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Blockchain’s potential to disrupt health care
Handshake representing trust among competing partners

By Ray Bajaj, SVP and Chief Technology Officer 

Technology is ever-evolving, ever-learning, and ever-bridging the gap between the now and a brighter tomorrow. Technological progress prompts paradigm shifts that fundamentally change the way we do things.  

For example, the printing press allowed us to leave written parchment behind. The telephone created a shift from sending messages via telegraph. The internet replaced “snail mail” with email and real-time communications.

Today, blockchain technology holds the same promise of sending us leaps ahead by enabling authenticity, traceability, and transparency without the need for human intermediaries.  

According to Gartner, blockchain is estimated to generate $3.1 trillion in new business value by 2030 through the enablement of smart contracts, automation of industry-wide processes and real-time data and insights. As blockchain’s potential continues to grow, many technology leaders in health care are driven to ask the question: “How will this innovative technology disrupt our industry?”  

Identifying the problem blockchain solves       
To understand the significant impact blockchain can make in healthcare, it’s worth looking at the historical nature of the problem blockchain solves. This is where the Byzantine Generals Problem, a metaphor for the nodes in a decentralized computer network, comes in. The problem, first outlined in research funded by the National Aeronautics and Space Administration in 1982, is that all of the generals poised to attack the city they’ve surrounded must agree on one strategy, or failure is inevitable.

In describing the problem, the research authors wrote, “several divisions of the Byzantine army are camped outside an enemy city, each division commanded by its own general. The generals can communicate with one another only by messenger. After observing the enemy, they must decide upon a common plan of action. However, some of the generals may try to [repel the attack or] prevent the loyal generals from reaching agreement.” How can they trust one another?

How this problem relates to health care  
There are approximately a thousand plus pharmaceutical manufacturers, 30-plus distributors and 100,000-plus dispensers of pharmaceutical products. In order to take unnecessary costs out of their industry, all of these stakeholders must agree on a single set of processes, like contract terms, rebates, prices and other financial measures in trading between institutions. Given these stakeholders have a common mission to improve health care, how can they develop the trust necessary to agree, collaborate and manage the processes more efficiently?

Over the past 50 years, we have worked to address industry-wide problems with technology, creating standard interfaces and operating procedures among key stakeholders across the pharmaceutical supply chain. Though the implementation of these interoperable standards has helped, the industry still has lacked a significant degree of cohesiveness, resulting in an estimated $10B in revenue leaks annually due to disputes, incorrect approvals, duplicate discounts, and incorrect pricing.  

Creating a solution through blockchain technology  
Distributed blockchain ledger technology allows for a transformation in how these transactions are executed, providing a great opportunity to bridge the trust gap between companies and to enable harmonious collaboration.    

The blockchain-based system offers data interoperability between trading partners.  That means all stakeholders of the system know we are operating with the same data. This enables us to ensure our systems are aligned well before product or money changes hands from one stakeholder to another.    

In the simplest terms, blockchain allows for the seamless, secure execution of end-to-end business functions, thanks to its properties of encryption, immutability, tokenization, decentralization and a distributed network.  

Coming back to the Byzantine General’s Problem, the confluence of these components enables agreement between generals (decentralized consensus), incentive to join and maintain the trust in the network (tokenization), assurance that a general’s message can’t be changed (immutability), protection of information to ensure it can only be read by the party it was intended to (encryption), and lastly, shared communication across a network to offer greater reach (distributed).   

The rising potential of blockchain across healthcare  
The health care industry can leverage blockchain to solve many complex problems. At Cardinal Health, we are collaborating with Chronicled to explore future opportunities using blockchain, such as:  

  • Streamlining financial processes for pharmaceutical and medical products across the supply chain  
  • Building clinically integrated supply chains to improve patient outcomes
  • Enhancing visibility for track and trace of pharmaceuticals across the supply chain

We are excited about the opportunities blockchain offers to directly impact our customers and improve patient outcomes across the health care continuum.  

Designing for the future  
Every organization faces the challenge of managing current processes and business models and simultaneously designing for the future. The current norm is a patchwork of Enterprise Resource Planning interactions – ERP-to-ERP– between companies, which involves spending a great amount of resources to achieve information consensus, but the results are inadequate.

To design for the future, organizations need to challenge the conventional wisdom, anticipate the needs of future customers, think outside the box and use technology to reframe the problem. Executing the agenda for change in a complex health care industry may not be easy – but it is possible.  

Through integrated problem-solving and disciplined implementation, blockchain gives health care leaders the opportunity to collaborate to solve the interoperability problem. And by bridging the gap between stakeholders, it offers the potential to create new, emergent solutions that better serve our customers and patients across the entire industry.    

Ray Bajaj leads Fuse, the Cardinal Health innovation engine and product development center. With deep expertise in digital transformation and innovative technologies, Bajaj brings a vision to reimagine health care delivery by harnessing the power of cutting-edge technology, human-centered design and clinical expertise to improve patient outcomes. Bajaj is also responsible for IT strategy, enterprise architecture and enterprise transformation services at Cardinal Health. Before joining Cardinal Health, Bajaj was head of The Garage, an innovation hub for Capital One; earlier, he was chief architect for Global Commercial & Investment Banking at Bank of America. He holds a master's degree in Technology Management from Columbia University.