Contributed Commentary by Rich Herrington

May 24, 2019 | In 2013, the U.S. Congress enacted the Drug Supply Chain Security Act (DSCSA). The purpose of the act was to establish an electronic and interoperable system to identify and trace prescription medications as they were distributed across the United States. The Food and Drug Administration (FDA) established a 10-year, three-phase plan for implementation, and a 100% compliance deadline by 2023.

The same year DSCSA was passed, the Organization for Economic Cooperation and Development (OECD) estimated that counterfeit prescription drugs represented 2.5% of the global pharmaceutical trade—roughly $200B at the time.

In 2017 INTERPOL's Operation Pangea X—the largest undercover operation of its kind—resulted in: the seizure of $51M in counterfeit drugs, more than 1,000 investigations launched, more than 3,000 websites taken offline, and more than 3,000 online ads removed for illicit pharmaceutical sales.

As of 2018, anti-counterfeit US Customs and Border Protection (CBP) officials reported that 78,000 packages of illegal counterfeits were seized at John F. Kennedy airport per day. While law enforcement officials continue to ramp up anti-counterfeit measures, phase two of the DSCSA is in effect. Legal requirements for track-and-trace, product verification, and illegitimate drug notification require action now, not later. Why?

Severe Consequences

Distribution of non-serialized or non-grandfathered prescription drugs became illegal as of November 2018, meaning pharmaceutical companies in noncompliance are equally as liable for illegal activity as counterfeit drug dealers. Exact criminal implications remain to be seen but this is what is known. Selling counterfeit drugs is criminal fraud and also in violation of the Trademark Counterfeiting Act of 1984. Companies in violation can be fined up to $15M. Individuals convicted under the act are subject to fines of up to $2M and 10 years in prison for the first offense. After the first offense, the fine can jump to $5M and 20 years in prison. Each count of criminal fraud carries up to a five-year sentence.

What's more, the Consumer Product Safety Commission (CPSC) can sue companies for up to $1M that sell, distribute, or import counterfeit products sold online. If the act of selling is willful, vendors face further criminal penalties of up to $50,000 and one year in prison.

Counterfeit Drugs Hurt

Counterfeits not only cost individuals for prescriptions that have little or no medicinal value, often, these fake drugs contain maliciously harmful ingredients. Up to 1 million deaths are attributed to counterfeit prescriptions annually. Counterfeits may contain rat poison, paint, mold, and more, and 95% of online pharmacies fail to comply with laws and industry standards.

The perpetual rise in online pharmacies and counterfeit drugs is not coincidental—nor is it a recent development. A decade ago, 25% of physicians in the UK reported treating patients who were adversely affected by prescriptions purchased online—and within the last five years, counterfeit prevalence in areas of Africa and Asia was upwards of 70%.

It costs taxpayers billions annually to fund government deterrence—with relatively minor victories to date. Counterfeits hurt pharmaceutical companies' brand reputations and bottom lines as well. Given how much has already been invested in combating counterfeits, many pharmaceutical companies are not inclined to invest more in the battle. This is short sighted as anti-counterfeit laws will inevitably be mandated globally given the severity of the problem and the damage caused to patients and companies alike. Beyond legal and moral reasoning, failure to adopt technological countermeasures including blockchain is a missed opportunity for improved efficiency, sustainability, and profitability.

Check All That Apply

Blockchain capabilities align near perfectly with the FDA's requirements map for full DSCSA compliance by 2023. What must be accounted for, however, is the time it will take for proper implementation. Blockchain is not an instant resolution. As is the case with all new technology adoption, the best practice is to think big and start small. The transformational journey starts with understanding current readiness. How well is company data managed already? What planning and preparation for adoption has been accomplished? What expertise and resources are available?

Regardless of where a manufacturer, wholesaler, or pharmacy is in the process, there are four primary areas of blockchain application for DSCSA compliance:

• Track-and-trace via an electronic, interoperable system
• Controlled substance monitoring for illegal and out-of-pattern ordering
• Cold chain monitoring to ensure temperature integrity
• Active ingredient source and provenance tracking from raw, to active, to stage, to final product manufacturing

Blockchain has further implications beyond mitigating the counterfeit drug trade. This technology affords companies the improved security that inherently comes with compliancy solutions and is ideally suited to deliver supply chain optimization. There is also emerging interest in leveraging blockchain for gamification to encourage improved patient adherence and reporting.

Building the chain

The first step in building the blockchain is identifying a use case—in this instance, compliance with the DSCSA to combat counterfeit drugs. Next, choose the optimal option for each of the following to build a bespoke chain:

• Consensus mechanism 
• Platform 
• Node design 
• Blockchain instance 
• APIs 
• Admin and user interfaces 

Each has numerous options and builds on the choice before it—i.e. the platform depends on which consensus mechanism is chosen. Node design depends on the platform, and so on.

There are numerous open source and free options for building healthcare blockchain, as well as several third-party platforms that are already on the market. Whether to build internally or via external resources is an important decision given that blockchain security depends on maintaining key access security.

When executed and managed correctly, there is no question that blockchain is superior to centralized data management for security purposes—but it is not infallible. The more variables added to the equation, the more risk there is that blockchain's decentralized and encrypted security can be compromised by unauthorized key access. Blockchain expertise is crucial—especially for custom solutions—so open source and turnkey are not always the best option.

Any solution or vendor that is added to the equation should be strongly vetted and all work peer-reviewed prior to deployment—especially in regards to smart contracts.

The war on counterfeit prescription drugs will only be won through transparency, accurate monitoring, and precision track-and-trace capabilities. These are the very benefits that blockchain is uniquely qualified to provide.

Rich Herrington is EVP, Client Success Team Leader at SoftServe. He is a technology and management executive with 20 years of software product development and management experience at companies ranging from SMEs to multinationals. Throughout his career, Rich has implemented strategic partnering relationships to increase productivity, quality and time to market for his clients' products and projects. He can be reached at rher@softserveinc.com.