Can Chronicled replace the supply chain

Blockchain: will it change the supply chain in the pharmaceutical industry?

The supply chain in the pharmaceutical industry is becoming an increasingly complex system, making it more difficult for drug manufacturers and their partners to ensure safe and on-time delivery. The transport route for products is not always a transparent process.

Thousands of people and companies interact with products in transit, including those that require special care because they are perishable, fragile or very expensive. The trading partners in the supply chain usually exchange contracts, agreements and transactions using different management systems (some of which are still paper-based), with the result that many work steps are carried out twice and time is wasted. The partners in the supply chain also use differently mature systems that differ in terms of speed, functionality and security and thus cause further inconsistencies and delays.

One solution to overcoming these challenges could be in the blockchain, an electronic transaction book that includes an ever-growing list of entries known as blocks. Each of these blocks is a cryptographically protected, timestamped transaction entry. The blocks are linked and recorded in a chronological "chain". A blockchain can be used to secure internal supply chains as well as those with multiple parties involved.

Possible future solution structure (Chronicled. The MediLedger Project: 2017 Progress Report. February 2018)

This network, which is usually managed according to the peer-to-peer principle, follows a series of fixed rules. Because the database is distributed over a computer network, it does not provide a central point of attack that could attract hackers. The security is guaranteed by complex encryption, so that the individual, timestamped entries cannot be hacked or changed. The data transfer takes place for a small fee. After the blocks have been saved, changes to data and / or programs are almost impossible; this ensures transparency and builds consistency and trust among all users of the blockchain.

Even the US FDA is looking into the blockchain. One of the biggest challenges for the pharmaceutical industry is compliance with the US Drug Supply Chain Security Act (DSCSA) with a deadline of November 2023. The law requires that all prescription drugs, including returns, can be tracked across the supply chain using an interoperable system - this is critical in combating counterfeit medicines, which are not only dangerous to patients but cost the pharmaceutical industry hundreds of billions of dollars annually around the world.

“The FDA is actively exploring the potential of blockchain technology in identifying appropriate technical solutions to track drugs in transit from the manufacturer to the pharmacy and better empower the agency to protect consumers from drugs that are counterfeit, stolen, contaminated, or otherwise can be harmful ”, so Jeremy Kahn, Trade Press Officer of the CDER. "This is part of an FDA endeavor to help develop improved drug trade safety tools required by the DSCSA."

In December 2017, the FDA held a public meeting on the matter. "We are currently reviewing the information from the meeting and from comments received in order to better determine the advantages and disadvantages of blockchain technology in tracking the movement of prescription drugs," added Kahn.

Advantages of the blockchain

The blockchain has the potential to make the supply chain safer, more transparent and more rational. All inspection and transfer points are recorded and can be tracked using biometric methods, multiple barcode scans or sensor technology (including radio frequency identification). This data set, which is kept continuously in real time, can be viewed at any time by authorized persons, including patients, at the end of the supply chain. The technology also creates an audit trail that meets regulatory requirements and simplifies the management of smart contracts along the entire value chain. All of these safeguards and controls make it much more difficult for criminal networks to penetrate the pharmaceutical market and sell counterfeit drugs.

In addition, the blockchain can protect the quality of the products. Sensors can track the location and also measure and record external environmental factors, which are particularly crucial for pharmaceutical deliveries. For example, vibrations or the temperature can be monitored in order to detect unacceptable deviations that could lead to deterioration during shipping (and correct them in real time if possible).

"The potential of the blockchain lies in the fact that many databases behave like a single one in order to increase efficiency and effectiveness along the supply chains of cooperating companies", says Michele D’Alessandro, Vice President and Chief Information Officer, Manufacturing IT at Merck & Co.

However, that's easier said than done.

One of the biggest obstacles in the implementation of a blockchain is the large number of existing platforms used in the pharmaceutical supply chain, on which different operating systems with different levels of security often run. The pharmaceutical industry is very careful about protecting intellectual property and companies are already reluctant to share data due to their distrust of autonomous systems that are claimed to be secure and cannot be tricked. In essence, blockchain is a new technology that has yet to be fully scaled and tested for the pharmaceutical industry's supply chain, which is why many companies prefer to wait before investing in its implementation.

The blockchain can also help smaller providers in the supply chain to make their operations more efficient and improve the flow of capital. This is especially true for supply chain partners in emerging markets, where hundreds of companies populate the market. Trading documents made transparent with the help of the blockchain help to build trust in these small and medium-sized companies and their business practices, make it easier for them to borrow and reduce the turnaround time for payments from weeks to days.

