Blockchain Technology Can Help Reduce Flow Of Counterfeit Drugs

Biotech ()

Biotech ()

The global pharmaceutical industry is faced with a thriving counterfeit drugs market, a source of unfair competition that harms innovative and generic industries, and most importantly, puts millions of lives at risk. Despite strict enforcement efforts and policies, the problem of counterfeit drugs continues to exist and grow by dangerous proportions.

“Counterfeit medicine is fake medicine. It may be contaminated or contain the wrong or no active ingredient. They could have the right active ingredient but at the wrong dose. Counterfeit drugs are illegal and may be harmful to your health,” as defined by the U.S. FDA.

The problem of counterfeit drugs in the global pharmaceutical industry is exacerbated by its complicated and opaque supply chain. In one of its report, Pfizer points out that, “…growing involvement in the drug supply chain of under-regulated wholesalers and re-packagers, the proliferation of Internet pharmacies, advancements in technology that make it easier for criminals to make counterfeit drugs, and the increased importation of medicines.”

Magnitude of the Problem

The estimates on the size of the global counterfeit drug market range from $75 to $200 billion and can make up half of all drugs sold in some low-income countries as per the U.S. Department of Commerce. Such illegal operations have resulted in more than 100,000 deaths all over the world.

INTERPOL has been conducting yearly operations to crackdown on illicit sale of medicines, medical devices and equipment. During its 2016 Operation Pangea, a joint team from 103 countries seized more than $53 million worth of potentially dangerous medicines and suspended 4,932 websites selling illicit pharmaceuticals. In 2011, INTERPOL had seized harmful medicines worldwide worth $6.3 million. While this highlights success for authorities, it always showcases that expansion in the size of the pharmaceutical counterfeit market over these years.

The European Union Intellectual Property Office 2016 report estimates fake medicines cost the European Union (EU) pharmaceutical sector €10.2 billion each year. It further suggests that it causes a loss of 4.4% of the legitimate sales of pharmaceuticals resulting in 37,700 jobs directly lost across the pharmaceutical sector in the EU alone.

Industry Measures & Blockchain

The industry has been under phenomenal pressure to place mechanisms to check the abuse of its supply chain and ensure authenticity of products by plugging the entry of fake drugs into the supply chain especially the part -- between the manufacturer and consumer.

In the U.S., one of the existing solution is ePedigree, in which drug shipments are tracked, such as through RFID tagging, while in West Africa there is mPedigree to track the genuineness of the product. However, these methods have fallen short of the ways counterfeit drugs find entry into the supply chain.

It can partially be because of a centrally managed system which leaves scope for documents to be fudged. IBM (IBM) suggested that if these systems can be brought on the blockchain, their efficiency can increase exponentially.

The U.S. FDA has been recommending the use of technologies such as radio frequency identification (RFID) chips and tags. Pharmaceutical giants such as Pfizer (PFE), GlaxoSmithKline (GSK), Purdue Pharma, Johnson & Johnson (JNJ) have embedded popular and expensive drugs with RFID chips.

However, the huge costs involved in building the right infrastructure for RFID have held back its mass adoption.

In regular cases, the complexity of the present-day supply chains which run across multiple entities and geographies in a fragmented manner, limit the efficacy of measures such as RFID tags. Hence the broader issues continue to linger.

That only highlights the importance in making a visible supply chain where all players such as suppliers, vendors, partners and distributors are all brought together in a cohesive and comprehensive manner.

The distributed ledger technology, or blockchain, is a viable option for the highly complex pharmaceutical industry. The blockchain would enable an fixed record of all transactions, visible (with details such as location, data, quality, price) to all involved entities, while minimizing the tampering of records. Besides making the supply chain secure, transparent, verifiable and decentralized, the blockchain will help reduce costs involved in tracing problems areas and plug loopholes in the supply of genuine medicines.

Deloitte’s Rubix is working on building applications for resolving these issues in the pharmaceutical industry. During a keynote presentation, this year, co-founder of Deloitte Rubix identified three use cases that could benefit from the application of blockchain technology: drug safety, drug channels, and public safety.

In addition, start-ups such as iSolve, Blockverify, Chronicled are engaged in projects related to blockchain and pharmaceutical supply chain. Blockverify conducted a pilot project with a Swiss pharmaceutical company in 2015 while iSolve’s Project BlockRx is working on “developing and enhancing the drug supply chain and new drug development by leveraging the blockchain technology. In November, Chronicled launched CryptoSeal which are blockchain registered, tamper-evident adhesive seal strips containing a Near Field Communication (NFC) chip that can be customized to fit and seal shipments of pharmaceuticals, including individual’s cartons and containers.

Final Word

A secure, transparent and a well-functioning supply chain is crucial for the companies spending billions on research and development to come up with path-breaking formulas as well as for millions of people who rely on life-saving medicines. It’s become even more important due to sensitive issues like bioterrorism. On this issue, U.S. FDA says, “Although counterfeit drugs and bioterrorism may potentially be related, FDA has no reason to believe that counterfeit drugs are being manufactured or introduced for any reason other than making a profit.” While there aren’t any current reports to verify the link, it is a possibility which cannot be ignored and preparations to tackle it should be in place beforehand.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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