blockchain paper

26 May 2016 Nephron Pharmaceuticals Corporation |

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Safety & Revolution How blockchain technlogy & the Internet of Things creates Drug Supply Chain Security Act compliancy and revolutionizes the pharmaceutical industry

Shane Slider 26 May 2016


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ABSTRACT OR EXECUTIVE SUMMARY The purpose of this white paper is to explore one way in which a pharmaceutical manufacturer/compounder can become compliant with the Drug Supply Chain Security Act: the blockchain. The white paper explores how deploying a blockchain could create this FDA compliancy, but also revolutionize how supply chains operate through use of Internet of Things technology. Finally, this white paper uses Provenance.org concepts to build a rough framework for how a blockchain for Neostigmine Methylsulfate would be built and be operated.


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TABLE OF CONTENTS

DSCSA INTRODUCTION ............................................................................................... 4

BLOCKCHAIN: EXPLAINED ......................................................................................... 6

INTERNET OF THINGS: EXPLAINED ........................................................................... 9

HYPOTHETICAL NEOSTIGMINE BLOCKCHAIN ....................................................... 11

CONCLUSION .............................................................................................................. 15

ADDITIONAL RESOURCES ........................................................................................ 16


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DSCSA INTRODUCTION 31 March 2016- A Sacramento family mourns the loss of their 18 year old son who died from an overdose on the opiate Norco. He is the sixth person in the area to die from overdosing on this painkiller. It’s the start of an epidemic. Toxicology reports showed that this drug was missing one of the necessary ingredients of Norco, and instead, was laced with Fentanyl, an opiate significantly stronger than Morphine and Heroin. This was not just a laced drug, but a counterfeit pill, mimicking Norco in shape and size, but far more dangerous in potency. Counterfeiting drugs, a problem commonly associated with Malaria and HIV medicine in developing countries, has made its way into the United States while growing to be a $75 Billion industry worldwide (WHO). In November of 2013, President Barack Obama passed into law legislation that could make way for a new era of supply chain security and transparency in the US Pharmaceutical Industry. Title II of the Drug Quality Security Act, the Drug Supply Chain Security Act, outlines the ambitious goal of building a more data-rich and transparent supply chain for pharmaceuticals in the United States. More importantly, the DSCSA gives certain guidance to carry out a list of provisions, but allows members of the supply chain to develop and share ideas. Instead of a firm list of rules, the FDA lists out a set of provisions and an overarching goal: “Title II of DQSA, the Drug Supply Chain Security Act, outlines critical steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.” -FDA.gov


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According to the FDA, the DSCSA solution must be interoperable and electronic, and focus on seven provisions:

1. Product Identification: Manufacturers and repackagers are expected to put a unique identifier on certain prescription drug packages.

2. Product Tracing: Members of the supply chain must be able to provide transaction history when a drug is sold in the US.

3. Product Verification: Supply chain members must develop processes to verify the prescription drug packages through the supply chain.

4. Counterfeit Detection and Response: Supply chain members are expected to develop methods to detect, quarantine, and investigate suspect drugs.

5. Notification: Supply chain members must develop processes to notify the FDA in instances of suspect drugs.

6. Wholesaler Licensing: These members must license themselves with the FDA, and their information will be made public on a database

7. Third-Party Logistics Provider Licensing: These members will be required to license themselves with state or federal authorities.

Each tenet of the solution has a different due date over the next ten years. Pharmaceutical supply chain members need to be compliant with these provisions, but the methodology for compliancy can be as radical or conservative as needed. What if there’s a solution that only meets each one of these provisions, but simultaneously builds Nephron into the industry leader of consumer safety, and revolutionizes the industry’s supply chain procedures? This is the potential of implementing blockchain and Internet of Things technology to Nephron’s supply chain.


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BLOCKCHAIN: EXPLAINED Blockchain: The easiest way to understand a blockchain is it being a distributed ledger of all transactions within a certain industry, supply chain, or company. The ledger is being constantly updated and audited by nodes of the system. Validated transactions create a block, which is attached to the chain of blocks before it. Think about pressing the “back” arrow on your internet browser. Press it once and you see the block, or webpage, before it. Press it enough times and you’ll eventually find the origin of your browsing experience.

