Blockchain is making big news in supply chains, but its true importance is hard to overstate. Walmart is the latest retail giant to join the MediLedger consortium, which is developing a blockchain-based solution for pharmaceuticals. The news was confirmed by a Walmart spokesperson, but no further details have been revealed.
Initial reports on the Walmart partnership focused on the benefits for MediLedger, and of the role that blockchain can play in a fragmented pharmaceutical market. However, these reports understate the extent of the issues in the global pharmaceutical supply chain, and the role that blockchain can play in solving them.
What is MediLedger?
MediLedger was formed in 2017 by San Francisco blockchain company Chronicled. The aim of the consortium is to build an open network which operates across the entire pharmaceutical industry, from factory to drugstore. Members include manufacturers Pfizer and Genentech (owned by Swiss pharma giant Roche) and wholesalers McKesson and AmerisourceBergen.
The consortium was formed in response to the U.S. Drug Supply Chain Security Act (DSCSA) which will come into force in 2023. The Act tasks the pharmaceutical sector with “building an electronic, interoperable system by November 27, 2023, that will identify and trace certain prescription drugs as they are distributed within the United States.”
Counterfeiting in the Pharmaceutical Industry – A Global Concern
Counterfeit drugs are a global problem. The World Health Organisation estimates that more than ten percent of all drugs in developing countries are fakes, generating more than $30 billion annually. The WHO calculates that over 115,000 people each year die from the use of substandard antimalarials alone.
It’s also a serious issue in developed countries. Since 2012, 63 different faked medications have been found in sales to over 3,000 clinical institutions in the US. This counterfeiting epidemic is what led Congress to pass the DSCSA in the first place.
Not Just A Regulatory Challenge
The new legislation puts the responsibility on drug companies to develop a solution that satisfies the FDA requirements of being “interoperable.” However, regulatory pressure isn’t enough by itself to force the pharmaceutical industry to implement a solution.
But there are also strong market pressures, and the EU is a case in point. The EU Falsified Medicines Directive has been in force since 2013. A European consortium of pharma companies including Swiss Novartis, German Bayer, and British AstraZeneca has launched a project called the Innovative Medicines Initiative. Its goal? To establish “establish a common blockchain ecosystem for pharmaceutical development, manufacturing, and distribution.”
A common argument in favor of blockchain is that a decentralized solution helps to unite fragmented markets. While true, such efficiency gains are marginal and could take years to return the investment of a multi-party solution.
The main reason the pharmaceutical industry is so excited about blockchain is that it could help reclaim the market from counterfeit drugs, worth billions each year. If pharma companies can bring this back to their top line, it makes a vast and immediate difference to profitability.
Furthermore, like so many industries, the pharma supply chain is global. U.S. drug companies aren’t necessarily sourcing all ingredients or manufacturing on U.S. soil, and pharma companies also sell their products overseas. So, operating in nationwide silos isn’t going to overcome the counterfeiting challenges.
Where Walmart Comes In
Walmart’s first forays into blockchain targeted fresh produce. With its retail clout, the company can insist on suppliers signing up for the new technology as a precondition of working together.
Many people only interact with the pharmaceutical industry via over-the-counter medications. If Walmart can get consumers used to checking their medication’s provenance, it would help drug companies to make their blockchain endeavors a success, and reclaim the profits skimmed off by fake drugs.
MediLedger is only one of the FDA’s pilots for implementing the DSCSA. Walmart has also joined up with IBM, KPMG, and Merck for another blockchain interoperability pilot. In total, six blockchain pilots will run concurrently.
The use of blockchain in fighting counterfeit pharmaceuticals underlines the broader potential for enterprise adoption. Increased profitability, combined with better patient protection and ousting fake drugs make the technology far more than just a buzzword to the global pharma industry.