The Chain Of Survival In Healthcare.

By | January 19, 2019

Our modern healthcare ecosystem is a tangled network of payers, providers, patients and politics with multiple layers of bureaucracy, innumerable silos and many a confused middle manager. In the same way that cities evolve, most new strata have emerged reactively to accommodate new technologies, growing populations and a more global marketplace. The challenge is to adapt, improve efficiency and quality whilst maintaining or reducing costs. This dilemma troubles most health executives these days with virtually every aspect of daily business under the management microscope.

Of much interest to executives is that of supply chain management (SCM). Aligning SCM with the care delivery model is a complex beast. Misaligned stakeholder incentives and goals, data silos and human supply chain communication failures all contribute to the challenges seen in most organisations. It is not surprising, therefore, that the healthcare supply chain market ($ 2.31 billion) is projected to grow at a momentous CAGR of 40.2 % during the period to 2023.

The Health Industry Distribution Association in the USA made several recommendations in 2016. On the basis of an evolving reimbursement landscape, shifts in healthcare demand and changes in delivery models they suggested that:

  • Providers, suppliers, and payers must share data to link products and outcomes.
  • Organisations should take advantage of the expertise and resources available from suppliers and
  • Look for savings from utilisation management and inventory reductions.

A 2013 Mckinsey report suggested five specific supply chain capabilities that can have a dramatic impact on performance and profitability, with an estimated $ 130 billion opportunity in cost savings across the value chain. Of the five, three can be accomplished internally. Two others, alignment (via global standards) and collaboration are potentially the most powerful but require a company to work together with its customers, suppliers and even its competitors. More than 70 percent of healthcare supply chain executives identified specified collaboration as the greatest opportunity.

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Improving data-driven decision making is the area most critical to the future of supply chain in healthcare with focus on real-time data analytics and integration of supply chain and clinical processes being key.

In 2018, Gartner identified eight strategic technology trends for supply chains. Artificial Intelligence, Internet of Things and advanced analytics were part of that collection as was blockchain. It is likely that a combination of these will have greatest returns over any one of them alone.

What, then are the opportunities for blockchain?

Recent trends in transforming supply chains in healthcare appear to be moving toward centralisation and customer-centricity. However, what centralised systems are unable to do, distributed ledger technology (DLT) may solve rather elegantly. Collaboration relies heavily on data integrity and cross-party trust. Being able to self-verify and audit all transactions adds enormous value in achieving that trust.

Of all the current use cases of blockchains in healthcare, it could be argued that the application to supply chains holds the most promise. Benefits and proposed uses include:

  • Accountability in shipping, tracking, and transfer of goods.
  • Reduced counterfeiting and theft.
  • Better managed inventory – preventing stock-outs, expirations and misuse.
  • Identify and trace prescription drugs distribution.
  • Controlled substance monitoring.
  • Cold chain monitoring.
  • Monitoring the source and provenance of active pharmaceutical ingredients.

It is a reasonable question to ask what advantages DLT solutions may offer over the current tools in use. No point replacing a system that works. Put simply:

  • Records in centralised databases usually managed by system administrators can be edited or deleted whereas blockchains have immutability.
  • Blockchains are kept synchronised through consensus mechanisms so that a single ‘state’ is replicated across all participants rather than a third party needing to reconcile databases and transactions after the fact.
  • Invalid transactions are not permitted thus trust is managed at the agreed protocol level.
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Dismissing the problem of oracles, it appears that DLTs may be useful and are worthy of consideration.

There are several criteria imposed by the Drug Supply Chain Security Act (DCSCA) when it comes to medication provenance tools. This act mandates product identification, tracing and verification as well as the ability to detect and respond to suspected counterfeits. Notification and information sharing capabilities additionally confirm the suitability of distributed ledgers.

Several notable start-ups have emerged to solve these issues, and all appear compliant:

  • The MediLedger Project, backed by a group of companies that includes pharma giants Genentech and Pfizer, has successfully piloted a program that uses blockchain tools to track medicines.
  • io combines sensors and blockchain technology to monitor products requiring cold-chain handling to improve pharma supply-chain efficiency.
  • BlockVerify authenticates products by tracking quick response (QR) codes on packaging of pharmaceuticals on a blockchain.
  • FarmaTrust is a blockchain and AI based provenance system for use in pharmaceutical and healthcare markets.

This list is of course not exhaustive. IBM, Consensys (supporting Viant), VeChain, iSolve and others are all working on solutions in supply chain that will no doubt have cross-over functionality in healthcare.

In the event that DLT solutions demonstrate more value than those already in use, executives will be faced with the issue of deciding between the various offerings. Whichever one they choose, solutions that focus on interoperability in combination with governance will likely be the most successful. The jury is out as most products are still in their infancy and are yet to prove their worth.

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Technology, however, is only one half of the solution. The big elephant in the room is that of how to encourage coopetition. No matter how much evidence is presented about data sharing, cultural change is difficult. Trust issues cannot simply be whisked away by a new type of ledger.

While Bitcoin very cleverly introduced proof-of-work mining and crypto-economic incentives, many subsequent ICOs have failed to see their utility tokens turn into anything of value. It remains to be seen if cryptocurrencies are sufficient to alter the way companies interact. Ignoring this function, however, should be done with caution – particularly when considering the deployment of permissioned solutions.

The subject of tokenomics deserves more than a passing mention and is the subject of a future post.

Bottom line though, healthcare supply chains needs to change. Which technology combination will make the difference is yet to be revealed.

Forbes – Healthcare