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The Pharmaceutical industry has been plagued by the realities of counterfeit medicines being introduced into their complex supply chains for decades. With increasing threats to patient lives and brand credibility, companies are looking for innovative solutions. The rise of digitalization, and specifically blockchain technology, gives new hope for solving Big Pharma’s global supply chain issue.
The pharmaceutical industry has long been troubled by the alarmingly high rate of counterfeit medicines entering the global supply chain. The World Health Organization defines counterfeit medicines as products fraudulently produced or mislabeled to give the appearance of being genuine [1]. These fraudulent medicines can be detrimental, and even lethal, to patient health as they may contain inconsistent levels of the active pharmaceutical ingredient, or may be manufactured in unregulated and unsafe conditions [2]. In addition to patient impact, counterfeit products directly influence pharmaceutical company revenues and reputations, as these products cannibalize genuine product markets and weaken brand image and credibility. With a 56% increase in international counterfeit pharmaceutical incidents between 2012 and 2016 (Figure 1), this is a growing problem that is amplified in complex global supply chains for large pharmaceutical companies. One such company that has recently felt the pain is Genentech, which was the victim of 3 counterfeit incidents of its blockbuster cancer drug Avastin beginning in 2012 within the United States (Figure 2) [3, 4].
Figure 1: Total number of fraudulent pharmaceutical incidents has risen by 56% since 2012. A fraudulent incident is defined as either counterfeiting, illegal diversion or theft [2].
How can pharmaceutical companies such as Genentech address counterfeiting?
One potential answer lies in leveraging the rise of digitalization to better trace all products and their constituent parts across the global supply chain. Genentech has taken this initial step by partnering with other large pharmaceutical companies to invest in the MediLedger Project [5]. This project leverages blockchain technology to create a dependable record of all transactions within Genentech’s complex pharmaceutical supply chain. The project aims to integrate the recording of drug deliveries for all stakeholders in the supply chain in one computer system. As a result, each step in the distribution process will be recorded digitally, creating a permanent record of when the drug is exchanged between stakeholders. Thus, in addition to making it more difficult for criminals to introduce fraudulent materials or steal pharmaceuticals from the supply chain, this would allow for increased speed in tracing and investigating when disruptions occur. By successfully completing a pilot and investing heavily in leveraging blockchain technology, Genentech is riding the digitalization wave to get a firmer grip on its global supply chain over the next 3-10 years. However, this is not enough.
Figure 2: In 2012, there were multiple discovered cases of counterfeit Avastin being distributed in the United States. This image illustrates the difference between the original (top) and it’s fraudulent counterpart (bottom) [4].
Genentech must remain cautious about overreliance on digitalization. The downside of new technologies, such as blockchain, is the ever-present threat to cyber security [6]. As we have seen recently, cyber attacks can be detrimental to customers as well as company profits and credibility. In an industry where mistakes could directly lead to adverse patient outcomes, the stakes are even higher, and thus safeguards must be put in place when connecting an entire global supply chain using blockchain. As each stakeholder, whether it be the drug maker, distributor or hospital, owns a particular node in the blockchain, a cyber attack that impacts any one of these nodes, could lead to mismanagement of drugs along the supply chain.
Thus, Genentech must invest in non-digital mechanisms for dealing with counterfeiting. One such way is to innovate packaging and labeling techniques to make it impossible to replicate. This would include investing in R&D to further complicate barcodes and create additional unique identifiers for each drug. Further, Genentech should invest in authentication procedures that allow stakeholders within the supply chain, and especially hospitals, to more rapidly confirm the validity of drugs when they are received. Finally, Genentech should continue investing in mass serialization internationally to work toward improved traceability on the global scale.
Remaining Questions
While blockchain technology and the rise of digitalization provide exciting potential solutions, the challenges of securing a complex global supply chain in the pharmaceutical industry are plenty, and many questions remain. This new approach relies on participation by all parties in the supply chain, but will all stakeholders be open to adopting this new technology? Even if they are open to it, will they have the infrastructure and means to do so? Further, will switching to blockchain introduce more problems (in the form of cyber security) than it will help solve? In any case, the rise of digitalization has given corporations like Genentech new ways to address problems that have plagued the industry for decades.
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References
[1] “Substandard, Spurious, Falsely Labelled, Falsified and Counterfeit (SSFFC) Medical Products.” World Health Organization, 1 Jan. 2016, www.who.int/mediacentre/factsheets/fs275/en/.
[2] “Counterfeit Situation.” Pharmaceutical Security Institute, 2017, www.psi-inc.org/counterfeitSituation.cfm.
[3] Blackstone, Erwin A., et al. “The Health and Economic Effects of Counterfeit Drugs.” American Health & Drug Benefits, June 2014, ncbi.nlm.nih.gov/pmc/articles/PMC4105729/.
[4] “Genentech Warns of Fake Avastin.” 15 Feb. 2012, www.in-pharmatechnologist.com/Article/2012/02/15/Genentech-warns-of-fake-Avastin.
[5] Roberts, Jeff John. “Big Pharma Turns to Blockchain to Track Meds.” Fortune, 21 Sept. 2017, fortune.com/2017/09/21/pharma-blockchain/.
[6] Berke, Allison. “How Safe Are Blockchains? It Depends.” Harvard Business Review, 7 Mar. 2017, hbr.org/2017/03/how-safe-are-blockchains-it-depends.