FIGURE 1

SOURCE: Peer Point Solutions

http://www.peerpointsolutions.com/blockchain-technology-to-change-the-world/


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Because of its chain-like nature and its supply-chain interoperability, a blockchain can provide provenance on any medium of currency. In the case of bitcoin, any user of the blockchain can see the date it was created. In the case of Neostigmine Methylsulfate, a consumer could see its formulation date, date of compounding, transactions among distribution and wholesale companies, and, finally, date of use. In the case of the Sacramento teen who died from counterfeit Norco, he could have used a blockchain to verify the authenticity of his painkiller, which could have prevented his ingestion of the counterfeit drug. This information rich experience will eliminate the possibility of consumption of counterfeit drugs in legal channels, as the drug won’t have a complete transaction history. Because of its distributed nature, the transaction history is constantly updated on dozens, hundreds, or thousands of independent computers. Corrupting the ledger would mean simultaneously corrupting a majority of the computers involved in the blockchain to form a false consensus. Counterfeiters attempting to add their products to the blockchain or thieves trying to remove products from the blockchain would alert authorities much faster than current systems of investigations. The blockchain that Bitcoin operates on, with millions of users across the globe, has still yet to be hacked or compromised.

FIGURE 2

Data is distributed to all nodes, and can be accessed by all members, decentralizing supply chain processes. SOURCE: Provenance White Paper

https://www.provenance.org/whitepaper


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Because of its transparent nature, blockchain tech creates a more lean system. Details of transactions are broadcasted onto the ledger (with calculated levels of anonymity and redaction) for all members of the blockchain to see. Smart-contract logic, and Internet of Things technology could be incorporated so that this data-rich ledger of transaction history is automatically compared to stock level, and reorders are made automatically depending on downstream demand. This removes human error from the process. The future applications get even more revolutionary. Adapting financial applications could reduce processing times on transactions from a matter of days to a matter of minutes. Insurance applications could eliminate fraud. And intra-supply chain voting systems could make inter-organizational decision making faster and tamper proof. In the case of Neostigmine, a blockchain could be developed that assigns a unique QR code to each individual syringe. This creates a linkage between the physical product and a digital equivalent of value on the blockchain. Every transaction is recorder in the entire Neostigmine supply chain, providing a complete tracing of the product. Counterfeit products can be easily detected as they will not have an attached transaction history, and this can be reported immediately to the FDA to start an investigation. Wholesalers and 3rd Party Logistic Providers would have to register themselves to the blockchain, and could use the same data to register themselves with the FDA, or state/federal authorities, respectively. There, you have the potential to complete all seven FDA provisions, while making a better operating supply chain. Reread this quote: “Title II of DQSA, the Drug Supply Chain Security Act, outlines critical steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.” -FDA.gov The blockchain need becomes even more apparent.


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INTERNET OF THINGS: EXPLAINED The blockchain provides a wealth of information that can be used to make Nephron, and other pharmaceutical companies, DSCSA compliant. However, it would be a crime to end the use of that information there. “Everyone thinks Wal-Mart’s success is because of economies of scale. The real reason is we replaced inventory with information.” -Sam Walton Using this wealth of information in coordination with internet-connected devices and sensors can revolutionize how Nephron operates. The Internet of Things operates on the principle that there are almost as many internet-connected devices on Earth than there are people (Google). Google also predicts that, in four years, there will be a 2:1 ratio of internet-connected devices to people. Thus, the Internet of Things builds smart systems of these devices in order to improve functionality. Think of the common example of the house: My phone records my sleep patterns and gentle wakes me with an alarm when I am at my point of lightest sleep. When I turn off the alarm, the device connects with lights in the room, which turn on and become gently more intense (so as not to hurt my vision). The phone then sends a signal to my shower and my thermostat. The shower turns on to my preferred temperature and the thermostat heats the downstairs of the house to my preferred temperature. When I turn the shower off, it sends a signal to my Keurig that it is time to start brewing a cup of coffee. While I get my day started, the GPS on my phone is connecting to a protected layer of data of other phones. It can understand traffic on my route to work. Today, there is congestion on Blossom due to graduations, my phone lets me know I need to leave six minutes early.


