. Combined with artificial intelligence (AI), machine learning (ML), natural language processing (NLP) and other advanced digital tools, blockchain could also significantly accelerate data mining and analysis of information in published literature patents/patent applications, as well as newly generated research results and in future patient data.10

The security of data stored using blockchain technology is also beneficial for protecting intellectual property and patient privacy and ensuring that raw research data files are not tampered with.10 The immutable nature of records kept using blockchain technology can also provide assurance that initial clinical trial designs and protocols have been adhered to.

The potential for the technology to assure privacy and accuracy of clinical trial data is of particular importance.11 People are more likely to participate in clinical studies if their data will be protected and if they are sure it will be used properly. Issues with conformed consent could also be addressed through unfalsified time-stamping of consent forms.12

Blockchain technology could also be used to develop public registries for the rapid disclosure of clinical trial results. In addition, access by all stakeholders in
a clinical trial to a central repository of data in real time should help reduce trial timelines.11

DLTs can also enable the implementation of virtual trials, in which there is no centralized trial center and patients receive their medications and have samples picked up at home.13 Such trials make it possible for patients in remote locations or who have difficulty traveling due to complications of their diseases to participate. They also eliminate the need for extensive physical facilities and a large staff. The success of virtual trials, however, depends largely on the ability to collect and securely maintain data.

Manufacturing Impacts?

Blockchain technology could also facilitate the advancement of next-generation, personalized therapies. The logistics involved in the production of autologous cell therapies is highly complex and requires an assurance of chain of identify — the sample taken from a patient, once converted into the cell therapy, must be returned to that patient. Blockchain technology can support the manufacture of this type of personalized product.

It may also enable 3D printing of personalized drugs in a physician’s office or hospital.13 There is already one such drug approved by the FDA: Spritam® for the treatment of epilepsy as approved in 2015. To make this approach to drug manufacturing more practical, better systems are needed for managing manufacturing and patient data. AI and ML could be used to analyze this secure data for determination of the ideal dosage and formulation for a given patient and inputted into a 3D printer for production of a personalized medication.

Don’t Forget IP and Tech Transfer

Technology transfer for academia to industry can be a challenge. It is not only difficult to identify potentially valuable opportunities; once that has been accomplished, establishing a chain of title can be nearly impossible if the university scientists have collaborated with scientists at other universities, companies and private research services. Blockchain-based platforms for the management of early-stage technology information could overcome this problem. The technology is an ideal fit for tracking the work performed across a decentralized and convoluted network. Investors could use the platform to identify the owners of a given technology and establish permanent records of any deals they implement.14

Smart contracts enabled by blockchain technology allow the implementation of a contract without human involvement once the underlying binding contract has been coded.15 For intellectual property protection, these smart contracts would allow pharma companies to establish and enforce IP agreements, such as license agreements, and even make payments in real time in response to the recording of milestone achievements. The security and transparency of blockchains could also provide a digital means for maintaining evidence of the origin of an innovation and ensuring the protection of trade secrets, such as manufacturing process details.

Managing Patient Data

The hope is that one day blockchain technology will facilitate the management of patient data across providers, including different insurers and even research organizations. A single unique identifier could be used to securely track a patient (using audit trails) across the entire healthcare system while maintaining patient privacy, gathering data from wearables and indicating where the patient is at any given time, what tests they have had and other transactions in which they have participated.16 Perhaps most importantly, patients could control the authorization of access to all of this data. Such a system could significantly reduce administrative costs. Of course, a very high level of cooperation between all parties would be required — a state that will take some time to achieve.

In the short term, most efforts will involve these types of closed consortia and pilot projects that do not involve real patient data. In the medium term, scalable systems with proven permission and authentication capabilities will be implemented with limited real patient data. Eventually, full patient-driven systems will be in place with master health records and access rights controlled by the patients themselves.16

Building the infrastructure to support data sharing and transaction tracking across the pharmaceutical manufacturing supply chain and the wider healthcare system is one of the major limiting factors for implementation of blockchain technology in the pharmaceutical industry — and other sectors. 

Blockchain and Payer Relationships

Pharmacy benefit managers (PBMs) serve as intermediaries between pharmacies, drug manufacturers and payers by managing formularies, negotiating discounts and rebates, and processing and paying prescription drug claims, generally using electronic platforms. Blockchain technology could offer a much more efficient and transparent solution that could reduce waste, alleviate pricing variations and provide a better customer experience.17

For instance, blockchain technology and smart contracts could accelerate the insurance authorization process on the front end and speed claims processed on the back end. Change Healthcare is already using a system based on DLT to track claims throughout their life cycle and do so for large volumes of patients — up to 50 million transactions per day.16

On a smaller scale, some insurance companies, providers and a lab services leader have joined the Synaptic Health Alliance to focus on maintaining accurate provider directories — a requirement of the Centers for Medicare and Medicaid Services,4 while others are focusing on developing systems for verification of physician licensing.16

Building the Infrastructure

Building the infrastructure to support data sharing and transaction tracking across the pharmaceutical manufacturing supply chain and the wider healthcare system is one of the major limiting factors for implementation of blockchain technology in the pharmaceutical industry — and other sectors.

All of the major application software companies and many new start-ups are focused on developing solutions that can leverage blockchain technology. In addition to the development of these physical systems, acceptance of data-sharing must be realized — this will require collaboration and the demonstration of the security and privacy features of blockchain solutions.

