A 2012 meningitis outbreak caused by tainted drugs manufactured by the New England Compounding Center resulted in more than 100 deaths, legal action, and increased regulatory scrutiny on the U.S. pharmaceutical sector. As a result, Congress passed the Drug Quality Security Act (DQSA), which increased pharmaceutical tracking and security and aimed to force manufacturers to have much greater visibility into their supply chains.

An initiative of this magnitude necessitates some significant technology enhancements. The pharma sector currently relies on databases featuring point-to-point connections between manufacturers and distributors, which is no match for the large scale interoperability required by the DQSA. In addition, as Lucas Mearian wrote in a recent Computerworld piece, “The central database approach is also open to the risk of diversion, counterfeit, and a trust gap between siloed systems.”

But the answers to these challenges may be found in an emerging technology: blockchain. As Mearian puts it, “Blockchain eliminates the need for individual wholesalers to manage large volumes of product lists and manufacturer addresses, complying with DQSA regulations while reducing errors and providing savings to the entire supply chain.”

Two years ago, the Healthcare Distribution Alliance (HDA) began developing The MediLedger Project, a blockchain-based network created to address new traceability regulations. As of this spring, the MediLedger network had a response time of 100ms or less within the same region and 400ms for coast-to-coast verification of look-up requests. The network is currently being piloted by nine of the top 20 global pharmaceutical companies and two of the top three U.S. wholesale distributors.

An example of the latter can be found in AmerisourceBergen. The Pennsylvania-based wholesale distributor manages more than 50,000 pharmaceutical products and ships more than 3 million SKUs daily from distribution centers that represent more than 130,000 deliveries to healthcare centers and pharmacies. While the company is still in the staging environment with blockchain, AmerisourceBergen believes the technology will revolutionize communication between companies and engender much greater transparency and visibility.

Heather Zenk, SVP of replenishment and manufacturer operations, told Mearian, “If we all aren’t on blockchain as an industry, every time Pfizer changes its phone number and serial number, they’d have to go to each and every [partner] and provide them the new information. So, we’re basically using [MediLedger] as a phone book.”

Avivah Litan, a Gartner vice president of research, believes blockchain is “ an appropriate technology for the industry to turn to because multiple entities need to share a single version of the truth based on immutable data where no one entity is in control.” Yet she also cautions against painting the technology as a miracle solution, emphasizing that it’s still early days and that there are a number of business processes that must be addressed before blockchain can reach its full potential.

As AmerisourceBergen and the other pharmaceutical companies piloting the MediLedger network mature in their implementations, expect to see more discussion of how other technologies must change to support a blockchain-enabled industry.

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