Blockchain Technology in a VRS Solution

Beginning November, 2019, the US pharmaceutical supply chain will be put to the test. The “Saleable Returns” requirement of the Drug Supply Chain Security Act (DSCSA) is a major milestone for the distributors, as well as the manufacturers. Compliance will require significant levels of interoperability, at high speeds, with clever security approach to prevent abuse.

Let’s have a look at what the “saleable returns” requirement entails.

Per 582(c)(4)(D): “… upon receipt of a returned product that the wholesale distributor intends to further distribute, before further distributing such product, the wholesale distributor shall verify the product identifier, including the standardized numerical identifier, for each sealed homogeneous case of such product or, if such product is not in a sealed homogeneous case, verify the product identifier, including the standardized numerical identifier, on each package.”

In the US market there are nearly 60 million saleable pharmaceutical returns or 7-8 billion dollars’ worth of product annually. This means that about 226 thousand of returns will need to be verified daily. These verifications need to happen between roughly 500 manufacturers and over 150 distributors. Brute force approach would require potentially hundreds of peer-to-peer connections to be setup by each involved supply chain participant.

In itself, 60 million verifications annually is not such a significant number, especially when compared to the financial world with as many transactions in a single day. Each time you run a credit card the transaction goes through the processor provider, then the specific credit card network, and into the card issuing bank to verify that you have sufficient funds to cover the purchase. The response is then sent back via the same path. The issue with the pharmaceutical industry is that there is no similar mechanism in place that would allow product identifier (PI) data verification in under a second, which is one of the industry requirements. Interestingly, credit card transactions currently take about 2.5 seconds to complete.  

Verification requirements wouldn’t be such a problem if there was a central repository where all manufacturers would be required by law to send their PI data and then wholesale distributors would run their verifications against that repository. This is how pharmaceutical traceability is approached in other countries, such as South Korea, EU countries, and Russia. The US government, however, did not mandate, let alone provide, such a central system. Counting on the industry to self-organize to build such a central system was pointless; there are too many industry players with highly variable business processes and frequently conflicting interests.

To address the 2019 milestone requirement, HDA (Healthcare Distribution Alliance)  members, entrenched in the middle of the pharmaceutical supply chain, started an important undertaking by creating an HDA VRS Working Group, comprised of manufacturers, wholesalers, dispensers and solution providers. The work of this group and subsequent subgroups led to the creation of the Verification Router System (VRS) business requirements, standards and specifications.

Let’s take a quick look back to review what a Verification Router Service is and how it works.

A VRS is an interoperable solution used to manage the acceptance, formatting, and delivery of the requests and responses to support DSCSA verification requirements, as well as other business requirements defined between trading partners.

“The manufacturer stores all of its product identifier information locally, which is connected to a third-party routing service. Upon receiving a saleable return, the distributor captures the product data and sends it to a third-party router service, which then routes the query to the appropriate manufacturer’s database,” according to the HDA.

A verification router service allows the authentication of products by entering the four product identifier elements (GTIN, serial number, lot and expiry date) into a Verification Request, which is routed by the VRS based on information in the look-up directory (LD). A look-up directory can be compared to a phone book, which associates a product name (GTIN) and its address (Manufacturer/brand owner’s PI repository) represented by a URL. A Verification Response is then generated by the manufacturer and routed back to the requestor to let them know that the PI for the product is verified. Taking this information into account, the wholesaler can then make the decision to return the product to the saleable inventory.

                                          Illustration courtesy of Healthcare Distribution Alliance [HDA]

The key challenges of such a Verification Routing Service are interoperability and governance. For interoperability strict standards were developed to ensure that Verification Requests/Responses can be successfully routed between the supply chain participants and their VRS providers. Also, standards will ensure that look-up directories are updated and synchronized, according to the industry requirements. Governance is, perhaps, the most critical piece of the puzzle, as it will define who can participate in the Verification Routing Service, what processes are used to onboard and offboard various participants, how the change control will be implemented.

At Adents, we consider blockchain to be the best long-term technology to meet the US DSCSA requirements, but we understand that it is not a quick and easy path to navigate. That is why we have developed a VRS solution that uses blockchain for look-up directory, while encapsulating it in such a way that we remain fully compliant with the developed specifications and interoperable with other VRS solutions. By doing so, we position our clients for smooth transition from DSCSA compliance in 2019 to a more ambitious, scalable, and visionary, long-term approach.

Interested in learning more about Adents’ VRS? Contact our team.