Since the inception of the ‘world wide web’, no other technology in the digital space has caught the attention of the world quite like ‘blockchain’. It has the potential to be a gamechanger with its promise of unmatched data security. Even though the implementation/ application of blockchain’s much-coveted underlying technology into various other industries has been a very recent phenomenon, the learned are already prophesising about its ability to shepherd us into a completely new way of network interactions and data storage. This future reality has been nick-named ‘Web3’.
Many of us are already aware of Bitcoin and other such cryptocurrencies, which are based on blockchain technology. It would not be a stetch to say that until now, cryptocurrencies have the most successful implementation of this technology in real world settings. Blockchain is particularly well placed to service sectors where data integrity and privacy are the foremost concerns. It is no wonder then, that the earliest adopters in this regard have been entities which want to record financial transactions. Briefly, its decentralized nature and the ability to link changes in data to previous records, essentially acting as a digital archive, has been the main reasons behind the success of blockchain. This combined with security mechanisms like distribution and verification of all records/ ledger across multiple nodes of the network and ‘proof of work’ ensure that in practice, it is next to impossible to tamper with any data on the system. Thus, blockchain networks become important tools for storage of sensitive data and tracking history of the same.
Application of the Technology
As they say, the proof of the pudding is in the eating. And, blockchain as a concept stands vindicated on this account, with evident success. As discussed above, blockchain-enabled cryptocurrencies such as Bitcoin are a testament to the technology’s security and effectiveness aspects. This is already acting as a catalyst for more blockchain-based ideas and applications to address other real-world issues. Recently, non-fungible tokens or NFTs have been in the limelight and were proven to be reliable repositories to store and record ownership of digital assets.
Notarization of documents is another space where blockchain technology holds immense promise. Needless to say, any implementation in this sphere will also require adequate legal developments and modification of existing laws to recognise such notarization. Regardless, notarization of documents has already been identified as focus area by many players in the field and we may witness blockchain technology being deployed effectively in this regard, sooner rather than later.
Scope for Regulation of Pharmaceuticals and Healthcare Sector
Blockchain technology enables a holistic, efficient, and transparent ecosystem in which data may be stored and tracked, without being tampered with. These attributes make it a custom fit for regulation of the pharmaceuticals and healthcare industry. However, using blockchain for recording and storage of patient data has primarily been driven by private, individual players, who are willing to give this technology a shot.
Blockchain can also be leveraged to regulate interactions between the industry and Government regulators. This proposition is not only in line with the discussion around notarization of documents, but it takes a step further to recommend development of an end-to-end system where all records, starting for product development, trials, licensure, production, and supply chains, are recorded on a blockchain network. In the healthcare sector, in addition to patient records, operational data/ records of the clinical establishment, licenses and compliance information may also be recorded in this manner.
The benefits of the above approach will be manifold. The most prominent of these benefits are:
(a) Proof of Existence and Ownership of Permits: Once licensure related activities are shifted to blockchain networks, the existence and ownership of licenses/ permits obtained by any organisation will become unquestionable;
(b) Confidence in the Systems: Since the data stored on such systems will be tamper resistant, stakeholders’ confidence in the regulatory framework and its implementation will increase. This may also increase investor confidence as they will be able to verify the compliances of an existing entity on the click of a single button. Even from an M&A perspective, the need to review certain compliances physically may be done away with, as those checks will be automated and the results generated by such systems will be beyond any form of censure;
(c) Reduced Burden on Regulators: If all industry players are mandated to periodically upload the relevant compliance & production related data, records and registers on a blockchain related network, the need to conduct physical inspections will be considerable reduced. In fact, the system, on its own, may engage in data fusion and detect any gaps or non-compliances. The industry entities, acting as individual nodes of the systems, will also not be able to cook up data or tamper with the already uploaded data at a later stage;
(d) Elimination of Counterfeits: Blockchain networks can record all stages of a products manufacturing and sale. This, combined with tangible, physical markers such as QR codes can help in identification of products as being genuine or counterfeit, misbranded, etc. The validity of any medicine may be verified by everyone in the ecosystem, including Government authorities and the customers. This will benefit the industry along with perceptible public health benefits;
(e) Better Supply Chain Management: The movement of products can be tracked throughout the supply chain and recorded on a blockchain network. This will be especially helpful in case any product is required to be recalled, as the current location of each product will be accurately reflected on the network;
(f) Data Integrity: Integrity of data, especially during development and trials of drugs is of paramount importance for regulators and authorities. This data enables them to decide whether a new drug must be granted approvals or not. Therefore, regulators may consider making it mandatory to record on blockchain-enabled networks, in real time, trial subject enrolment, details of adverse events and data generated during the trials. Also, it will be very difficult to carry out any post factum changes to the data unilaterally. Pilferage and corruption will also be restricted; and
(g) Patient Data: Accurate diagnosis, progress tracking, and clinical trial data can all be recorded in real time, allowing authorities to examine and review the information. This would result in minimal or no data modification. Every entry would be safe and open to public for verification in an anonymized form. Errors caused by human intervention would be significantly reduced.
However, we must not jump the gun on this subject. It must be remembered that theoretically, it is still possible to hack or tamper with such a system. While brute force computing may not be able to crack such systems, the rise of Artificial Intelligence may change the equation.
Also, blockchain networks draw their strength from the number of users/ nodes on the system. The network becomes more and more decentralized with every new addition and it also becomes increasingly difficult for any player to alter data stored on the system by creating consensus. Any network which is deployed specifically for the pharmaceutical and healthcare sector may be vulnerable in this regard, certainly when compared to global networks such as Bitcoin and Ethereum. Therefore, the architecture of the network that is developed for regulation of the pharmaceutical and healthcare must be cognizant of this issue and actively try to counter it.
Regardless, the benefits of blockchain technology in the pharmaceuticals and healthcare regulatory sphere dictate that the regulators and the Government take a serious look at shifting certain compliance functions to blockchain network in the future.
For further information, please contact:
Biplab Lenin, Partner, Cyril Amarchand Mangaldas
3 List II, Entry 34, Seventh Schedule
4 State of Bombay v. RMD Chamarbaugwala MANU/SC/0019/1957, State of Andhra Pradesh v K. Satyanarayana MANU/SC/0081/1967 and Dr. K.R. Lakshmanan v. State of Tamil Nadu MANU/SC/0309/1996.
5 Varun Gumber v. Union Territory of Chandigarh and Ors MANU/PH/1265/2017, Gurdeep Singh Sachar v. Union of India, MANU/MH/1451/2019 Ravindra Singh Chaudhary vs. Union of India and Ors. MANU/RH/0499/2020, Avinash Mehrotra v State of Rajasthan MANU/SCOR/24761/2021 and Junglee Games India Private Limited and Others vs State of Tamil Nadu and Others MANU/TN/5230/2021
6 the Press and Registration of Books Act, 1867
7 Cable Television Networks (Regulation) Act 1995
8 Part III of the Information Technology (Guidelines for Intermediaries and Digital Media Code) Rule, 2021
9 definition 2(l) of the Information Technology (Guidelines for Intermediaries and Digital Media Code) Rule, 2021.
10 Section 5 of the Cigarettes and other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003
11 Rule 7 of the Cable Television Network Rules, 1994.
13 Syndicate Bank v. Ramachandran Pillai And Others, MANU/SC/0210/2011, see also Narendra Kumar Maheshwari vs. Union of India (UOI) and Ors. MANU/SC/0388/1989
15 FAQs on the Cyber Security Directions dated April 28, 2022 and FAQs on Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021