The outbreak of the COVID-19 pandemic is having an unprecedented impact on global supply chains across all industries, and the pharmaceutical industry is not an exception. A global US$1.25 trillion industry, it has been severely affected by the pandemic from different facets. Excessive demand for drugs and vaccines, shortage in raw material supplies, including APIs (Active Pharmaceutical Ingredient) impacting drug manufacturing, and delays in delivering pharmaceutical products affecting patient treatment are some of the problems that became evident globally. Though the vulnerabilities in pharmaceutical supply chains gained increased attention during the pandemic, the issues related to demand and supply management and logistics operations have been persistent for a long time. Building a more resilient supply chain by promoting end-to-end supply chain transparency, fostering trust amongst supply chain partners, providing accurate and on-time medical information to consumers, enhancing product integrity, and improving the accuracy in document and invoice processing are still the real challenges faced by executives of both pharmaceutical and logistics industries.
Experts suggest promoting transparency is a key to building a resilient pharmaceutical supply chain. A recent survey shows that improving supply chain transparency is the top priority for over 50% of pharma executives and 41% of health service providers in 2021. Blockchain provides a distributed, decentralized, transparent, and immutable record of the transactions architecture with no one owning the database but allowing access to all relevant supply chain partners. This is especially important for highly regulated industries such as pharmaceuticals. While there are several advantages offered by blockchain technology across the pharma supply chain and logistics firms, the following are the few applications with profound impact on the way pharmaceutical supply chains are managed:
Using blockchain, pharmaceutical manufacturers can share drug details such as temperature requirements and shipment information with the logistics providers. Meanwhile, the logistics providers, in continuously capturing, through sensors, the data relating to the location, temperature, or humidity of the drug during transit, can record them on the blockchain. Capturing data continuously and transmitting in near real-time through blockchain provides logistics managers greater visibility of the entire process and the condition of the drugs, thus allowing them to make timely decisions. CEVA Logistics, for example, in partnership with IBM and Maersk, developed a system that allows each member in the supply chain to view the progress of goods through the supply chain, understanding where the container is in transit.
The ability to identify all the steps a drug has taken on its journey and how it is handled from the manufacturer to pharmacy through blockchain technology builds patient trust through the elimination of counterfeit medicines or falsified drugs. This is critical as the sales of counterfeit drugs are estimated to be between $200 billion and $431 billion annually, accounting for more than 10% of the total pharmaceutical products distributed. Immutability properties of blockchain mean that the data stored in blocks is permanent and non-editable, giving supply chain members the ability to use the information as proof of the legitimacy of pharmaceutical products in shipments. Moreover, systems such as Blockchain Identity Management store the identity information of supply chain members that can be used to verify the identities of those involved in logistics operations.
Often, pharmaceutical companies rely on manual data entry, and paper-based documentation during logistics operations and the bill of lading is one such document. It is estimated that up to 10% of bills of lading contain incorrect data. Accenture has tested a blockchain-based system that can replace the traditional bill of lading to facilitate a single source of information on freight inquiries. Similarly, Wave developed a system in which ocean carrier company ZIM and pilot participants issued, transferred and received original electronic documents successfully through a decentralized network.
The consumer medicine information leaflet provides critical information which is highly regulated and needs to be updated with the changes in regulations. Over the past five years, 13% of all pharma recalls were due to packaging or insert issues. Australia imports over 90% of its medicines and is at the end of a very long global supply chain, making product recalls expensive. Meanwhile, the UK Medicines and Healthcare products Regulatory Agency (MHRA) has highlighted difficulties in managing product recalls. The use of blockchain in digitizing the leaflet ensures the consumer receives the most up-to-date digital leaflet for a drug. In addition, the use of digital leaflets could speed up packaging lines and reduce the recall associated with the leaflet, thus providing savings to both pharmaceutical and logistics firms.
Improving invoice and payment processing related to logistics functions could significantly contribute to increasing savings. Smart blockchain contracts store the rules, process financial payments when the rules are met, and ensure sufficient funds are available for on-time payments. Shipchain, for example, a blockchain-based system, tracks and traces shipments and makes payments based on the smart contract rules.
By building trust through transparency, driving agility through traceability, and building resilience, blockchain provides cost-efficiency to both, pharmaceutical industry and logistics firms. Given the benefits of blockchain-based solutions, it is time for companies to leverage this technology in a meaningful way.
Shams Rahman is a Professor of Supply Chain Management at the Department of Supply Chain and Logistics, College of Business and Law, RMIT University, Melbourne, Australia.
Aswini Yadlapalli is a Lecturer of supply chain management at the Department of Supply Chain and Logistics, College of Business and Law, RMIT University, Melbourne, Australia.