Big Pharma Eyes the Blockchain to Help Fight Fraud

It’s still early days for blockchain. For a few years now, publications like Forbes and Wired have been referring to it as 1994. It’s a relatively new technology, and how it can truly and helpfully be implemented is still something of a question.

For many casual blockchain enthusiasts, it’s linked directly and solely to bitcoin. The cryptocurrency made a huge splash as it approached almost $20,000 in value in the late part of 2017. At the time, fortunes were being made overnight and the concept reached the public consciousness in a big way.

But as the value of bitcoin collapsed in the new year, it seemed like its concept had failed to land.

Not so.

In fact, the underlying technology behind bitcoin, called blockchain, is more promising now than ever before. Massive, trillion-dollar industries like the insurance sector and healthcare are already exploring new avenues and use cases for the blockchain. In particular, the life sciences and pharmaceutical industry is taking a long, hard look at how blockchain could help revolutionize their business model.

For investors, bitcoin may no longer be a hot bet, but by following the money into huge, well-established sectors, the future is looking very bright indeed for blockchain.

What is the blockchain?

Although bitcoin is the most famous implementation of the blockchain, it’s not synonymous. The blockchain provides the underlying technology behind bitcoin. As a distributed ledger, a blockchain shares data across a network in a way that is impossible to alter or tamper.

Fundamentally, it is a system of sharing information. Using algorithms, new information is added to the blockchain and cannot be removed. That information is then instantly shared with all other members of that blockchain.

As a result, blockchain is not only transparent, because all participants can view the data on the chain, but it also removes the need for an intermediary to transmit or verify the data. As an immutable and permanent record, any party involved can audit the information and review it.

A big problem lurking for Pharma

The pharmaceutical industry is one of the world’s largest business sectors — and one that most frequently causes consumers and politicians frustration. Of the $1.1 trillion dollars in annual sales, it can be hard for outsiders peering in to see the value in pills that can cost hundreds or thousands of dollars each.

In fact, it’s become one of the most heavily regulated sectors, because so much is on the line. The third leading cause of death in the United States is caused by medical error. And pharmaceutical companies have a huge responsibility to create effective drugs through clinical trials, and then ensure that those drugs are being distributed safely across a massive network of shareholders — in this case doctors and hospitals, all of whom have to coordinate with insurance payers to do business.

It’s a big problem and a convoluted network. But the blockchain may be perfectly positioned to help.

Clinical trials

Before a new drug can be brought to market, it must go through clinical trials. However, these are extremely complex and time-intensive operations. Think about all the corporations and enterprises involved: there are the institutions doing the research and testing, the boards that manage data, the pharmaceutical companies sponsoring the research, investigators, and government regulators.

It’s little wonder that the entire operation costs, on average, between $30 and $40 million dollars each time. With so much valuable data to pass around between various shareholders, many clinical trials use expensive electronic data management tools, which aren’t cheap. They can add 10% on top of the normal costs of running the trial. That’s $3 to $4 million dollars, for those keeping score at home.

It’s money that the sponsoring pharmaceutical companies would rather not spend.

Seeing this opportunity, Loyakk have begun to create blockchain-enabled decentralized business networks as a way of sharing extremely sensitive, valuable data securely, efficiently with all parties involved with complete provenance of all the interactions, available as an immutable audit trail.

The essential nature of the blockchain — that data is simultaneously stored by all shareholders and updated everywhere at once — means that it does more than just securely contain information in a database protected by a private key.

It adds much more value than that.

In a clinical trial, every step of the way must be documented and reviewed. Sometimes this is for collaboration with other labs and scientists around the world. Sometimes it’s to allow investors to track progress. And often it’s so that government regulators can keep a close eye on progress.

By providing tamper-free data across a blockchain network, companies like Loyakk can help speed up the entire process, from conception to regulatory approval and deployment in the market.

Following the drugs from manufacturing to consumption

Once a drug has passed through a clinical trial and has been approved, it must be manufactured, often in large quantities. In many cases, the time and expense involved in the research and development of the drug has been vast. The Tufts Center for the Study of Drug Development estimated that the cost of developing a new drug is an eye-popping $2.7 billion. Critics have argued that that number is high, and cancer researchers in the Journal of Internal Medicine in November 2017 pegged the figure at closer to $648 million.

In either case, it’s clearly a loborous process. So it’s no wonder that drug companies have every reason to fight against counterfeit or fraudulent copies of their product. According to a recent report, counterfeiting of drugs costs big pharmaceutical companies roughly $200 billion a year.

And it’s not just a problem in the United States. Reports show that roughly 30% of all drugs sold in developing countries are counterfeits. That’s a massive problem that many companies would spend handsomely to remedy, if they could.

A system of sharing information along a business network using the blockchain can safeguard the progress of a drug from manufacturing to pharmacy shelf. The Drug Quality and Security Act requires that every drug unit has an electronic serial number. A system of data management on the blockchain could automatically track and record the movement of drugs using this method.

At every step of the drug’s journey, information could be recorded and stored immutably. That would help ensure that the drug is being moved safely. For instance, many drugs must be stored and transported at very specific temperatures. But it can also create a record that government regulators can review at any time, helping to prevent potential fraud or abuse.

By automatically verifying this provenance, pharmaceutical companies can help ensure that their product remains original and thus of high quality — while protecting their valuable investment.

Although blockchain may still be in its infancy, the case for some kind of ecosystem of business partners is clear, and the value is potentially enormous. Solutions that can manage data for enterprise-level shareholders could unlock the key to this trillion-dollar industry.