By 2020,pharmacies and hospitals must be able to verify that the drugsthey're dispensing came from manufacturers or repackagers. (Photo:Shutterstock)

Blockchain believers have delivered little morethan hype, mostly failing to get it deployed outside thecryptocurrency space where the technology was developed. But alittle-noticed U.S. law could change that, bringing the ledgersystem to the pharmaceutical business.

The Drug Supply Chain Security Act from 2013 requires drugcompanies and their supply-chain partners to more closely trackwhere their finished products are shipped, making counterfeit medicines harder to sneak into thesystem and easing drug recalls.

Related: Could blockchain fix health carecosts?

By 2020, pharmacies and hospitals must be able to verify thatthe drugs they're dispensing came from manufacturers orrepackagers, which divvy up huge batches of pharmaceuticals intothe actual bottles that get distributed in pharmacies or hospitals.While pharma giants are still evaluating how to comply, health-careanalysts says the impeding deadline is leading firms to seriouslyconsider the blockchain, since it's designed to create detailed andimmutable databases.

“The best bet going right now appears to be blockchain,” in partbecause of the shortcomings of conventional software, said ChetStagnaro, a consultant with health-care advisory firm FreedAssociates. “The potential is definitely there.”

Blockchain, originally developed as the ledger technology thatpowers the Bitcoin digital currency, is promising for corporations,if they can figure out how to use it. Proponents predict billionsof dollars in savings by handling records more efficiently andrapidly. Yet most corporate efforts are still in early developmentor testing.

Health care may buck that trend. The Center for Supply ChainStudies has been conducting studies and trials with drugmanufacturers, distributors and pharmacies since 2017 to assess howblockchain can meet the law's requirements, according to RobertCeleste, founder of the organization.

Plugging tens of thousands of American pharmacies into adrug-tracking database is a huge challenge, and a blockchain is anattractive way to simplify that, Celeste said. “From the blockchainpoint of view, there is still a lot of work to be done, but it'sbeing done in earnest,” he said.

Representatives from pharma companies GlaxoSmithKline Plc,Novartis AG, Merck & Co., Johnson & Johnson and Pfizer Inc.either declined to comment or didn't respond to inquiries abouttheir blockchain efforts.

More detailed

The law requires tracking each package of drugs separately, butcurrent industry software can only do it to the lot or batch level,said Arun Ghosh, blockchain leader at KPMG LLP. A blockchainsolution won't necessarily displace existing software, but augmentit, he said.

“With blockchain you can now get to a much lower grain ofdetail,” Ghosh said. For sophisticated drugs used in cancertreatment or biologics, which areexpensive to develop, that can lead to huge savings if a badingredient leads to a recall because the exact point of failurewill be recorded on the blockchain.

“The recall on a biologic is hundreds of millions of dollarscompared with a generic,” he said. Drugmakers will need to prove tothe Food and Drug Administration that expired drugs are returned tothem, Ghosh said. Here too, the detailed records kept by ablockchain may prove superior.

“When all these things come into place, blockchain is beingactively entertained,” he said.

Read more about the potential ofblockchain:

• Intel wants to use blockchain to fight the opioidepidemic
• UnitedHealth, Humana exploring blockchain to managehealth data
• In health care, is blockchain the technology we'vebeen waiting for?

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