The problem of counterfeit drugs
Counterfeit drugs, with sales ranging from US$163 to $217 billion, are the most lucrative sector of the global trade in illegally copied goods, and adversely impact both consumers and pharmaceutical companies.
As for consumers, thousands of people every year die or suffer health problems after taking counterfeit drugs.
From the companies’ perspective, counterfeit drugs impact their reputation, as well as damage their bottom lines. Drug manufacturers lose about US$ 205 billion annually in sales, and also spend large sums of money on marginally effective anti-counterfeiting measures.
To tackle this issue, the U.S. Congress enacted the Drug Supply Chain Security Act (DSCSA) in 2013, which requires the pharmaceutical industry to adopt, by 2023, an “interoperable system” which will allow the FDA to identify and trace prescription drugs as they are distributed in the U.S..
The task is far from simple: the industry will have to work together to create common standards and improve downstream communication. Manufacturers, packagers, wholesale distributors and even third-party logistics providers will play a role in creating this new system.
Can blockchain help solve the problem of counterfeit drugs?
Blockchain and supply chain
In a nutshell, blockchain is a ledger, a software that and creates a tamper-proof, indelible record of transactions. This record of transactions is decentralized: every participant (node) maintains a copy of the shared ledger, and needs to approve any change. Additionally, the system is fully transparent: the list of transactions is visible to everyone.
In the context of a supply chain, blockchain can be used to track the flow of goods and services between businesses and across borders. This means that, at each step of the distribution process, a network of computers can vouch for the provenance and authenticity of a shipment—making it harder for thieves to unload stolen medications, or for counterfeiters to introduce fake wares.
An important advantage of using blockchain is its reliability: it is virtually impossible for malicious actors to alter the event logs. Another advantage is speed: should a shipment be disrupted or go missing, the data stored on the common ledger provides a rapid way for all parties to trace it, and determine who handled the shipment last.
Pfizer’s involvement in the MediLedger project
Pfizer has teamed up with Genentech (member of the Roche group) and other pharmaceutical companies to introduce the MediLedger project, a blockchain platform to prevent counterfeit drugs from entering pharma supply chains.
If the project meets its goals, everyone from drug makers to wholesalers to hospitals will be recording drug deliveries on a blockchain: its aspirations go beyond DSCSA compliance, and the participants hope to use their system to help fundamentally move the industry forward in improving drug security and preventing the production and trafficking of counterfeit drugs globally.
While is it promising that major pharmaceutical players are involved in the project, introducing a blockchain system – in which each participant controls a node in the network – will be challenging in the pharma industry, where large conservative companies dominate.
The road forward
If the project succeeds, it will undoubtedly disrupt the pharmaceutical industry. However, some additional issues about blockchain will also need to be considered:
- How can blockchain address potential errors, fraudulent transactions or bugs in the code without creating data vulnerability?
- Despite blockchain’s current decentralization, private ledgers will inevitably arise, as companies seek to protect market share and profits. How can interoperability across private and public blockchains be assured?
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 Peter Behner et al., “Fighting counterfeit pharmaceuticals: New defenses for an underestimated – and growing – menace”, Strategy&, June 29, 2017, https://www.strategyand.pwc.com/reports/counterfeit-pharmaceuticals, accessed November 2017.
 Interpol, “Pharmaceutical Crime – The Dangers”, https://www.interpol.int/Crime-areas/Pharmaceutical-crime/The-dangers, accessed November 2017.
 Peter Behner et al., “Fighting counterfeit pharmaceuticals”.
 See, for instance, Jeff Swiatek, “Lilly spends millions fighting fake pharmaceuticals”, USA Today, April 6, 2013, https://www.usatoday.com/story/news/nation/2014/04/06/drugmaker-spends-millions-fighting-fake-pharmaceuticals/7357799/, accessed November 2017.
 U.S. F.D.A., “Drug Supply Chain Security Act”, https://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/DrugSupplyChainSecurityAct/, accessed November 2017.
 Edwin Lopez, “Big Pharma builds blockchain prototype to stop counterfeits”, Supply Chain Dive, September 21, 2017, https://www.supplychaindive.com/news/big-pharma-blockchain-MediLedger-DSCSA-FDA/505563/, accessed November 2017.
 Michael J. Casey and Pindar Wong, “Global supply chains are about to get better, thanks to blockchain”, Harvard Business Review, March 13, 2017, https://hbr.org/2017/03/global-supply-chains-are-about-to-get-better-thanks-to-blockchain, accessed November 2017.
 Jeff John Roberts, “Big Pharma Turns to Blockchain to Track Meds”, Fortune, September 21, 2017, http://fortune.com/2017/09/21/pharma-blockchain/?iid=sr-link2, accessed November 2017.
 Joseph Young, “Pharma Giants Use Ethereum Network to Prevent Counterfeit Medicine”, BTCMANAGER, September 25, 2017, https://btcmanager.com/pharma-giants-use-ethereum-network-prevent-counterfeit-medicine/, accessed November 2017.
 Jeff John Roberts, “Big Pharma Turns to Blockchain to Track Meds”, Fortune.
 Richard Lumb et al., “Editing the uneditable – Why distributed ledger technology must adapt to an imperfect world”, Accenture, 2016, https://www.accenture.com/t20160927T033514Z__w__/us-en/_acnmedia/PDF-33/Accenture-Editing-Uneditable-Blockchain.pdf#zoom=50, accessed November 2017.
 Michael J. Casey and Pindar Wong, “Global supply chains are about to get better, thanks to blockchain”, Harvard Business Review.