Blockchain Technology: How Much Money Will It Save?
Lately, more and more analysts are claiming that the pharmaceutical industry is an almost perfect match for blockchain technology.
A big reason for that is the need for sophisticated track and trace technology, which comes with the need for detailed data on product's point of origin and supply chain control. When pharmaceuticals are returned, much of it goes to waste and is destroyed because the company cannot verify the product's authenticity, which results in losses in the billions industry-wide every year. Blockchain technology possesses qualities that can simplify and assist those needs and beyond, which is a big reason why it is being explored to help solve real-world issues within the industry. Many companies have already tested the technology or are using it in the wider industry already.
Contract Pharma spoke with David Thomas, co-founder at GlobalBlock, about the future of Blockchain Technology in the Pharmaceutical industry, along with some of the major issues it has the potential to solve and potential money it can save.
Contract Pharma: What are the main pillars of blockchain technology?
David Thomas: A blockchain is a decentralized database of transactions (or data) that exists on multiple computers at the same time. It is a record keeping technology that, in simple terms, is conceptually similar to a spreadsheet that is duplicated thousands of times across a network of computers and that is constantly updated.
The advantages of blockchain are that it is, by its inherent set up, independent, transparent and secure. Its security comes from the fact that its data cannot be altered, it cannot be controlled by any single entity and has no single point of failure that can be exploited by hackers. Encryption technology allows individuals' digital assets (data) to be kept anonymous and protected. Further, removing intermediaries from the process allows transactions (transfers of data) on a blockchain to be carried out faster and cheaper than traditional methods.
CP: What are two major real-world issues in the pharmaceutical industry that blockchain technology offers a solution for?
DT: The biggest real-world issue in pharma today is provenance of drugs. It is all too easy to counterfeit drugs and it's not only the end patient that suffers from imitation drugs making their way onto the market, but the cost to pharma companies themselves is huge. Firstly, being able to detect the counterfeit drugs is very hard and secondly, the difficulty in being able to trace them back to their origin makes such trackability almost impossible.
Provenance is also an issue when it comes to the return of inventory. Instead of intentionally destroying this surplus product, the preference would be for the pharmaceutical company to resell it, so it doesn't miss out on clean profit. There is, however, a catch: before the drugs can be resold, the manufacturer must verify the authenticity of the returned drugs. So, the provenance problem provides two issues in one. Blockchain's ability to track and trace data with the inherent benefit of immutability can provide a viable solution.
CP: How can blockchain technology verify the authenticity of returned drugs?
DT: Blockchain is proving effective in the finance industry because of the fact that it prevents double counting. Transactions are verified by the blockchain network itself, as opposed to a third party or central counterparty. The same principal can be applied to other industries, pharma being one of them.
For example, there are plans in the USA to fully serialise products, so they are trackable, but this would rely on each manufacturer doing so independently. By implementing a de-centralised blockchain solution, clarity regarding provenance could be provided for both manufacturers and clients, who could independently verify the quality and point of origin of drugs quickly and securely.
Merck have partnered with SAP to develop the SAP Blockchain POC (Proof of Concept) app, which allows the user to link various pieces of data to a barcode attached to a product. Item number, serial number, batch number and expiry date can all be inputted against the product. These data are extractable via the app, which is powered by the blockchain.
CP: How much money could this save industry-wide when it comes to reselling returned drugs instead of destroying them?
DT: Although returned pharma product accounts for a relatively small percentage of goods (approximately 1-3% of sales), this equates to $7-10 billion per annum. CP: What new trends within the industry are conducive to introducing blockchain technology worldwide?
DT: Another use for blockchain would be in the security and integrity of clinical trial data. Security is a key pillar of blockchain technology and where confidential patient information is concerned it is of the upmost priority. Being able to have accessible and secure data would mean that when a trial enrolls participants they could be checked against the existing chain - allowing them to be included or excluded from multiple studies at once. Around 20-30% of the mainstream budgets of pharmaceutical companies are spent on clinical trial security so there are large potential savings to be made with this technology.
CP: Any predictions for the what the prevalence of blockchain within the pharmaceutical industry will be in 2023?
DT: In the pharmaceutical industry where trustworthiness is a cornerstone in terms of public perception and revenue is key for the manufacturers, blockchain technology has multiple applications that can satiate the public hunger for transparency, toughen up the entire supply chain of drug production, and make substantial savings. We may well be a couple of years from full integration but suffice to say that when the industry fully understands blockchain and the real value of what it can do, adoption will quickly grow and become the norm for many years to come.
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