09.10.2018 | LOGFILE Feature 38/2018

Blockchain: Will it Transform the Pharmaceutical Supply Chain?

6 min. reading time | by Mark Crawford


The pharmaceutical supply chain is becoming an increasingly complex system, making it harder for drug manufacturers and their partners to ensure safe and timely delivery. Keeping track of products is not always a transparent process.

Thousands of people and companies interact with supplies and products being shipped, including those that require special care because they are perishable, fragile or very expensive. Trading partners in the supply chain typically exchange contracts, agreements and transactions using individual administrative systems (some still paper-based), often duplicating work and wasting time. Supply chain partners also use legacy systems of varying sophistication with different levels of speed, functionality and security, creating further inconsistency and slowdowns.

One solution to these challenges may lie in blockchain, an electronic transaction ledger that contains a continuously growing list of records, called blocks. Each block is a cryptographically secured, time-stamped transaction record. The blocks are linked and recorded as a chronological “chain.” Blockchain can be used to secure both internal and multiparty supply chains.

Future Solution Structure (Chronicled. The MediLedger Project: 2017 Progress Report. February 2018).

This network, typically peer-to-peer managed, follows a set of established rules. Distributed across a network of computers, the database has no centralized entry point that could attract hackers. Heavy-duty encryption ensures security so that each time-stamped record cannot be hacked or modified. Data transaction is conducted for a minor fee. After blocks are recorded, data and/or program modification is virtually impossible, which assures transparency and builds consistency and trust across all users of the blockchain.

Even the U.S. FDA is looking into blockchain. A top challenge for pharma is complying with the U.S. Drug Supply Chain Security Act (DSCSA) by the November 2023 deadline; this law requires all prescription drugs, including returned drugs, to be tracked and traced through the supply chain using an interoperable system—essential for fighting counterfeit medicines, which are not only dangerous to patients but cost the global pharmaceutical market hundreds of billions of dollars annually.

“FDA is actively exploring the potential of blockchain technology to identify appropriate technological solutions that will help trace drugs as they move from manufacturer to pharmacy, enhancing the agency’s ability to protect consumers from exposure to drugs that may be counterfeit, stolen, contaminated, or otherwise harmful,” said Jeremy Kahn, Trade Press Officer for CDER. “This is part of an FDA effort to help develop the enhanced drug distribution security tools needed to comply with DSCSA.”

FDA held a public meeting on this topic in December 2017 that included a presentation on blockchain. “We are currently reviewing the information gathered from the meeting and comments submitted to the docket to better determine the advantages and limitations of this technology for tracing the movement of prescription drugs,” Kahn added.

Advantages of Blockchain

Blockchain has the potential to make the supply chain more secure, transparent and streamlined. Every checkpoint or hand-off is recorded and traced via biometric measures, multiple barcode scans or sensor technologies (including radio frequency identification). This ongoing, real-time record can be viewed at any time by authorized parties, even patients, at the end of the supply chain. The technology also provides an audit trail that satisfies regulatory requirements and makes it easier to manage smart contracts across the entire value chain. All of these safeguards and controls make it much more difficult for criminal networks to penetrate the pharmaceutical marketplace and sell counterfeit drugs.

Blockchain can also protect the quality of products. Sensors can track location and also measure and record external environmental factors that are especially crucial for pharmaceutical supplies. For example, shock or temperature can be monitored to detect (and hopefully correct in real time) any unacceptable variances that could result in degradation during shipping.

“The blockchain promise is that many databases will behave as one, driving efficiencies and effectiveness across supply chains of companies operating together,” stated Michele D’Alessandro, Vice President and Chief Information Officer, Manufacturing IT, Merck & Company.

This, however, is easier said than done.

One of the biggest obstacles to implementing blockchain is the huge variety of legacy platforms used within the pharmaceutical supply chain, often running different operating systems with varying levels of security. The pharmaceutical industry is highly IP-sensitive, and companies are already reluctant to share data, being wary of autonomous systems that claim to be secure and foolproof. In essence, blockchain is an emerging technology that has yet to be fully scaled up and tested for the pharma supply chain, so many companies are taking a “wait-and-see” approach to blockchain before investing in its implementation.

Blockchain can also help smaller vendors within the supply chain run their businesses more smoothly and improve their flow of capital. This is especially true for supply chain partners in developing countries, where hundreds of companies crowd the market. Trading records made transparent through blockchain help build trust in these small and medium-sized companies and their business practices, making it easier for them to access credit and reduce turnover time for payments from weeks to days.

Ultimately, building trust is perhaps the biggest benefit of blockchain. “The initial focus of blockchain efforts for pharma has been rooted in the secure sharing of data, creating a universal truth of secure, immutable product information,” said D’Alessandro.