Ultimately, perhaps the greatest advantage of the blockchain lies in building trust. "The initial focus of the pharmaceutical industry when building blockchains was on securely sharing data and creating a universal source of secure, unchangeable product information," explains D’Alessandro.

"The real potential lies in the data and process models and in how far companies want to go in researching new business opportunities in a tightly networked environment with process and data sharing," adds Bob Celeste, Founder of the Center for Supply Chain Studies. "The blockchain creates additional trust among trading partners by using a common auditable environment that can be used to develop new business practices that add value to the relationship."

Pilot projects, prototypes and case studies

Visionary companies often implement blockchain initiatives in cooperation with like-minded partners. For example, Merck has partnered with SAP, AmerisourceBergen, and Cryptowerk to create a proof-of-concept (POC) blockchain system that complies with regulations and helps fight counterfeit drugs (1). The blockchain POC app for the pharmaceutical industry from SAP runs on mobile Android or iOS devices. It uses the simple scanning of barcodes to show in real time at which point in the supply chain a drug is currently located - be it at the manufacturer, brand owner, wholesaler or in the delivery system. This enables drugs to be checked by serial number, batch and expiry date, ensuring that they can be tracked at every point in the supply chain.

Another solution deals with counterfeit prevention. The name of the blockchain company TBSx3 stands for "To Be Sure, To Be Sure, To Be Sure". While serialization is helpful for tracking, counterfeiters can copy a product's serial number. TBSx3 therefore offers three levels of protection. Each product protected by TBSx3 has a unique encryption 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 suspicious anomalies. The third layer consists of a "double-spend prevention" feature that crosses out an ID / code after use and ensures that any attempts to use a forged copy of the ID / code are rejected (2).

As part of a further pilot project, DHL and Accenture published initial findings on a jointly developed working prototype that tracks pharmaceutical products from the starting point to the consumer, thereby preventing manipulation and errors (3). This blockchain-based serialization prototype uses nodes in six geographic regions to track pharmaceutical products along the supply chain. The transaction book can e.g. B. be shared with manufacturers, warehouses, dealers, pharmacies, hospitals and doctors. Laboratory simulations show that the blockchain could process more than seven billion unique serial numbers and 1500 transactions per second.

The MediLedger project, launched by Chronicled in 2017, brought together a working group of executive pharmaceutical manufacturers and distributors to explore the potential of blockchain technology in terms of meeting tracking requirements and improving overall performance and security of the supply chain (4). In 2018, the group plans to conduct a thorough investigation into the transfer and verification of data / product ownership among its members using a blockchain prototype.


Blockchain is a relatively new technology that many pharmaceutical companies do not fully understand (or trust), so they are reluctant to adopt it. Some drawbacks are the investments already made in other technologies to ensure traceability and DSCSA compliance, the uncertainty and risk that always come with investing in new technologies, and costly implementation with limited short-term benefits to large-scale adoption.

Blockchain platforms are rapidly evolving to meet industry demands. “The blockchain of today and tomorrow is no longer the blockchain from three years ago,” says Celeste. “Progress is supported by the projects among trading partners or small groups of trading partners. The benefits of these experiments will show the way how this technology will evolve from its current state to production-ready platforms. "

There are still numerous policy, standards, and governance decisions to be made before it can be rolled out across the industry. Celeste predicts that research and adoption of the blockchain will take place in moderate increments, starting with low-risk processes or those with few alternatives (e.g. DSCSA). These processes need to be carefully recorded, checked, validated and investigated from an official point of view. "The regulatory authorities and certification bodies may need to reassess their understanding of processes and data in view of the special characteristics of a common, unchangeable, programmable environment," he says.

The development of the blockchain will be accelerated most through cooperation, communication and willingness to experiment on the part of the official, industrial and academic partners who are working on the advancement of this technology. As trust grows, research partnerships and projects will find (and share) more new and better ways of using blockchain to secure supply chains in the pharmaceutical industry.

"The most promising is to experiment with other targeted use cases, as we would with other new possibilities," says D’Alessandro. “It's also important to partner with experts outside of the industry who can share technical expertise. The closer our ecosystem of companies, partners and practitioners learns and works together, the faster the development of innovation, growth and takeover of the blockchain will take place. "


  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 specialist business and technology writer based in Madison, Wisconsin, USA. He has also authored five books on science and American history.

The article has already been published in the PDA Letter July / August 2018 (Issue 7) and appears in our newsletter LOGFILE in German translation with the kind permission of the PDA.