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Blockchain applications in the pharmaceutical supply chain and the impact on M&A

By Caron Dhillon 24 Oct 2018

There have been some very grandiose claims about blockchain technology. You may not know what it does, but you have almost certainly heard its praises being chanted through the media for its ability to “revolutionise” industries across the globe in every way imaginable. The BBC even recently published an article weighing its potential to solve the Irish border problem post-Brexit[1]. So, it’s no surprise that over the last year it has become a hot topic in the pharmaceutical industry for its potential to resolve some of the long-standing issues facing the drug supply chain.

So, what is this revolutionary technology? In simple terms, blockchain technology is software that records transactions in blocks, which link together in chronological order to form a secure, transparent digital ledger system. The database is spread across a network of distributed nodes, each with their own copy of the entire blockchain. By continuously synching their own copies with other users, these nodes ensure the information exists simultaneously in multiple places – creating a strong, secure, decentralised system that is almost impenetrable to hackers. Perhaps one of its most fascinating features is its ability to allow two parties to interact without a middleman. Immutable, verifiable, transparent – it can fundamentally alter how we process identity management, international contracts and complex bank transactions, and is arguably key to creating a more connected and automated world [2].

Does this mean that blockchain can provide the long sought-after solutions that the pharmaceutical supply chain has been searching for? It is no secret that the supply chain has its weaknesses. Current visibility across the supply chain is often fragmented and incomplete, with limited control and traceability across the research materials, drug manufacturing and sales processes. Verifying where a drug product’s ingredients were sourced, where it was manufactured and the distribution journey into the patient’s hands has proved difficult, and yet is arguably more scrutinised than ever as pharma is increasingly under pressure and demand for greater transparency in the supply chain by regulators. With issues such as incorrect labelling of medications and a growing counterfeit drugs market, the supply chain has become an issue for everyone.

The implementation of blockchain is by far one of the most promising solutions to many of these problems facing the drug supply chain today. Blockchain provides real-time access to data and visibility across the entire supply chain. It ensures there is always a single version of records, not two separate databases, preventing room for human error and other fraudulent activities. This means when you head to the pharmacy to collect your prescription, you will know if the medication contains the intended APIs and whether it was stored in the appropriate conditions, ensuring that it is of the highest standard. Once data is entered into the blockchain, it cannot be removed or deleted, and any changes are visible to all in the ledger, including who made the change, and at the specific date and time the change was made. Any lapses in integrity are therefore easily detected.

Many companies are already investigating the use of blockchain within the supply chain, and the value it could add to different points across the supply chain, including drug safety, patient safety, and clinical trials management. A quick scan can pull up the entire history of a specific product within the supply chain, verifying its authenticity and integrity.

This means that pharma will be better able to reduce the number of counterfeit drugs in the market, and significantly decrease the errors which result in product recalls and associated deaths each year related to information gaps within the supply chain. Medical errors are estimated to be the third leading cause of death for Americans, and the use of a digital ledger could substantially decrease this figure. Blockchain can help improve the efficiency of delivering a safe and effective medicine to patients and overall, develop a stronger foundation of trust in the pharma industry, who in recent years has been struggling to maintain its reputation with end-consumer patients.

With private equity firms already showing widespread interest in the laboratory automation market and cloud-based solutions in pharma [3] it is only a matter of time until we start to see similar M&A trends in blockchain-based applications within the supply chain. Facing an estimated global annual loss of US$200 billion due to the counterfeit drugs market[4], close to 60% of healthcare executives are expecting to implement a commercial blockchain solution by 2020[5]. According to a recent report by BIS Research, blockchain in healthcare alone is estimated to grow over US$5.61 billion by the end of 2025[6]. Still in its very early stages, critics are quick to point out that blockchain is quite slow, making it difficult to scale up – but numerous start-ups and recent investment activity suggest continued confidence in the cutting-edge technology.

Venture Capital firms and investors are already starting to place their bets on the digital ledger. PokitDok, a developer of APIs for healthcare verticals, is just one example of a well-funded venture capital- backed start-up building blockchain solutions for the healthcare industry, with total funding of US$50 million. Similarly, California-based Chronicled, specialising in blockchain-based applications for supply chain, has raised close to US$5 million to date.

Not short of funding, blockchain start-ups continue to populate the healthcare scene, and should be watched closely by both buyers and sellers. As pharma looks to move towards implementation of the digital ledger within the supply chain, it is only a matter of time until we start to see some major acquisitions in this space from trade players such as CROs or CMOs with strong strategic rationale to increase their portfolio of services offered to pharma. Undeniably, an attractive opportunity for future investment and research, investors should continue to keep a keen eye on developments in the space.


[1] Could Blockchain solve Irish Border Issue? [BBC] – Link 

[2] Blockchain Technology : facilitating decentralisation in enterprise [Results International] – Link 

[3] Software solutions hold the key to laboratory automation [Results Healthcare] – Link

[4] The next big thing in pharmacy supply chain: Blockchain [Healthcare IT news] – Link

[5] This Is Why Blockchains Will Transform Healthcare [Forbes] – Link

[6] Global blockchain in healthcare market [BIS Research] – Link


Read more on Blockchain Technology in The Bulletin: Issue 69 here


Caron Dhillon


Contact Caron


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