Frequently drugs are returned to pharmaceutical manufacturers, and instead of destroying them they re-sell them. While the proportion of drugs may be small at 2-3% of sales, the value exceeds $6 billion a year. Wholesalers may order too much and hence return the unsold stock. SAP is working with a group of manufacturers on a blockchain project to verify the returns are original products.
The global counterfeit market could be as big as $200bn a year according to Reuters. In third world countries, the proportion of counterfeit drugs is very high. But even in the developed world, you could buy life-saving medicine from your local pharmacy which was previously returned. If the manufacturer didn’t adequately verify the return, your drugs could be fake.
Both the EU and the US have introduced legislation to deal with the issue.
Europe enacted the Falsified Medicine Directive (FMD), which comes into force in most EU countries in February 2019. Drugs have to be serialized or barcoded. The EU adopted a centralized approach, so manufacturers upload serial numbers to the regulator’s database. That way suppliers can connect to the same database and verify the data.
In the US the 2013 Drug Supply Chain Security Act (DSCSA) is being phased in over a period of ten years. By late November this year manufacturers have to implement serialization or barcoding at a package level. And by the same time next year these serial numbers have to be used to verify returns.
But there’s no centralized regulator database in the US.
Blockchain comes to the rescue
Without a centralized database, one option would be for every distributor to integrate data with every pharmaceutical manufacturer. That could be painful and significant work.
So it makes sense to have a blockchain as a shared resource where pharmaceutical manufacturers record the serial numbers of their packages. Wholesalers and customers can then connect to the blockchain and verify the product is authentic.
The blockchain is immutable, transparent, and by sharing information avoids multiple complex integrations.
Originally a blockchain prototype was created between Merck, AmerisourceBergen, and SAP. When news spread, other customers approached SAP. A client emailed saying they like the idea, but what about scaling it up? “SAP you have the contacts”. The person at SAP who received the email has worked in client engagements in that sector for 15-20 years. He was able to respond within thirty minutes, and just a week later they had an onsite workshop of 20 people including several clients.
As a result, today there are more than fifteen SAP clients working on the project. These customers include Merck, AmerisourceBergen, GSK, AMGEN, Boehringer Ingelheim, McKesson, and Novo Nordisk.