Pfizer along with McKesson Corporation, AmerisourceBergen Corporation, and Premier Inc. are joining the healthcare blockchain initiative Mediledger to improve their supply chain processes.
The Problem of Chargebacks
Mediledger is a project of the Chronicle blockchain startup group. Chronicled is engaging major healthcare companies for designing a distributed ledger system. Their main goal is solving misalignments and costly errors. Such issues arise from contracting and chargebacks in the pharmaceutical sector. Chargebacks arise when distribution of drugs occurs through wholesalers. Pharmaceutical firms transact with several players along the supply chain as pricing and eligibility contracts are being made separately.
According to Susanne Somerville, Chronicled’s CEO:
“Chargebacks in healthcare are not a regulatory driven problem, but rather a business inefficiency […] we came together with a smaller set of companies to build a prototype to solve some of the problems that happen today between contracting and chargebacks.”
The Nature of the the Pharmaceutical Business
The production of drugs by businesses and their distribution to wholesalers and merchants is unique. The price of drugs can vary dramatically upon their arrival to customers. In addition, drug classifications occur under insurance and medical assistance programs. Therefore, insurers and government bodies are also involving themselves in the process. With these different programs and distribution channels, pricing to consumers often varies. Wholesalers sometimes have to sell drugs at below their cost which forces them to chargeback the pharmaceutical company.
The MediLedger protocol intends to eradicate friction by linking all the players on a distributed ledger system, which will automate contract reconciliation and chargeback processes. Currently, the design stage is underway with protocol testing to occur before the end of the year.
According to Chronicled CTO, Maurizio Greco, MediLedger employs blockchain technology to attain three things. First, it keeps synchronized public data, guaranteeing that each partner is using the same “source of truth.” Second, it retains an immutable record of processes that have occurred, but in a private manner that protects valuable business insights. Lastly, it uses smart contracts to implement business requirements and carry out transactions to enable the integrity of the system.
The Decentralized Experience Brought by the Use of Blockchain
Although Mediledger’s open protocols can be accessed by any individual in the pharmaceutical industry who longs to take part in the system, users’ information is secured by a firewall. According to Chronicled, data sharing occurs with the transacting players a user prefers. There is no centralized source control of data since the blockchain plays the role to link records cryptographically. The ledger also has no “super user” access. In addition, the network manager lacks access to the users’ private keys and sensitive information.
These initiatives symbolize the journey toward designing a brand new network and ecosystem. Furthermore, it serves as a place where competitors and trading partners can dramatically advance the processes.