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Fears pharma sector will miss interoperability deadline, blockchain or not


US legislation is forcing trading parties in the pharmaceutical supply chain to become interoperable by 2023. You’d think breaking up the task into piecemeal deadlines would make it easier to comply with the 2023 deadline. But it could make it harder. Some have doubts the industry can meet the deadline for the Drug Supply Chain Security Act (DSCSA).

“I don’t think there’s any chance we’re going to meet the 2023 DSCSA deadline even with a non-blockchain solution,” says Jeffrey Stollman, an industry consultant. He believes the challenge is governance. “You need to have some rules, and there’s no organization structure right now to create those rules.”

Pharmaceutical industry fragmentation

Stollman listed thirty industry bodies who could get involved in such a process. Apart from the manufacturers and wholesalers, you have the hospitals, pharmacies, and numerous other groups. Stolman believes you need a non-profit to bring the industry together and the Center for Supply Chain Studies could fit the bill.

“Each group has very different opinions and don’t want to give hegemony to the other group,” said Stollman. “In the Pharmaceutical industry, the three most powerful players are the distributors, and 90% of the product goes through them. If you can’t get buy-in from those three nothing’s going to go anywhere. And they typically are on the opposite side of the manufacturers.”

The distributors he’s referring to are Amerisource Bergen, Cardinal Health, and McKesson. Between them their 2016 revenues topped $400 billion.

MediLedger has managed to bring the three together to talk with some manufacturers. The blockchain pharma consortium has an open think-tank-like working group. While a handful of companies have signed up commercially, the non-commercial working group is far broader. The MediLedger solution is agnostic about industry groupings, but co-founder Susanne Somerville acknowledges the guardedness between the groups.

Mediledger’s first solution to verify saleable returns will go live in October or November. So far the solution involves just the wholesalers and manufacturers. But the parties started to realize that they can use the same engine for hospitals and pharmacies to verify a drug. However, it’s unlikely that every hospital and pharmacy is going to invest in blockchain. But they might use a mobile app. Plus there’s already a precedent.

“Wholesalers do what they call a passive management model for the data for 70% of all pharmacies. So the [three] wholesalers aren’t just 90% of the wholesale market, they’re 70% of the dispensing market.”

What about logistics?

One of the topics both Stollman and Somerville raised was the importance of addressing the spirit not just the letter of the DSCSA laws.

Stollman said: “DSCSA doesn’t deal with chain of custody. It only deals with change of ownership.” He continued: “there’s a big hole because all this counterfeiting is happening while the stuff is on the truck between sites. We know when it leaves we know when it arrives. But we don’t control it in transit.” Ledger Insights previously wrote about pharma anti-counterfeit solutions.

One if the issues is the logistics companies were late to the party with DSCSA solutions, so most companies have already chosen another solution provider. Hence companies will either be forced to use the logistics solution and pay twice for software, or the logistics companies will have to plug into other solutions.

What if there’s no agreement?

Both Stollman and Somerville worry about the potential for a fractured industry.

One of Stollman’s concerns is that there are multiple blockchain initiatives. “Everyone’s trying to win the whole pie. Maybe the industry will end up just fracturing when we’ll build some kind of interoperability layer after the fact. I just think that’s terribly inefficient. And one of the other issues for the manufacturers, in particular, is they’re global. So they want a solution that they can scale to other places.”

Somerville concurs. “At some point, we have to agree on the protocol, and you can’t have 75 different ones.”

Holistic design: The need to look to 2023 not just 2019 requirements

One question is what needs to be agreed upon? Stollman split it into three groups. Technical design issues, voting, and payment. He thinks the voting and payment are a little less urgent. But he believes that it’s necessary to make about seventy percent of the 2023 design decisions now.

Stollman reckons a lot of the decisions are relatively simple: “Do you want to go left or do you want to go right? It doesn’t really matter. But we don’t want to build something going left and then have to redo it when everyone decides they want to go right later on.”

It’s possible to break up any project into pieces. Many people look to solve each part independently and then progress to the next one. The problem is the modules are not independent. It needs a holistic view at the design stage.

Somerville has already seen the piecemeal approach in her attempts to integrate with third-party vendors for the 2019 verifiable returns solutions. “You will end up with kind of a mess. You might end up with stuff that doesn’t work. You end up making concessions: oh we decided that back in step one, we’re in step 5 now. And step one doesn’t work correctly, so we’re going to do a workaround instead.”

She continued: “I’m confident that we [Mediledger] are absolutely thinking ahead to 2023. I know our solution has the legs to get there.”

But MediLedger is only the blockchain part of the puzzle. The software that uses the blockchain data is provided by numerous solution providers who likewise need to take a holistic view.

Stollman was very clear about why a holistic design process is essential: “the main reason is one of the requirements of DSCSA is interoperability.”

How will governance work?

Stollman isn’t proposing a particular framework for governance. He wants to facilitate discussions and let the industry come up with solutions to governance. MediLedger and Somerville are adopting a collaborative approach.

MediLedger has three overriding principles. Firstly, the industry decides collaboratively. Secondly, try to create objective criteria. And thirdly, try to keep the number of decisions to a minimum. That’s helped by the fact that MediLedger is limiting itself to purely the protocol/network layer. They don’t create end-user software and have no access to the data.

Somerville said: “Who’s allowed in? Objective criteria. So the group will get to decide what those criteria are. But after that, they don’t get to vote people on or off the island. People who operate nodes. Same thing, what are the objective criteria?”

She continued: “To me the one that’s the most critical is can we come up with criteria that are objective about what protocols can be reviewed and put on this network so that it cannot become political.”

Somerville’s concern is that in the future one sector of the industry could resist some functionality it sees as a competitive advantage when the rest of the industry might really want it. So it shouldn’t be blocked. “Otherwise you get to this crazy game where there’s two things on the network because nobody can agree to anything else.”

But she’s optimistic about compromise because all parties have so much to gain. “For all this benefit I’m willing to give up these few things that I hold dear.”

If you’re interested in learning more about Blockchain and Pharma Supply Chain, Hanson Wade is running a conference in Boston in October. The link includes a 10% ticket discount. We’ve found Hanson Wade events have strong speakers, hardly any sponsor promotional content, and provide excellent networking opportunities.