Pharmaceutical industry: The supply chain out of glass or on the way to blockchain

Technologies of Today and Tomorrow in the Pharmaceutical Industry

The global market for pharmaceuticals reached $1.2 trillion in 2018.  In the medium term, world market shares will increasingly shift towards the emerging markets, especially in favor of China and Brazil, whose pharmaceutical growth rates are well into the double-digit percentage range. According to Handelsblatt calculations, the ten largest pharmaceutical companies were able to increase their pharmaceutical sales by 6.6 percent to a total of 362 billion dollars last year. With comprehensive growth and emerging competition, efficient processes within the supply chain are increasingly becoming a decisive competitive factor.

Highly complex supply chains

In the pharmaceutical industry, companies have to deal with highly complex processes within the supply chain. A large number of different suppliers, regulatory agencies, pharmacies, hospitals, insurance agencies, and producers rely on different computer systems that are incompatible without a connection. With so many different stakeholders along the supply chain; it’s also difficult to validate the information and to protect against missing documentation and human errors during data entry.  Also, many different stakeholders along the supply chain add and change data.

When recalls occur, it is especially difficult to trace where the source of the damaged product occurred within the process. Transparency along the entire supply chain and access to real-time information is the key to precisely knowing drug components and quickly identifying the source of a recall. This also minimizes situations in which the end-user receives harmful or counterfeit medicines.

The aim should, therefore, be to create a supply chain out of glass

This term embodies the wish that clients and end customers only buy products for which the production process up to the material composition is entirely transparent. One promising solution to achieve transparency and traceability in the future will be Blockchain. Blockchain is poised to enable complete traceability of drugs, from manufacturer to end consumer, and to pinpoint the exact location of a breakdown in the supply chain, should it occur.

Currently, many blockchain developments are still pilot projects, and implementation across the entire network of suppliers, and producers will take a long time. An example of this is the MediLedger Project which formed in 2017 to test a closed blockchain system to track who touched what drug at what time.

Experts agree that Blockchain could have a revolutionary impact on industries such as Pharmaceuticals. However, the implementation of Blockchain will depend on where your company falls on the maturity curve. An initial implementation took about three to five years. The result is an application with a limited number of participants. For a broader application, a lead time of five to ten years is necessary.

So, with such large growth, what can companies do now to address transparency and traceability?

As a starting point towards the implementation of blockchain-based processes, a digital supply network like Elemica can offer great added value: Data is captured from supply chain trading partners across each transaction, communication, and collaboration. Manual processes, such as submitting a purchase order, is completely digitized and can be shared with others electronically. All data is rationalized and is correlated across business processes. Once linked, the data is converted to valuable information bringing extended capabilities for visibility. Finally, with rationalized data, active collaboration and constant visibility, companies can identify patterns that can be used to feed machine learning algorithms to create higher-order problem-solving capabilities.

And these digitization processes are an important qualification on the way to blockchain and support it significantly, even if blockchain has already been implemented.

Because digital channels provide the network with information that includes all trading partners, industry hubs, GPS data, risk data, weather information, public/private blockchains, and much more. Networks centralize this information from multiple sources and provide transparency. Companies can optimize their processes based on this information transparency.

From such a network, it is a comparatively small step towards intelligent contracts because all the rationalized data and connections to suppliers are already given. And even if not all suppliers immediately participate in blockchain projects, a digital supply network can already act on a future-proof basis. That means one solution cannot live without the other. And blockchain is, so to speak, the last link in the realization of the vision of industry 4.0 or the Internet of Things.