This is fascinating – thanks, Ivneet. I would be really curious to know at which point in the pharmaceutical supply chain counterfeit medications enter – is it closer to the manufacturing end (i.e., wholesalers) or closer to the end user (i.e., distributors)? I did some searching and couldn’t find a clear answer (which may not be known). The use case for blockchain and digitalization in tracking the distribution of pharmaceuticals is very interesting. It reminded me of how several manufacturers of everyday consumer goods are using technologies like RFID tags to track inventory in production and shipping. An interesting solution for pharma that I came across is the use of “edible bar codes,” or microtags that pharmaceutical companies can use to track drugs on a batch basis (https://www.pharmpro.com/article/2016/01/keeping-counterfeit-medicines-out-supply-chain). Similar to the recommendation you described in your essay, it’s a bit of a mix between digital and non-digital mechanisms for tracing drugs through the supply chain. I wonder though if players at the end of the supply chain (i.e., pharmacies) would have to invest in equipment or technology that is able to scan these barcodes to confirm their authenticity. That could require huge investment across the space if it needs to happen at the individual pharmacy level, though perhaps it’s not necessary.
This was a fascinating article! I had no idea that globally this was such a major issue, I was expecting this article to focus on markets with cheaper access to drugs selling them in more expensive locals but counterfeit medicine is a scary phenomena. I wonder the key driver of this issue, is it mainly due to the fact the real medicines are expensive or hard to access and do you think it would be easier for companies like Genentech work to improve those two levers? Additionally, similar to many consumer goods (such as clothing) counterfeit fighting, I think the government should play a stronger role in educating the public that this is an issue and promoting regulation that acts as a barrier for it to occur.
This is super interesting article Ivneet! I had not realized the scale of this issue. Another element to consider is how effectively digital traceability can be implemented on a global scale – in particular, the speed and complexity of doing so in developed vs. developing countries.
The World Health Organization just released an article last week reporting that an estimated “1 in 10 medical products circulating in low- and middle-income countries is either substandard or falsified.” Certain countries, including the United States with its Drug Supply Chain Security Act (DSCSA), are beginning to introduce laws that require the digital tracking of medication from production to scale. However, these traceability systems may be much more challenging to implement in developing countries.
My hope is that as large pharma companies develop robust digital traceability systems, they will take a holistic approach to eliminating counterfeit drugs across the globe, rather than focusing primarily on top revenue-driving countries. To do this, they will need to partner with developing companies, most likely at the expense of profit, to help these countries build the necessary digital infrastructure and processes.
This is fascinating – thanks, Ivneet. I would be really curious to know at which point in the pharmaceutical supply chain counterfeit medications enter – is it closer to the manufacturing end (i.e., wholesalers) or closer to the end user (i.e., distributors)? I did some searching and couldn’t find a clear answer (which may not be known). The use case for blockchain and digitalization in tracking the distribution of pharmaceuticals is very interesting. It reminded me of how several manufacturers of everyday consumer goods are using technologies like RFID tags to track inventory in production and shipping. An interesting solution for pharma that I came across is the use of “edible bar codes,” or microtags that pharmaceutical companies can use to track drugs on a batch basis (https://www.pharmpro.com/article/2016/01/keeping-counterfeit-medicines-out-supply-chain). Similar to the recommendation you described in your essay, it’s a bit of a mix between digital and non-digital mechanisms for tracing drugs through the supply chain. I wonder though if players at the end of the supply chain (i.e., pharmacies) would have to invest in equipment or technology that is able to scan these barcodes to confirm their authenticity. That could require huge investment across the space if it needs to happen at the individual pharmacy level, though perhaps it’s not necessary.
This was a fascinating article! I had no idea that globally this was such a major issue, I was expecting this article to focus on markets with cheaper access to drugs selling them in more expensive locals but counterfeit medicine is a scary phenomena. I wonder the key driver of this issue, is it mainly due to the fact the real medicines are expensive or hard to access and do you think it would be easier for companies like Genentech work to improve those two levers? Additionally, similar to many consumer goods (such as clothing) counterfeit fighting, I think the government should play a stronger role in educating the public that this is an issue and promoting regulation that acts as a barrier for it to occur.
This is super interesting article Ivneet! I had not realized the scale of this issue. Another element to consider is how effectively digital traceability can be implemented on a global scale – in particular, the speed and complexity of doing so in developed vs. developing countries.
The World Health Organization just released an article last week reporting that an estimated “1 in 10 medical products circulating in low- and middle-income countries is either substandard or falsified.” Certain countries, including the United States with its Drug Supply Chain Security Act (DSCSA), are beginning to introduce laws that require the digital tracking of medication from production to scale. However, these traceability systems may be much more challenging to implement in developing countries.
My hope is that as large pharma companies develop robust digital traceability systems, they will take a holistic approach to eliminating counterfeit drugs across the globe, rather than focusing primarily on top revenue-driving countries. To do this, they will need to partner with developing companies, most likely at the expense of profit, to help these countries build the necessary digital infrastructure and processes.
Source: NPR, “Fake drugs are a major global problem, WHO reports,” https://www.npr.org/sections/goatsandsoda/2017/11/29/567229552/bad-drugs-are-a-major-global-problem-who-reports