Use of Blockchain in Pharma Industry

Trust is the foundation of the medical profession. When we fall ill, we trust the advice of our doctor and we consume the prescribed medicine with a trust that the medicine will help us recover from our illness. And by and large they do. However, that may not always be true. The medicine you bought might actually be a counterfeit with visual appearance similar to the actual one. Some fraudsters out of their personal interests and monetary gains, exploit the lacunas of the pharma supply chain to introduce these fake drugs in the system.

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Here we will study the challenges that pharma industry is facing today. Then we will see how blockchain is going to disrupt this industry and bring about a paradigm shift in how it works. The pharma supply chain is quite complex and has multiple entry points, even then there is no robust and secure system to track the movement of these drugs. Tracking these drugs can be challenging due to many reasons like: Companies, today no longer work in silos and are not limited by the physical boundaries. They trade internationally and are a part of the global network.


Further, the pharma supply chain is highly fragmented has various stages and involves multiple hands from product manufacturers to product packages to logistic partners and finally to a pharmacy from where we buy these drugs. Still the current system in pharma supply chain is not interoperable and unified. When drug changes hands, there is no system for the receiving stakeholder to verify that the drug he received is an original product from the manufacturers.

Therefore, an increased number of stakeholders and nodes in the supply chain results in a complex system with very less control and nearly no transparency. One of the biggest pain point for these stakeholders is to track the product’s journey that can reveal its point of origin, its real time location at any point of time and the route it has taken to arrive at the pharmacy.

Additionally, several drugs remain active below a particular temperature and therefore during its journey it is mandatory to maintain the desired temperature range for the drug to remain active and effective. Any fluctuation in the temperature above the desired range can hamper the effectiveness of the drug and make it unfit for medical use. And there is no way for the consumer or the company to know if the drug has been maintained at the proper temperature throughout its journey and is still active.

In this opaque supply chain structure a manufacturer has no clear visibility into the inventory of distributors and wholesalers, thus it becomes a tedious task for the manufacturer to efficiently manage his inventory to a level where any spikes in demand can be handled without any issue. Drug shortage leads to delayed treatments of patients and thus poses a significant threat to public health. The issue of drug shortage demands attention and collaboration from everyone involved in providing these lifesaving medicines to patients. This includes pharmaceutical companies producing medications, wholesalers, distributors, pharmacies and health care providers. But because of the complex supply chain, there is lack of coordination among the players to better communicate their demands.

The manufacturers don’t get accurate information about the demand on time that results in delayed manufacturing and supplying of drugs. Shortage of drugs can even force health care providers and patients to shift to alternate drugs that in turn can lead to a less effective treatment. Sometimes certain drugs lead to serious side-effects and therefore removal of such drugs from the market becomes very crucial to protect the customers.

In such a scenario, manufacturers are required to withdraw the drug from the market at the earliest possible. But the biggest challenge in such a scenario is the fact that there is no direct contact between the company and consumers who have bought this drug. Drug recall announcements are, generally, made online or through advertisements. Therefore customers are subject to their awareness and there are very high chances that he can miss out the announcement of this drug recall. It is very challenging for a regulatory body like FDA to monitor and regulate various players involved in the supply chain. Therefore it becomes very difficult to weed out the illegal companies who claim to be legal entities through false paperwork.

Counterfeit drugs is one of the biggest challenges that this industry faces today. The worldwide counterfeit drug market is valued over 200 Billion USD. Counterfeit drugs are responsible for killing more than 500,000 people every year. According to WHO estimates,1 out of every 10th medical product sold – including pills, vaccines and diagnostic kits is fake or substandard. According to European Pharmaceutical Review around 30% of drugs sold in developing countries are fake. Due to this growing challenge of counterfeiting, many countries have introduced strict regulations for tracking of the drug in pharma supply chain. For instance drug supply Chain Security Act passed by the US govt which mandates all the drug manufacturers to provide a unique ID on the drug for weeding out the counterfeit drugs.

Now let us discuss how counterfeit drugs affect our health: If counterfeit drug contains no active ingredient the drug fails to treat the patients and therefore harms them indirectly. In case of counterfeit antibiotics, patients don’t respond to first line drug, which makes their physician o prescribe them a stronger antibiotic. This unwanted use of a stronger antibiotic leads to antibiotic resistance in these patients.

The second scenario is if the counterfeit drugs have harmful ingredients like toxic paints, contaminated water, colored dyes, floor wax, boric acid, antifreeze. etc.. This leads to an adverse effect on the health of the consumer and proves to be fatal in many cases. For instance more than 500 children around the world died after consuming counterfeit cough syrup containing antifreeze agent ethylene glycol.