“The real potential lies in the data and process models and how far companies are willing to explore new ways of doing business in a highly connected, process- and data-shared environment,” added Bob Celeste, founder of the Center for Supply Chain Studies. “Blockchain creates added trust between trading partners by using a shared, auditable environment that can lead to new business practices that add value to the relationship.”

Pilots, Prototypes and Case Studies

Forward-thinking companies are moving ahead with blockchain initiatives, often in collaboration with like-minded partners. For example, Merck partnered with SAP, AmerisourceBergen and Cryptowerk to build a proof-of-concept (POC) blockchain system to comply with regulations and help fight counterfeit drugs (1). The SAP Pharma Blockchain POC app runs on a mobile Android or iOS device. It uses simple barcode scanning to provide real-time visibility for the location of drugs at any point in the supply chain, whether it is the manufacturer, brand owner, wholesaler or delivery system. This allows for verification of drugs by serial number, batch and expiration date, ensuring drug products can be tracked any point in the supply chain.

Another solution addresses prevention of counterfeiting. Blockchain company TBSx3 stands for “To Be Sure, To Be Sure, To Be Sure.” Although serialization is a useful traceability tool, counterfeiters can still copy a product’s serial code. TBSx3 provides three layers of protection. Each TBSx3-protected product has a unique encrypted code that identifies the individual product. The product is tracked as it moves through the supply chain. Machine-learning analysis of the movement pattern can detect and report any suspicious anomalies. The third layer is the “no double spend” feature that crosses off an ID/code after it has been used, assuring that any attempt to use a counterfeit copy of the ID/code will be rejected (2).

In another pilot, DHL and Accenture have released initial findings on a jointly developed working prototype that tracks pharmaceuticals from point of origin to the consumer, preventing tampering and errors (3). This blockchain-based serialization prototype uses nodes in six geographies to track pharmaceuticals across the supply chain. The ledger may be shared with stakeholders, including manufacturers, warehouses, distributors, pharmacies, hospitals and doctors. Lab simulations show that blockchain could handle more than seven billion unique serial numbers and 1,500 transactions per second.

The MediLedger Project, launched in 2017 by Chronicled, assembled a working group of leading pharmaceutical manufacturers and distributors to explore blockchain technology for meeting track-and-trace regulations and improving overall performance and safety of the supply chain (4). In 2018 the group plans to rigorously test data/product ownership transfer and verification among its members using a blockchain prototype

Moving Forward

Blockchain is a relatively new technology that many pharma companies do not fully understand (or trust), causing them to move slowly in terms of adoption. Some drawbacks include having already invested in other technologies that would ensure traceability and satisfy DSCSA, the uncertainty and risk that is always part of investing in new technology and costly implementation with limited short-term benefits until large-scale adoption occurs.

Blockchain platforms are quickly evolving to meet industry needs. “The blockchain of today and tomorrow is not the blockchain of three years ago,” said Celeste. “Advancement is being aided by the projects undertaken between trading partners or small groups of trading partners.

The benefits from these experiments will lead the way on how this technology matures from its current state to production-ready platforms.”

There are also plenty of policy, standards and governance decisions that remain to be made before industry-wide adoption takes place. Celeste predicts the exploration and adoption of blockchain will proceed in measured steps, starting with low-risk processes or processes that have few alternatives (e.g., DSCSA). These processes need to be carefully mapped, tested, validated and examined from a regulatory perspective. “The regulators and certification bodies may need to reassess their understanding of process and data, given the unique features of a shared, immutable programmable environment,” he said.

What will accelerate the development of blockchain the most is cooperation, communication and experimentation among the regulatory, industry and academic partners who are working to advance this technology. As trust grows, research partnerships and projects will continue to find (and share) new and better ways to use blockchain to secure pharma supply chains.

“It is most beneficial to experiment through targeted-use cases, like we would with any other emerging capability,” said D’Alessandro. “It is also important to partner with out-of-industry experts who have technical know-how to share. The more our ecosystem of companies, partners and practitioners learns and works together, the faster the innovation, growth and adoption curve for blockchain will be.”


  1. Galer, S. “Blockchain Surge Could Save Pharma Billions.” Forbes (Dec. 11, 2017)
  2. Henry, C. “What is blockchain and what can it do for pharmaceutical supply chains?” Pharma Logistics IQ (March 23, 2018)
  3. Henderson, J. “DHL and Accenture working on blockchain-based pharma supply chain project.” Supply Chain Digital (March 12, 2018)
  4. Chronicled. The MediLedger Project: 2017 Progress Report. February 2018.

About the Author

Mark Crawford is a professional business and technology writer in Madison, Wis. He is also the author of five books on science and American history.

The article was first published in the PDA Letter of July/August 2018 (Issue 7) and is reprinted in our LOGFILE Newsletter by courtesy of PDA.