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This example explains how the clustering of internet-connected devices to make waking up in the morning easier. Imagine what smart-devices could do for the pharmaceutical industry. Take, for instance, a shelf storing pharmaceuticals in the pharmacy of a hospital: This shelf has a sensor that monitors the content, stock level, and environmental conditions of the shelf. The sensor is connected to various systems including the Neostigmine blockchain. It uses transaction, production, and compounding data to compare demand and stock level. The sensor measures the order lead time for Neostigmine and it looks at surgeries coming on the hospital’s calendar. Constantly reading this data, the sensor communicates the need for an order to be placed to prevent a stockout event for the Neostigmine. The shelf then communicates an order with the hospital’s wholesaler. The shelf doesn’t think constantly reading data is tedious, that’s all it does. It takes human error out of ordering. Simultaneously, the shelf’s connectivity with the pharmacy’s thermostat means that it constantly records data on storage conditions, and can alert hospital staff if the medicine has been stored improperly and needs to be tested for functionality. After using the blockchain to become DSCSA compliant, the opportunities really expand by using this information in coordination with smart systems of devices to change how we manufacture, compound, distribute, schedule, and sell products (industryweek.com).


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HYPOTHETICAL NEOSTIGMINE BLOCKCHAIN This portion of the white paper will show how a blockchain would operate for the entire supply chain of Neostigmine. Terminology and definitions can be found in the attached glossary. This blockchain is modeled after the concept detailed in Provenance.com’s famed white paper: “Blockchain: the solution for transparency in product supply chains” The three elements of this blockchain are Actors, Architecture, and Actions. Actors are the various groups that are involved in the supply chain and will be registered to the blockchain. They perform Actions, which alter or move the Neostigmine through the blockchain. Actions are limited by the Architecture that each member is given. For instance, if the Actor is a surgeon, the Architecture of his software won’t allow him to perform certain Actions (like compounding or producing syringes). A distributer can move the drug but not actually own or alter it. Building The Blockchain

Registration: First NSCC would employ a 3rd Party Blockchain Company to build a consortium blockchain. This company would do all of the programming to create the architecture and actions associated with the architecture. It is imperative to keep in mind ideas of scalability as the consortium adopts other compounders, producers, distributors, logistics providers, customers, and auditors. This company would then be tasked with registering new members to the blockchain network. This is the process of creating a virtual identity that matches the physical identity of the supply chain member. Members such as NSCC will create information rich profiles that give consumers a look into the cleanroom environment, SOPs, and management structure as a way to develop trust between consumers and producers that goes beyond brand name. Finally, the registrar employs public-private key infrastructure to ensure unique identities using similar technology to how Nephron employees sign in to NCR/CAPA meetings. Standards Certification: Certification would happen simultaneous to the registration of members to the blockchain network. The Food and Drug Administration acts as the Standards organization in the Neostigmine blockchain. They continue to do what they currently do. They inspect the facilities of industry members and ensure that they are FDA compliant.


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This builds an additional level of trust between consumers and the blockchain network. FDA approval in addition to being registered to the blockchain network is the basis for further actions. Just as one wouldn’t buy a syringe of Neostigmine from an unmarked white van, they wouldn’t buy a syringe that didn’t have a transaction history of registered and certified Actors.

Linking Technology

These devices link the physical product in the supply chain to its digital equivalent in the blockchain network. This proposal involves using RFID tagging on the case level, and QR codes on the unit level. Case level RFID tagging will allow for the passive transfer of data from the blockchain to the supply chain, which reduces the labor requirement for members of the supply chain. QR codes will be able to link the administrator of Neostigmine to the product’s history to share with the patient directly before administration. This QR code also provides a more secure form a serialization on the unit level.

FIGURE 3

How passive RFID updates a blockchain| SOURCE: epc-rfid.info

http://www.epc-rfid.info/rfid


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Operating The Blockchain

Production: This program allows an FDA compliant producer of Neostigmine to introduce the drug into the supply chain, and introduce a digital equivalent of the drug into the blockchain. Compounding: This program allows an FDA compliant compounding facility to alter the drug in some way. In the case of NSCC, the compounding program would allow the center to change its form from vials into smaller syringes. Smart-contracts are in place so that inputs must be used to create outputs, and inputs are destroyed once the syringes are produced. Wholesale: This program allows for the sale of neostigmine and its movement through the supply chain and blockchain, but doesn’t allow it to be altered in anyway. A wholesaler that purchased 10 cases of Neostigmine syringes couldn’t sell 12 cases to hospitals, because the global nature of the ledger and its many auditors would prevent this accident. Distribution: This program allows for the change of possession, without the change of ownership. Registered and Certified 3rd party Logistics Providers can move neostigmine through the supply chain, and this is mimicked through the blockchain network. Administration: This program is performed by a surgeon right before use. As the surgeon scans the QR code, the syringe is destroyed from the blockchain network as it indicates the imminent usage of the syringe. User-facing applications allow doctors to go over the drug’s rich history with his patient in order to verify the drug’s authenticity.


