Blockchain – a type of shared but incorruptible ledger technology – is helping businesses up their game when it comes to data management. Security, data transparency, traceability, and organizational efficiency can all be improved when these systems are implemented – clear benefits for pharma. So why are some companies so slow off the mark in using the technology? Here, Jonathan Bywater from full-service law firm VWV makes the case for blockchain and outlines how it can help support supply efficiency.
As supply chain security and visibility become increasingly important to pharma companies, what role will blockchain play?
Distributed ledger technology’s most attractive use in supply chains is its ability to verify authenticity. In other words, it can provide a means for anyone to screen for counterfeit medicines to an extremely high degree of certainty because it’s highly unlikely for the database to be corrupted. Provided the manufacturer places their products “on chain” and their movements are logged, you have an immutable source telling you the quantity of medicine manufactured, where they’ve been distributed, and if the end users accept them.
An additional benefit is that this timestamped log is impartial, showing whose custody shipments are in at any time. Companies can even rely on the technology to facilitate payments via smart contracts. So, the advantages are not limited to one specific area.
Why haven’t more pharma companies adopted blockchain?
Many pharma companies still rely on legacy systems that make it difficult to quickly integrate blockchain technologies into operations. To utilise the technology, companies have to make high-level investments in both human resources and capital. Staff also have to learn new processes and software, meaning that until the competitive advantage of using distributed ledger technology shows in the market, the shift is likely to be gradual.
What role did blockchain play during the pandemic? And what lessons have been learned?
The general consensus is that the pandemic delayed the adoption of distributed ledger technologies. Companies worldwide felt the repercussions of supply chain disruption and changes to consumer habits, which meant that the implementation of blockchain fell low on priority lists. However, in some cases, blockchain technology was used effectively to coordinate logistics.
Despite the limited use, the global crisis helped drive further discussion about blockchain’s benefits; for example, ledger technologies could potentially have helped counter the fake vaccines that flooded the market during the height of the pandemic. This topic also feeds into a wider conversation about the influx of counterfeit medicines in pharma supply chains.
What are the key limitations of blockchain?
In my view, the proof of work model of blockchain has four main limitations: its environmental impact, storage requirements, volatility of currency, and data protection. The computing power needed to mine (add information to the blockchain) plus the duplication of work is an obvious source of environmental concern. Beyond environmental challenges, every piece of data added to a blockchain needs to be transcribed onto every copy of the blockchain, resulting in a much greater cost than server or cloud storage, This is compounded by uncertainty on the cost of cryptocurrency at any given point in the future making it difficult to forecast costs.
Finally, despite pseudonymization (the removal of unique identifiers from databases) of blockchain transactions, putting information on an immutable ledger raises significant questions on how this fits in with data protection legislation. For instance, under the EU’s General Data Protection Regulation, how should someone’s right to erasure be interpreted? Is the principle of data minimization congruent with blockchains? Such question may unnerve companies yet to adopt the technology.
What lessons do pharma companies still have to learn about blockchain?
It can take decades to fully integrate new technologies into mainstream society. The most obvious example of this is the rise of the internet. It started in academia in 1969, but it was not until the 1990s that it started to become mainstream. Now it is hard to imagine a day when you don’t interface with it.
Today’s blockchains aren't the finished article, but they are on a positive trajectory that could one day make them ubiquitous in day-to-day life.
Jonathan Bywater is a Trainee Solicitor at VWV, a law firm with offices in Bristol, Birmingham, London and Watford.
If you have any questions about this article or have a legal need related to crypto-assets please contact Jonathan, who is a member of VWV's crypto-asset law group, on 020 7665 0965 or at jbywater@vwv.co.uk
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