Merck, Blockchain, and Your Friendly Neighborhood Pharmacy

Article by Tom Serres

The pharmaceutical industry is under constant scrutiny and subject to ever-growing demand. Between research and development, marketing, intense regulation, and significant competition, industry participants must be innovative, nimble, and wise with their processes and procedures.

Merck, a global healthcare leader, excels in the crowded space due to a variety of strengths that the company leverages to its advantage, including innovation in today’s most significant healthcare challenges as well as their evolving business model and accompanying strategies. To that point, Merck partnered with Animal Ventures in early 2017 to launch a pilot program to advance pharmaceutical industry supply chains, primarily through the targeted implementation of blockchain-based technologies.

The project aims to address global logistical deficiencies with a series of micro-solutions that, collectively, lend new speed, reliability, security, and agility to industry supply chains rather than a single, comprehensive solution. Once completed, it will equip the pharmaceutical industry with the tools necessary to thrive in an unpredictable marketplace.

Pharma Faces Unique Logistics Issues

Pharmaceutical firms currently struggle to effectively meet escalating demand that has resulted from expanding consumer bases in emerging markets, increasing regulatory and quality control factors, and a growing battle against counterfeit drugs.

Due to a mix of procrastination and outright reluctance, the industry has lagged in embracing technologies that would vastly improve its supply chains. But with an estimated 20 percent of pharmaceutical profits projected to stem directly from improved supply chain processes and procedures, pharmaceutical companies have a clear incentive to invest in technologies for their logistics framework.

In its blockchain pilot, Merck is attempting to address specific issues that would alleviate current and future stressors on its supply chains. First priority: creating a framework that gives trustless access to transaction data with both internal and external stakeholders along the supply chain. This framework should enable all participants with the ability to forecast demand, shift distribution as needed, and preemptively address adverse events within the marketplace. The increased transparency afforded by a more efficient throughput of data between entities will significantly reduce the occurrence and repetition of such events in the future.

Human latencies, a pervasive issue amongst virtually all modern enterprises, also pose a significant challenge to Merck and its drive towards a smarter, more efficient supply chain. Human beings create information silos and communication gaps that affect all participants, costing companies vast amounts of value that are difficult, if not impossible to recover without a more effective logistics framework.

Although Merck is rightly framing its project around blockchain-based technologies, Internet of Things (IoT) will also play a critical role, communicating vital and sensitive information to involved parties in a manner that is both scalable and cost-effective. The necessary convergence of separate innovations like blockchain and IoT will be a crucial component of global serialization standards.

Unlocking Tomorrow’s Potential

Merck is using multiple layers of blockchain technologies to create robust supply chain solutions for the pharmaceutical industry, isolating effective communication, collaboration, and cognitive abilities to maximize both internal and external efficiencies and abilities. Collectively, these layers significantly increase data sharing within companies as well as to outside partnerships, creating connectivity and opportunities connected to cognitive asset chains for all industry participants.

Effective supply chain solutions don’t just require technology but participant buy-in as well. Merck faces challenges in getting industry stakeholders to comprehend and embrace the tremendous advantages offered by a decentralized supply chain. Industry partners, including governments, suppliers, and even competitors must all collaborate and agree to work towards a trustless supply chain. But if these various actors converge around investment into and integration of these tools, everyone stands to benefit.

The resulting supply chains will be proactive, continuously identifying and minimizing sources of interruption, interference, and disruption. If unforeseen events occur – for example a ransomware attack – the supply chains will rapidly adapt to the unexpected variables and share information between all involved entities. Moreover, seamless, blockchain-based communication will be a critical building block towards a shared global infrastructure that can foster needed serialization standards for the pharmaceutical industry. Through these efforts, Merck is assembling the necessary technologies and collaboration to provide the pharmaceutical industry the agile, cognitive supply chains needed to navigate a rapidly evolving marketplace.

If you are interested in learning more about this project, check out Animal Venture’s Asset Chains report.