Blockchain in Pharma Supply Chain-Reducing Counterfeit Drugs

Though effective supply chain management is the biggest challenge in every industry, in healthcare, there is additional risk and complexity as a compromised supply chain in healthcare can affect the patient’s safety.

Increased adoption of technology, globalization and industry populated with multiple stakeholders in various jurisdictions have given rise to a complicated health supply chain.

The pharmaceutical supply chain is one of the most prominent verticals when it comes to the damaged areas of health supply chain.

A Fraser Insititute Study says that worldwide pharmaceutical sales reached USD 1.1 trillion in the year 2015. The OECD has found the counterfeit goods to be accounted for 2.5 percent of the global pharmaceutical drugs trade.

Experts have estimated the sale of counterfeit drugs to be twice of the rate of legal pharmaceutical trade, which is a serious issue.

The pharma blockchain holds the potential to enhance security, integrity, data provenance, and the functionality of the supply chains with its transparent, immutable and auditable nature.

Blockchain-focused companies are working to remodel tracking and accountability in the shipping of goods.

Blockchain in Pharma Supply Chain could not only reduce counterfeiting and theft issues but also help manage inventory. In the global health domain, organizations like Red Cross, USAID or the Global Fund aim to trace back the distribution of donated medications across different countries.

We shall explain how blockchain can be implemented in the pharma supply chain and what benefits it can bring to the ecosystem.

To help people understand the potential of blockchain in pharma supply chain, we have discussed the following topics in the article:

Here’s why Pharmaceutical Supply Chain require an innovative solution:

  • Visibility:
    A lack of visibility can be one of the significant challenges that raise issues like counterfeits, drug shortages and opioids. Patients, retailers and regulators don’t know where drugs have been originated and what is the procedure of manufacturing.Also, if a drug was contaminated at the time of manufacturing, the supplier could be called to address the issue due to lack of transparency.
  • Regulatory compliances:
    Around 40% of manufactured drug products and 80% of active pharmaceutical ingredients are imported to the US from overseas. From drug production to distribution, every step has to comply with regulations under the Drug Supply Chain laws.Enforcing such regulations involves lengthy paperwork and take a lot of time, sometimes even months.Therefore, meeting the standards for traceability need significant changes.
  • Cold-chain shipping:
    Many of the world’s top-selling medicines are sensitive and require cold-chain shipping, i.e., storing goods in a temperature-controlled environment.Keeping the drugs cold is an essential part of the supply chain that connects drug producers to patients. But storing the essential information related to cold-chain shipping in centralized databases can be prone to manipulations or data hacks. Also, the current software does not have tracking capability of maintaining a full chain of identity.

The U.S. drug distribution model mainly comprises of three trading partners – manufacturers, wholesalers and pharmacist. Let’s consider the case of the pharmaceutical supply chain and how pharma blockchain works in it.

Blockchain in Pharma Supply Chain- Re-modeling drug distribution process

Stakeholders that can be involved in the distribution of drugs are as follows:
  • Manufacturers
  • Logistic Service Providers
  • Distributors
  • Hospital/Pharmacy
  • Patient

Step 1: Manufacturer manufactures the drugs and adds QR code to it

A manufacturer produces the drugs and adds the QR code to it, containing essential information like timestamp, item name, location and manufacturing and expiry date.
The information added by the manufacturer gets stored on the blockchain, making it possible for other stakeholders to to trace the drugs’ supply chain transparently.

Once the information is added to the blockchain, a hash ID is produced that can be used for tracking back the transactions.

The drugs can be shipped to the distributors via IoT-enabled vehicles with temperature sensors to enable cold-chain shipping.

It can be possible to exchange and store the data gathered by temperature sensors on the blockchain. The transparent and immutable distributed ledger can save a considerable amount of time in case of an audit of storage conditions of temperature-sensitive drugs.

The drugs transferred through IoT-enabled vehicles can also send the real-time location to the blockchain so that stakeholders and government agencies could find at what time the drugs were delivered and received.