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How It Works Pretend that this blockchain exists and is operational, and, seeing the success of compounded drug industry, a new wholesaler wants to enter the supply chain to be a certified reseller of Neostigmine. Before any action, this wholesaler would be certified by the FDA and then registered to the blockchain by the Registrar. This would match the real world wholesaler with a digital identity while also creating trust for customers because of FDA inspection. Pending these two actions, the Registrar would then assign the wholesaler to Wholesale architecture, meaning that the company could buy and sell the Neostigmine, but not alter it in any way. The wholesale could, of course, only run Wholesale style actions on this architecture. Once setup, the wholesaler accepts a case of Neostigmine from NSCC. The case is passively scanned via RFID readers when it exits the compounding center, when it is loaded onto a certified 3PL truck, and when it enters the wholesaler’s warehouse. All of these alterations are recorded in order as blocks on the blockchain. The wholesaler sells the case to a hospital where it is stored until use. When it is ready for use, a hospital surgeon scans the individual unit’s QR code, which removes that uniquely identified syringe from the blockchain. The surgeon can review the transaction history of that vial with the patient before the administration of the drug to better inform the customer. All of these transactions are being constantly audited for authenticity before they become a block at various locations in the blockchain.


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CONCLUSION Blockchain, in coordination with the Internet of Things, is an opportunity to become compliant with DSCSA regulation, but also change Nephron’s business operations. Industry’s understanding of these two concepts and their potential is just beginning to develop, and I feel that the concepts outlined in this whitepaper are elementary now, and will be outdated in less than a year. The whitepaper reads almost like an advertisement, so I would like to offer some criticisms and drawbacks to the potential solution I pitched in the previous pages. Supply Chain Integration: The technology for blockchains exists, and is growing at an astonishing rate. In the financial services sector, the sum of investments in blockchain tech tallied nearly $500,000,000 in 2015. Blockchain experts agree that the most difficult aspect of implementing this blockchain is convincing all the supply chain members that the friction caused by process and operating system changes is worth the added value of using a blockchain. Not to mention, the idea of broadcasting all transactions made in the supply chain to each member of the blockchain is a bit off putting for many people. Costs: There are two major costs involved with the blockchain. First, data storage will be a huge issue as millions and billions of transactions will be recorded, all linking to the transaction before it. Cloud data services are creating the potential for big data storage, but this will eventually be an amount of data storage my mind cannot comprehend. In addition to the data storage costs, a blockchain will, to my knowledge, require the adaptation of similar processes throughout the supply chain. While this will reduce friction in the supply chain long term, the implementation will undoubtedly cause friction during implementation. Does Nephron Need the Blockchain?: Let me sound like a broken record here and return to this quote: “Title II of DQSA, the Drug Supply Chain Security Act, outlines critical steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.” -FDA.gov The full blockchain implementation is probably more immediately necessary for highly counterfeited and expensive drugs. However, building a blockchain network could facilitate contract manufacturing for more at risk drugs. Security: While the blockchain, to date, is incredibly secure, the Internet of Things is not. If someone is able to access your system of internet connected devices they could maliciously sabotage the business. While this is concerning now, a new industry of IoT security is actively working to solve this problem.


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ADDITIONAL RESOURCES This list of sources is being updated to better fully represent the information used in this white paper.

1. Provenance a. Provenance Whitepaper

2. Lorne Lantz a. Lorne Lantz Website

3. Goldman Sachs Whitepaper a. Goldman Sachs Whitepaper

4. Title II of the Drug Quality and Security Act a. DSCSA

5. Blockchain is a Better Use for Pharma a. Blockchain: Pharma

6. The Blockchain: Explained (Video) a. Blockchain: Explained

https://www.provenance.org/whitepaper

http://www.lornelantz.com/

http://www.goldmansachs.com/our-thinking/pages/macroeconomic-insights-folder/what-if-i-told-you/report.pdf

http://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/DrugSupplyChainSecurityAct/ucm376829.htm

http://www.globalpmsystems.com/how-the-blockchain-is-becoming-a-better-fit-for-pharma-the-blockrx-project/

https://www.youtube.com/watch?v=YIVAluSL9SU


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