How Blockchain Technology Could Combat the Global Counterfeit Drug Market

IEEE survey of the pharmaceutical industry identifies benefits and challenges

2 November 2017

Pain-reduction pills, cancer-fighting drugs, and epilepsy medication were among the 25 million counterfeit medicines worth US $51 million seized in the worldwide Operation Pangea X conducted in September by Interpol, the international police agency said.

More than 3,580 websites selling fake drugs were taken offline by the operation, which was carried out in 123 countries.

Counterfeit medicine, often sold on the Internet, might be contaminated or expired, or it might contain the wrong ingredients or an incorrect dose of the right ingredients. As many as 1 in 10 prescription drugs around the globe are counterfeit, according to Interpol. It estimates counterfeit medicines, which are increasing in number, are responsible for more than a million deaths each year.

Selling fake drugs is a lucrative business driven by the increase in sourcing inexpensive medicine from online pharmacies. The World Customs Organization estimates the annual counterfeit medicine market at $220 billion. The main factor driving the rise in use of Internet pharmacies is the soaring cost of medicine.

The current pharmaceutical supply-chain infrastructure has created an opportunistic gap that feeds the growth of counterfeit medicine, according to Maria Palombini. She’s the emerging communities and opportunities development director for the IEEE Standards Association’s Global Business Strategy and Intelligence group.

Blockchain technology, the underlying ledger system for Bitcoin transactions, is being discussed as a way to optimize and secure the pharmaceutical supply chain, but there are still a lot of unknowns about it. The IEEE Standards Association sponsored an independent research report, now available for purchase, on the state of the technology’s adoption by U.S. pharmaceutical manufacturers’ supply-chain operations.

REPORT DETAILS

The U.S pharmaceutical supply chain is composed of three key trading partners: manufacturers, wholesalers, and dispensaries, which include retail pharmacies and medical facilities. It is critical for the partners to collaborate so the distribution of medicine from the manufacturing facility to the patient is efficient, effective, and secure, Palombini says. To improve collaboration, they must have the ability to see and share their data.

“Their current legacy platforms don’t effectively allow the ability to manage the balance between sharing data and retaining privacy in a verifiable and tamperproof environment,” Palombini says.

The initial version of the study is focused on the U.S. distribution model because the country’s pharmaceutical market is the world’s largest, according to Palombini. The study covers compliance with the U.S. Food and Drug Administration’s Drug Supply Chain Security Act track-and-trace guidelines. It outlines steps to build an electronic, interoperable system to identify and follow certain prescription drugs as they are distributed in the United States.

The IEEE report includes responses from 300 representatives from manufacturers, wholesalers, and dispensaries that are exploring the use of blockchain technology or currently testing it in their operations. The report identifies the perceived benefits as well as barriers to achieving adoption. Future versions of the study will look at the European, Latin American, and Asian markets.

“IEEE’s interest in advancing blockchain adoption in the pharma supply chain is twofold,” Palombini says. As an emerging technology, blockchain has generated a great deal of hype that can be misleading, especially in the areas of health care. IEEE sees there’s an opportunity for blockchain to address optimization, compliance, and security issues currently present in the supply chain.

“If we can bring a balanced awareness of the technology’s potential while at the same time develop a standard that would reduce some of the barriers to adoption, then we can effectively help the entities combat counterfeit medicine and thereby improve patient safety and reduce the economic impact of this global epidemic.”

BENEFITS AND BARRIERS

The idea for the report came from the Pharma Supply Blockchain Forum that IEEE-SA held in June at John Hopkins University in Rockville, Md. More than 50 industry representatives attended. They discussed the benefits and raised several questions such as who would pay for the technology, who would own the data, how do they get buy-in from management and patients, and what type of blockchain model should be used. To help answer such questions, IEEE commissioned the study.

The benefits of using blockchain technology include its decentralization, encryption methods, and immutable recordkeeping, which means everyone works with one original record that can’t be altered or deleted but simply appended with updated transactions. As the drug moves through the supply chain, each transaction would be noted and time-stamped, forming a record that could be tracked with anonymity, according to Palombini. The technology gives key trading partners with permission rights the ability to view each transaction, knowing the source of the records is verified, she adds.

The technology “enables patients to verify the source of the medicine on the blockchain,” she says. “To get there, protocols and processes would need to change to accommodate that ability. The technology also lets supply-chain executives have more inventory visibility, so they could anticipate shortages and could better execute drug recalls.

“Blockchain is not designed to replace existing track-and-trace systems,” Palombini says. “It offers them the ability to be interoperable with other systems and enables the privacy and data-sharing capability that is needed.”

Some respondents said they believe blockchain technology would help them comply with the Drug Supply Chain Security Act, but others said they are uncertain.

The study found that manufacturers are concerned with the cost of installing the system, its security, and its ability to connect all networks. Wholesalers and dispensaries are worried about the technology’s acceptance by the public as well as the challenges of using it. All are concerned about the visibility of the data and trusting others with viewing their company’s information, which would be exchanged. Even with such concerns, though, most of those surveyed said they are likely to escalate their blockchain implementation within the next two years, according to Palombini.

The majority of the respondents agreed that pharmaceutical manufacturers should have the financial responsibility for implementing the technology as well as maintaining it. And they said manufacturers should own the data.

The main conclusions IEEE drew from the study, Palombini says, are the need for more education about the technology’s benefits. Also, there’s a need for technical standards that can alleviate the concerns of potential users, support the integration of existing networks, and reduce the cost of implementation.

“Standards eliminate the need for customization and increased costs, establish credibility with the technology, and provide the roadmap to integrate with existing platforms and systems,” Palombini says.

To learn more, listen to Jeff Pane, IEEE associate marketing manager, interview Palombini about the study’s findings.

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