In another case, counterfeit inhalers for the treatment of pediatric lung disease were found to contain contaminated bacteria that hospitalized them. Wrong concentration of the active ingredient in the drug also has adverse effects on the health of patients. Counterfeit drugs hijack the brand and infringes the patent rights of legitimate pharmaceutical manufacturers. Counterfeiters just copy the appearance of the products and take advantage of the money that has gone in the research and development of these original and authentic medicines. And for consumers too this is a big menace as counterfeit drugs lead to both health and financial loss for them when they paid their hard earned money for these fake products. And that too with a substantial threat to their health.

Now the question arises how do counterfeit drugs enter into the supply chain. As discussed earlier the pharma supply chain is quite complex and a drug changes multiple hands before reaching a pharmacy near you. It may happen that one or more parties in the supply chain are unethical and are involved in illegal practices. They may introduce counterfeit, contaminated products in the supply chain to increase their profit share. For any drug to be manufactured, the basic requirement is the raw material. It may happen that the raw material itself is coming from an unauthentic or uncertified source.

Certain companies and trading partners claim to be certified legal entities by using false and forged papers and using these certifications they can easily introduce fake drugs into the supply chain. Online distribution and Internet sales are the most common ways for the counterfeit drugs to enter into the supply chain and reach the consumers. According to WHO, more than 50% of the drugs sold online are counterfeit. Drug shortages can also open the doors for counterfeit drugs to enter into the market. In addition to the above reasons, social stigma is also another reason which makes it easier for counterfeit drugs to enter into the market.

For instance Viagra is one of the most widely produced counterfeit drugs. Patients may be too ashamed to consult a physician for this drug. Therefore they will unknowingly buy the fake versions of this drug online. Conditions that favor counterfeiting are: Fake drugs are relatively cheap to manufacture. You will be shocked to know manufacturing fake drugs is a more lucrative business than that of narcotics because of higher profit margins and lower risk.

In developing countries, lack of adequate regulation and enforcement is a reason that encourages counterfeiters to fake drugs. Even in the developed countries, the penalties for counterfeiting are inadequate and less severe. Lack of transparency and overall complexity of the pharma supply chain, makes it very easier for the counterfeit drugs to gain entry into the market. Today pharma companies are exploring new routes to synthesize new drugs and therefore their raw materials requirements have become quite complex. Because of these requirements these raw materials are sourced from various suppliers, who are geographically scattered across the globe. As the raw materials required, run into tens of thousands, it becomes very crucial for the manufacturing companies to have a check on the ingredients and to ensure that the suppliers are complying to the guidlines provided by them.

In the current system, there is no clear way to know if the raw material supplied is authenti or it is some cheap counterfeit. Once the raw materials are sourced from the suppliers the manufacturing process starts. Big pharma companies generally have multiple plants scattered in various locations. This further adds to the complexity of the supply chain. The manufactured drugs are shipped via third party cold chain logistic companies to local distributors and various other countries.

In many cases, these logistic partners don’t have the adequate capabilities to maintain these drugs at the required conditions thus leading to drugs losing their effectiveness. But for a manufacturer it is very difficult to ensure that the drugs were moved under the appropriate conditions as specified by them. If the drug is to be distributed within the same country, it is shipped to thousands of local distributors, spread across the country. The distributors then supply these drugs to secondary wholesalers or to pharmacies and hospitals, who sell these drugs to the patients. And in case the drugs are to be exported, they change multiple hands in various countries before reaching their final destination. In such a scenario with lack of transparency and control, the supply chain becomes vulnerable to counterfeiting.

Now let’s understand how blockchain can help to keep a check on counterfeiting: A blockchain based supply chain have information on all the parties involved like ingredient suppliers, manufacturers, logistic partners, wholesalers, distributors, pharmacists or hospitals. At each node in the supply chain, drop-off and pick up activity gets recorded in the shared ledger along with the time stamp.

The physical transfer of ownership of the goods, gets recorded virtually in the blockchain, only after each receiving party verifies, that the shipment has been received from the correct source. In a blockchain ledger, no one can tamper the records in the chain, including their own. Suppliers will initiate the blockchain by recording the serial number on the packs of the raw materials which are to be sent to the manufacturers. Additionally, location of the supplier will also be recorded on the blockchain. These suppliers also need to upload the certificates of the authenticity of these supplied materials. This can be done by getting their facility inspected by a regulatory body and getting a legal certificate proving the same. When the ingredients reach the manufacturer, The even will be recorded on the block chain along with the date of receiving and the respective location.

