Beginning this month, the U.S. Drug Supply Chain Security Act (DSCSA) is stipulating that the authenticity of returned drug products must be verified prior to resale.

In order to comply with the act, more than two-thirds of the U.S. market is relying on a blockchain solution developed by the SAP Innovation Business Solutions organization, the Life Sciences unit at SAP, and SAP Innovation Center Network group.

Pharmacies throughout the European Union have been equipped with barcode scanning equipment since February 2019. There, all prescription medicines now have a unique identifier that consists of a serial number, product code, expiration date, and a batch/lot number. This identifier is printed on the product packaging in readable form, and as a data matrix barcode. Manufacturers route the data in these identifiers to national data repositories via a central European hub – a process for which SAP has developed a solution – so that the authenticity of pharmaceutical products can be verified against it. Using special scanning software, pharmacists can check whether a drug product was supplied by the listed manufacturer and is not counterfeit.

The European Union’s Falsified Medicines Directive, 2011/62/EU, requires all member states to implement this verification procedure. Outside the EU, Turkey began operating a central regulator database seven years ago. China, India, and Russia also have their own data repositories.

One in 50 Pharmaceuticals Are Returned to Manufacturers

The picture in the U.S. is rather different. When President Barack Obama signed the DSCSA in 2013, its 10-year implementation plan clearly defined the steps required to make the pharmaceuticals supply chain more transparent. However, the plan did not instruct the U.S. Food and Drug Administration (FDA) on the technological framework.

What the act did stipulate was that product tracing should be possible in 2015, and, starting in 2017, all medicinal products should carry a printed serial number. It also stipulated that, beginning in November 2019, the authenticity of all products returned to wholesalers, for any reason, should be verifiable. For example, a wholesaler might inadvertently supply too many or incorrect products.

“Saleable returns account for about two percent of the entire market,” explained Oliver Nürnberg, product owner at SAP Life Sciences. That equates to between US$7-8 billion and 6-7 billion every year.

Blockchain Verification: Four Benefits

The U.S. accounts for more than 40 percent of global pharmaceuticals sales. “Given the gigantic volumes of data involved, some pharmaceuticals manufacturers were concerned about whether a central database was the right answer,” said Nürnberg, for whom a decentralized solution was viable.

Yet, wholesalers that accepts returns must be sure they are not counterfeit before reselling them. According to Nürnberg, who only advocates for a certain technology if it is the best possible solution for business purpose, “This is a classic blockchain scenario.”

Blockchain is ideal for verifying drug products for four reasons:

  1. Data protection: No personal data, such as patient data, is used, only product data.
  2. Effort: The infrastructure can quickly be put in place within six months.
  3. Security: Once written on a blockchain, content cannot be changed or deleted. It can only be appended.
  4. Distribution: Data is easy to distribute in the blockchain.

More Than Two-Thirds of the U.S. Market Uses Blockchain Solution from SAP

The principle is simple. Each package is verified using a scanner. An algorithm uses the data matrix code printed on the package; consisting of the product code, batch or lot number, expiration date, and serial number to create a hash – a 64-digit chain of letters and numbers that cannot be changed. A block can be added to the chain provided that the original information is not altered.

For example, a wholesaler scans the products it takes back to verify their authenticity. Blockchain technology makes it possible to track the journey each product has taken and establish if it can be resold. Nine of the 20 largest pharmaceutical companies and two of the three largest wholesalers in the U.S. have now opted for the SAP blockchain solution. That is more than two-thirds, 72 percent, of the U.S. market, remarked Nürnberg, who hopes that several more companies will increase that share by November.

Blockchain for Verifying Returns: An SAP Co-Production

The pharmaceutical blockchain solution is a co-production by SAP’s industry unit, with Nürnberg’s team; consulting, with SAP Innovative Business Solutions; and SAP Innovation Center Network. Taking Nürnberg’s basic concept for verifying returns, “an initial proof of concept (POC) conducted with SAP Innovative Business Solutions and involving three customers aimed to test whether the blockchain approach was the right solution in combination with the appropriate technology stack,” said Ross Doherty, a developer and team manager for SAP Innovative Business Solutions.

The first POC confirmed that the technology stack was capable of mapping the processes reliably. A second, larger-scale POC confirmed that the solution was infinitely scalable – an absolute requirement for the multi-billion-dollar pharmaceuticals market.

“We look very closely at what the customer actually needs, whether the solution is efficient, and whether it is a fit for the specific industry environment,” said Jochen Schneider when describing normal procedure within the SAP Innovative Business Solutions organization. A POC is the only way to identify a “big thing” or “cutting-edge technology” with enough promise that it becomes a candidate for a standard SAP solution portfolio, like SAP Information Collaboration Hub for Life Sciences.

Doherty, pointing specifically to the high-tech, retail, and food sectors, claims that blockchain is bursting with potential because it is transferrable to many other industry sectors.

Pharmaceutical Blockchain: Potential in Crisis Zones

All manners of other applications are possible within the pharmaceuticals industry too. Nürnberg sees potential in developing economies like those of southeast Asia and central Africa. The World Health Organization estimates that more than 30 percent of pharmaceutical products dispensed in these regions are counterfeit.

“Aid organizations such as Médicins Sans Frontières therefore often have to use drugs whose origins they can’t be sure about,” said Nürnberg. The technology infrastructure to solve this issue has been developed. All that is required is mobile access.

The benefits of the technology for pharmaceutical companies are two-fold. On the one hand, they can contribute to ensuring that fewer counterfeit products reach patients. Conversely, blockchain gives them transparency on how many drugs actually get through to, and are used by, the Red Cross or Red Crescent in crisis zones.