There are, in the meantime, a number of smaller efforts underway to test the potential for blockchain technology to benefit the pharmaceutical industry. In one example,15 pharma companies have collaborated with SAP to develop the SAP Pharma Blockchain POC (Proof of Concept) app for tracking drug shipments, which was launched in 2017 and has undergone multiple iterations since.2 In early 2019, SAP announced the availability of SAP Information Collaboration Hub for Life Sciences, a blockchain solution designed to help customers comply with the U.S. Drug Supply Chain Security Act (DSCSA).

Novartis is using blockchain technology and the IoT to identify counterfeit medicines and track temperature with real-time visibility for all participants in the supply chain.12 Merck recently garnered a blockchain patent on its own covering technology for preventing counterfeit drugs by increasing supply chain security.

In a combined effort, Pfizer, Amgen and Sanofi are investigating the use of blockchain technology to safely store patient health data to speed clinical trials and lower drug development costs. Blockchain startup Exochain offers a way to securely store and manage clinical trial patient data that also allows patients to control how researchers may interact with their medical data.11 Boehringer
Ingelheim (Canada) has partnered with IBM to test the ability of the latter’s blockchain platform to “improve trust, transparency, patient safety and patient empowerment in clinical trials” by improving the management of clinical trial processes and records.18

Recently, IBM announced that it is working with KPMG, Merck and Walmart to develop a pharmaceutical blockchain platform that can track drugs as they move through the global supply chain.17 There are several other FDA DSCSA projects utilizing blockchain technology. One of the most prominent is MediLedger, which has over 20 members, including Pfizer, Amgen and Gilead. The goal is to leverage blockchain’s capabilities to create an interoperable system in which multiple parties, including manufacturers, wholesale distributors, hospitals and pharmacies can register, verify and transfer pharmaceutical products with absolute trust in their authenticity and provenance.6

With blockchain technology, the entire supply chain can be managed with one piece of software that is shared among authorized stakeholders.

Risky Proposition?

The benefits of implementing blockchain solutions to improve supply chain security, facilitate clinical trials and increase the efficiency of patient data management are clear. Of course, with the adoption of any new technology comes some level of risk. While blockchain technology is attractive because it assures security, the risk of data breaches or system failures cannot be fully eliminated or ignored. Scalability is also an issue that has yet to be resolved.18

The upfront cost and time to implement new blockchain solutions is not insignificant. In addition, the pharmaceutical industry is conservative by nature, and there is a hesitancy to make major changes to how data is stored and managed, despite the potential benefits.1 When it comes to patient data, companies may be slow to adopt blockchain technologies simply because of concerns around meeting regulatory requirements regarding the protection of patient privacy.


  1. Brettler, Dan. “Weighing the Risks and Benefits of Blockchain in the Pharmaceutical Supply Chain,” 24 Jul. 2019. Web.

  2. Challener, Cynthia A. “Blockchain Will Improve Efficiency.” ICIS Chemical Business. Apr. 2019. Web.

  3. “Blockchain in the Pharmaceutical and Life Sciences Industry.” Deloitte. 4 Jun. 2019. Web.

  4. Ghosh, Arun. “Blockchain’s Evolving Role In The Life Sciences Supply Chain.” Outsourced Pharma. 24 Apr. 2019. Web.

  5. Guenther, Carly, Matthew Pierson and Nishant Modi. “In Blockchain We Trust: Transforming the Life Sciences Supply Chain.” Accenture. 2018. Web.

  6. Louda, Betsy. “Blockchain Technology: How Much Money Will It Save?” Contract Pharma. 8 Jan. 2019. Web.

  7. “Blockchain: the next frontier for pharmaceutical supply chains.” Pharma Logistics. 15 Nov. 2018. Web.

  8. Withers, Nikki. “The potential of blockchain in a regulatory environment.” European Pharmaceutical Review. 6 Mar. 2019. Web.

  9. “The Drug Supply Chain Security Act and Blockchain.” Center for Supply Chain Studies. 21 Jun. 2018. Web.

  10. Shute, Richard. “Blockchain Technology in Drug Discovery: Use-Cases in R&D.” Drug Discovery World. 2017. Web.

  11. Zahreddine, Mohamad. “How Blockchain Will Revolutionize The Pharmaceutical Industry.” Forbes. 14 Nov. 2018. Web.

  12. Ram, Prashant. “Top 5 Blockchain Use Cases in Pharma and Healthcare — that you should know about!” Medium.com. 28 Aug. 2018. Web.

  13. Woods, Jorden and Radhika Iyengar-Emens. “Blockchain to Secure a More Personalized Pharma.” Genetic and Engineering News. Jan. 2019. Web.

  14. Haag, Thomas A. and Rolf J. Haag. “Blockchain & Bio/Pharma R&D, Tech Transfer, and IP.” 1 Jun. 2018. Web.

  15. “Interview: IP and Blockchain in the Pharma Industry with Birgit Clark and Ruth Burstall.” IPR Help Desk. n.d. Web.

  16. “How Blockchain Technology Could Disrupt Healthcare.” CB Insights. n.d. Web.

  17. Anderson, Brian N., Gregory Callahan and Michael DiPrima. “How blockchain technology will disrupt the PBM-payer-pharmacy relationship.” Milliman. 11 Jul. 2019. Web.

  18. Khatri, Yogita. “Pharma Giant Tests IBM Blockchain in Bid to Improve Clinical Trials.” Coin Desk. 13 Feb. 2019. Web.

  19. Carr, Cameron. “Blockchain: practical application in the pharmaceutical industry.” 9 Oct. 2019. Web.

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