Once drugs are manufactured they will be placed in bottles, vials or strips labelled with unique identifier and will then be grouped and packaged. These packages will have labels that will be scanned and recorded at every point throughout its journey from the factory till it reaches the pharmacy. Whenever these packets exchange hands, the concerned party will scan the label on the packets and the transaction will be recorded permanently on the blockchain . If anyone tries to temper the product or the information it can be detected easily.

Similarly, the whole journey of drugs from the ingredient supplier to pharmacy will be recorded digitally on the blockchain. The consumer can scan the unique number and can know the origin of the drug, the route that drug has taken and even the ingredients used to manufacture the drug, provided the customer has been granted access, to see this information by the manufacturer. Many medical aids like vaccines are sensitive to environmental conditions and any fluctuations in these conditions can make them ineffective. IOT devices like temperature sensors can be attached to the packages that will record the temperature and other conditions of the package throughout its journey.

Any change in the temperature will be recorded on the blockchain. Additionally the smart contracts will be executed when the compliance conditions are not met and an alert will be sent to the relevant parties in the supply chain. Thus through this technology, it can be ensured that the drugs remain in the suggested storage conditions throughout their journey. Even the consumer, with the help of this shared digital ledger, can easily know if the drug is active by scanning the label on the drug. Blockchain’s transparency and traceability provides a great potential advantage to the
pharma industry.

In case the drug shipment goes missing due to counterfeiting operations, it is much easier to locate it on the chain as the complete transaction is recorded on the ledger and it can easily be known who was possessing the consignment when the issue happened. Sometimes serious side effects of a certain drug are known, only when it reaches the market. in such a situation, manufacturers are required to withdraw the drug from the market at the earliest possible. It is still feasible for a company to recall the drug from the distributors and pharmacies. But the biggest challenge, is to contact the consumers who have bought this drug and intimate them to avoid using the drug. Drug recall announcements, are generally made online, or through advertisements. And there are very high chances that the customer may miss out the announcement and consume the drug.

In such a scenario, Blockchain technology will help manufacturers and pharmacies to keep a record of the people who have bought that particular drug. This will make it easier for them to contact these consumers and intimate them about the drug recall. The unsold stock of medicines by wholesalers or pharmacies is commonly returned to the pharma companies. These companies instead of destroying them might opt to resell them but before reselling they need to validate the authenticity of the returned drugs i.e. they need to confirm if the drug is effective and has been kept at the desired storage conditions throughout its journey.

Because any fluctuation in the temperature, humidity or in any other described environmental conditions can make the drug ineffective. The companies can scan the returned drugs by their unique ID and can track all the information of its journey. If they find the drug to be effective, then only this drug can be sent for reselling. It has become an urgent need to curb the counterfeit drugs for the well being of people.

As we have discussed discussed these fake drugs have serious side effects on the human health.Blockchain technology has the ability to minimize these frauds. A central authority say a company will decide who will participate in the blockchain or in other words who will act as nodes like suppliers, logistic partners, distributors, retailers, consumers etc and the smart contracts may be issued that will help in establishing the proof of drug ownership. When the drugs exchange hands, the unique ID will be traced and verified every time. Fake drugs entered into the system will not be verified as they don’t have the original unique ID and therefore will fail to become part of the network. This will even help to locate the node that allowed counterfeit drugs enter into the supply chain.

When a consumer gets the drug, he can trace all the required information, by simply scanning the unique ID on the medicine, with his smartphone, or by entering the ID on the company’s website. The drugs can be time stamped and the technology also ensures that the drug is in its expected geographical region. Online pharmacies are the main culprits for selling fake drugs to the consumers. According to WHO, 50% of drugs bought online are fake.


With blockchain technology one can identify that the drug he has received from online pharmacy is authentic or fake. This technology can save many lives by making them aware of these fake drugs. Drug shortage can lead to delayed treatment of the patients and thus pose a significant threat to public health. To avoid drug shortage it is very important that the drug manufacturers should get information about the demand on time so as to minimize the drug manufacturing and supply delays. But because of the complex supply chain, there is lack of coordination among the players to better communicate their demands. Shortage of drugs force healthcare providers and patients to shift to alternate drugs that can lead to less effective treatment and can even lead to the introduction of counterfeit medicines in the market.

As we know that blockchain technology will record all the information of the drug from its raw materials till it reaches the consumers. Therefore the digital ledger will also record the sales of medicines from a particular wholesaler or a pharmacy. This in turn will update the inventory of drugs available with them on the shared digital ledger . This insight will help the manufacturer to keep his inventory updated and supply these drugs on time to avoid drug shortage in the market.

This will be a win win situation for all the stakeholders involved. Patients will have timely access to the required drugs. At the same time, company also won’t suffer financial losses due to lost sales because of drug shortage.

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