The holistic value of supply chain management has evolved in a quantum leap over the last sixty years when Jay Forrester, professor emeritus in the MIT Sloan School of Management, proposed system dynamics as a precursor to supply chain management. His first book Industrial Dynamics published in 1961 presented how system dynamics analyzed industrial business cycles and dealt with the simulation of interactions between objects in dynamic systems. Arising from a project with General Electric, he wrote about the expanding effects down the supply chains due to fluctuations in demand, thenceforth known as the “Forrester effect” or bullwhip effect. Forrester’s systems view of an industry became the nexus of supply chain management.
In the last two decades, the disruptive technologies of the Internet, Digital, Mobile, and Social Media have upended the supply chain where the consumer finally holds the bull whip. Supply chain has finally become demand driven and digital technology has collapsed many links of the chain. Social media has impacted the consumer demand through peer-to-peer information sharing, rendering unprecedented sensitivity to demand signals in approaching real time.
Today, the emerging technology of Blockchain holds the promise to realize uprecedented value in the supply chain of an industry by restructure contracts, transactions, and the records, which are the fundamental elements of our economic, legal, and political systems. It has been said that Blockchain will do for transactions what the Internet did for information. What that means is that it allows increased trust and efficiency in the exchange of products and associated transactions.
The healthcare ecosystem is complex, with multiple stakeholders and intricate, sensitive interactions. The governmental regulations impose a constraint that requires data security, privacy and operational challenges be met to stringent standards. Ensuring ownership and trusted access to medical information and administrative while simplifying the process for efficiency is imperative. Blockchain technology has the potential to streamline and accelerate business processes, increase cybersecurity and reduce or eliminate the roles of trusted intermediaries.
Blockchain was introduced in October 2008 as part of a proposal for Bitcoin, a virtual currency system that eschewed a central authority for issuing currency, transferring ownership, and confirming transactions. This peer-to-peer network that sits on top of the internet was designed as a global network for routing value without trusted intermediaries. Its unpredented characteristics included no central point of control, high availability, strong data integrity, and network-wide consensus.
Blockchain is a shared, distributed ledger that facilitates the process of recording transactions and tracking of assets in a business network. An asset can be tangible — a drug, a clinical sample or cash. It can also be an intangible asset like intellectual property, such as patents, copyrights, or branding. This is a distributed, tamper-proof database that secures all records that are added to it, wherever they exist. Each record contains a timestamp and secure links to the previous record. Virtually anything of value can be tracked and traded on a Blockchain network, reducing risk and cutting costs for all involved. The transactional friction between patients, organizations, machines and algorithms would be eliminated, yielding an immense potential of Blockchain.
We can rewire the supply chain of our bio-pharma industry for a Brave New World of unlimited possibilities. Here are some broad areas for its deplotyment in the future:
Medical Health Research
The opportunity for research organizations to extract intelligence from volumes of patient data managed by drug companies, pharmacies, hospitals, doctors, patients (Electronic Health Records) and insurance companies is potentially realizable with Blockchain technology in the not too distant future. A patient’s healthcare information must represent trusted, authoritative evidence of care provided and decisions made, and display the identities of the participants in the care cycle.
A hallmark of Blockchain systems is strong data integrity and privacy. A researched can hope to analyze information from many sources in order to identify public health risks, develop new treatments and cures as well as enable personalized medicine. While limited data trickles through to researchers from clinical studies, surveys and teaching hospitals, it will be a game changing when patients, care providers and regulatory bodies responsibly share patient data for medical treatment breakthroughs
Drug Development and Clinical Trials
The US Food and Drug Administration requires all publicly-funded clinical trial labs to submit their data on human subjects to designated public repositories. Some repositories of the National Institutes of Health allow trial data to be deposited at ClinicalTrials.gov and using research data-sharing services such as figshare. Today, few research groups follow through correctly on this requirement, especially in the case of negative data. And the groups that do upload their data often fail to maintain it over the long-term, eventually leading t missing information.
Blockchain can provide additional accountability and transparency to the clinical trial reporting process. The data itself can be deposited anywhere while the Blockchain stores the links to pertinent clinical trials. All trials associated with a published study can be curated within individual blocks and published on the Blockchain.
Drug Supply Chain Safety Act (DSCSA)
Effective November 2023, The Drug Supply Chain Security Act (DSCSA) states that companies in the U.S. pharma supply chain will no longer be required to pass Transaction Histories (TH) to their customers, but must have… “…systems and processes necessary to promptly facilitate gathering the information necessary to produce the transaction information for each transaction going back to the manufacturer.” The unique capabilities of transparency and connectivity of Blockchain will be a huge asset as the trading partners of the healthcare ecosystem meet the regulatory requirements with greater cost efficiency.
Validation and Payment of Claims
The healthcare industry is hampered by the absence of costs reported in a timely and legible format. This problem is a symptom of interoperability issues and complex agreements between providers, patients, health plans/payers and government regulators. The key financial mechanism for the healthcare system is the health plan claim. The claim process starts with the patient, who is required by law to possess medical coverage backed by a health plan. When a patient needs services from a provider (physician, hospital, pharmacy or nursing home), that provider utilizes the health plan as an intermediary to determine service fees, including member cost share and health plan cost share. In order to determine these cost shares, the health plan must first validate services received from the provider against the agreement they share, as well as any applicable regulatory requirements for that interaction. The potential to reduce processing time and friction, including compliance with contract terms, is considerable.
Global Trade Transactions
The supply chains that support global commerce of bio-pharma drugs is characterized by inefficient and outdated processes and technologies to facilitate the movement of goods and related payments from drug manufacturers to consumers. It has been reported by BIMCO that cross-¬border trade is valued at $17 trillion annually, where on average, shipments require 36 original documents, 240 copies and the involvement of 27 entities.
Blockchain shows great promise in achieving efficiency and accountability in both processing as well as movement of goods and associated financial transactions. Blockchain-based systems have the potential to reduce or eliminate the friction and costs of current intermediaries.
Counterfeit Drug Prevention and Detection
The preponderance of contaminated drugs lacking authentic or active ingredients, or labeled at the wrong dose, threatens human life. Counterfeit drugs are products that have been deliberately and fraudulently produced or mislabeled to make them appear authentic. Each year, it is estimated these criminal products cause the death of between 100,000 and one million people. It is estimated that 10%–30% of medicines sold in developing countries are counterfeit while the comparable number in the industrialized nations is 1%. The value of the counterfeit drug market annually exceeds $200 billion. Blockchain enables the secure tracking of legal drugs and their financial transactions between trading partners.