Step 2: Distributors send the drugs to hospitals/pharmacists

Once the logistics service providers deliver the drugs to distributors, they can verify the origin of medicines with the help of hash ID stored on the blockchain.

They can trace back the information added by manufacturers such as the date of manufacturing, where it was manufactured and if it passed quality checks or not.

Distributors validate the received medicines and sign the transaction digitally which is then added to the blockchain.

The signed transactions trigger the smart contracts to send drugs to the hospitals/pharmacists.

Step 3: Pharmacists receive the drugs and verify its source

Pharmacists get the drugs which can be traced back to know its origination using the hash ID saved on the blockchain.

If any illegal distributor tries to sell counterfeit drugs with fake drug ID to pharmacists or patients, the transaction is considered invalid because of the fraudulent information added about the drug.

Also, unauthorized individuals cannot carry out transactions in the drug supply chain ecosystem without a valid private key.

Therefore, pharmacists would immediately get to know if any anomalies are found within the transactions.

Once the pharmacist approves the received medicines, the transaction between them and the distributor is added to the blockchain, ensuring the legal deal between them.

Step 4: Patients buy the drugs and scan the QR code to trace back its source

Patients can be ensured if the medicine they are buying is safe to take or not. By scanning the QR code attached to the drug’s packaging via their mobile app, they can get to know about its source and if it meets the quality standards.

The hash ID linked to the QR code would fetch information from the blockchain and patients can access the essential details.

Patients can give rating or feedback for the drugs they bought and it would be linked to the drug’s ID stored on the blockchain.

The rating added by the patient can help other individuals to decide if the specific drug is effective or not.

The drug supply chain’s transaction data maintained by blockchain is consensus-driven, transparent and immutable. With the help of a blockchain-based solution, it can become possible to move the governance model of the drug supply chain from regulation to surveillance net (every stakeholder can transparently survey the actions in the supply chain).

The benefits of blockchain implementation in the health supply chain:

  • End-to-end traceability of health products:
    The use of a pharma blockchain based solution will enable streamlined visibility of movement and stakeholders through which drugs or medicines transit in the supply chain. The improved traceability facilitates the optimization of flows of goods and an efficient stock management system.
  • Reduced losses related to counterfeiting:
    A blockchain application can enable clear visualization of health product’s journey from manufacturer to patients with the digitized transactions. Therefore, it would become possible to examine vulnerable points in the supply chain and reduce the chances of frauds and the costs associated with it.
  • Transparency to enhance accountability:
    The receiving and shipping of health products throughout the supply chain can be traced. Also, it is possible to trace the actors or stakeholders involved in the chain of shipment.
    If any problem arises during the supply of drugs or medicines, blockchain can enable to identify the last stakeholder by which the product passed through.
  • Efficient recall management:
    Using blockchain in the pharmaceutical supply chain can allow the identification of exact locations of medicines. The batch reminders can be sent out or carried out efficiently and quickly while maintaining increased safety of patient’s health.

A private blockchain can be the compelling use case of the pharmaceutical supply chain, but the rights granted to each stakeholder can be different depending on their roles.

We have also worked on a blockchain project for pharma supply chain solution- TraceRx

TraceRx is a distributed ledger platform that enables traceability of shipment of drugs. The client approached us to solve the problems of thefts, recalls and transparency in the shipment of medicines.

A blockchain solution provided by our team of blockchain development experts helped our client to empower the entire drug supply chain with enhanced tracking and traceability.


If you are also looking to transform your pharmaceutical supply chain with blockchain, consult us and discuss your requirements with us.

Author’s Bio

Akash Takyar
Akash Takyar
CEO LeewayHertz
Akash Takyar is the founder and CEO at LeewayHertz. With the experience of building over 100+ platforms for startups and enterprise allows Akash to rapidly architect and design solutions that are scalable and beautiful.
Akash's ability to build enterprise-grade technology solutions has attracted over 30 Fortune 500 companies, including Siemens, 3M, P&G and Hershey’s. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.

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