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Improving Opportunities in Healthcare Supply Chain Processes via the Internet

of Things & Blockchain Technology

Article  in  International Journal Of Healthcare Information Systems And Informatics · February 2019

DOI: 10.4018/IJHISI.2019040104

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 Improving Opportunities in Healthcare Supply
Chain Processes via the Internet of Things

& Blockchain Technology

Raja Jayaraman
Khalifa University of Science & Technology
Email: raja.jayaraman@kustar.ac.ae
Department of Industrial & Systems Engineering
P O Box 127788
Abu Dhabi, Abu Dhabi, UAE

Khaled Saleh
Khalifa University of Science & Technology
Email: khaled.salah@kustar.ac.ae
Department of Electrical & Computer Engineering
P O Box 127788
Abu Dhabi, Abu Dhabi, UAE

Nelson King
Khalifa University of Science & Technology
Email: nelson.king@kustar.ac.ae
Department of Industrial & Systems Engineering
P O Box 127788
Abu Dhabi, Abu Dhabi, UAE

Abstract
Despite key advances in healthcare informatics and management, little progress to address supply chain
process-related problems has been made to date. Specifically, key healthcare supply chain processes include
product recalls, monitoring of product supply shortages, expiration, and counterfeits. Implementing and
executing these processes in a trusted, secure, efficient, globally accessible and traceable manner is
challenging due to the fragmented nature of the healthcare supply chain, which is prone to systemic errors
and redundant efforts that may compromise patient safety and impact health outcomes adversely.
Blockchain, combined with the Internet of things (IoT), is an emerging technology that can offer a practical
solution to these challenges. Accordingly, IoT blockchain offers a superior way to track and trace products
via a peer-to-peer distributed, secure, and shared ledger of the blockchain network. This paper highlights key
challenges related to healthcare supply chains, and illustrates how IoT blockchain technologies can play a
role in overcoming these challenges now and in the near future.

Keywords: blockchain; counterfeits; expiration; healthcare; Internet of Things (IoT); supply chain

Page 1 of 20
 Improving Opportunities in Healthcare Supply
Chain Processes via the Internet of Things

& Blockchain Technology

1. Introduction

In health care, supply chain management (SCM) and related activities constitute the second largest pool of
expenditure (Scalise, 2005, Kowalski, 2009). The broad scope of healthcare SCM operations includes on-
time delivery and tracking of items across the supply chain (SC) until its intended use with patients. Past
studies in retail and manufacturing had quantified the strategic and competitive benefits of an efficient SCM;
yet, capitalizing on these benefits remains elusive for healthcare provider organizations. McKone-Sweet et.
al. (2005) identify several critical barriers in implementing effective SCM solutions for health care that
include misaligned or conflicting incentives, the need for better data collection and performance metrics, the
limited education about SC issues and potential conflicts among group purchasing organizations and other
SC partners. Further exacerbating the problems in healthcare SC concerns the use of disparate information
systems (IS) and software with limited interoperability. Consequently, the current inefficient, manual and ad
hoc practice for product tracking-traceability presents a compelling case to embrace automated technology
and machine learning solutions.

To date, a large body of healthcare SC literature emphasizes the need for more integrated information
technology (IT) and synchronized electronic data interchange (EDI) systems for enhanced product visibility
and traceability. Ford & Scanlon (2006), for example, argue how applications of effective SC methodologies
can contribute to increased quality and cost controls in healthcare purchasing. Landry & Philippe (2004)
highlight the need for hospital systems to better integrate logistics activities via reengineering and activity-
based costing. Landry & Beaulieu (2013) further unveil the challenges and complexities in hospital internal
SCM. De Vries (2011) points to the existence of multiple goals among stakeholders in health care that
strongly influence inventory-based decisions. Privett & Gonsalvez (2014) identify and prioritize significant
global pharmaceutical SC challenges such as the lack of key player coordination, vulnerable warehouse
inventory and order management, missing product demand information, improper temperature control during
product transport and storage, the need for shipment visibility, information disconnect and inadequate
tracking to avoid product shortage and expiration, and human resource (HR) dependency.

Today, resulting system-wide inefficiencies, interoperability issues, and data disconnect across the
healthcare systems are dominated by the lack of a trusted data-sharing platform. This entails a need to
improve how data are exchanged, stored and shared across multiple systems and stakeholders. The swelling

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cost of healthcare products and services makes a compelling case to adopt innovative technologies. Critical
processes in the healthcare SC include product recalls, monitoring for product expiration, shortages and
counterfeits – tracking these processes are cumbersome due to the lack of visibility, loosely integrated
logistics and siloed IS/IT. Given that multiple stakeholders are involved in managing healthcare SC
processes, IoT blockchain technology can offer a highly efficient way to track products from the raw material
source to the point of actual consumption via a peer-to-peer (P2P) distributed, secure, and shared ledger
system. The architecture and standards employed in IoT blockchain technology have a huge potential to
improve product traceability and visibility, thereby enhancing the process of managing recalls, expiration,
shortages and counterfeits throughout the healthcare SC.

IoT blockchain solutions to healthcare problems can be difficult to scope. Accordingly, this paper
focuses on the role of IoT-based blockchains in improving and addressing key challenges in healthcare
product management; specifically, managing SC processes dealing with product recalls, expiration, supply or
item shortages, and counterfeits. Here, existing information and product flow in managing these processes
are first reviewed. Drawing upon current inefficiencies and shortcomings, an IoT blockchain solution is
being envisioned that, to the best of our knowledge, represents one of the first attempts to fill a critical
knowledge gap in the literature targeting key healthcare SC processes. The overarching goal of this work is
to provide insights on innovative supply information management across healthcare SC processes, and to
identify potential solutions via IoT blockchain technology.

The rest of the paper is organized as follows. Section 2 overviews key data tracking problems across
the healthcare SC continuum. Section 3 presents our analysis of current practice for managing healthcare
information and product flow related to recall, expiration and shortage activities. In Section 4, the recent
literature on blockchain applications in healthcare is surveyed followed by a conceptualization of an IoT
blockchain solution for healthcare SC processes. Section 5 then concludes with insights into current and
future directions in the IoT blockchain research and application domains.

2. Healthcare Supply Chain (SC) Challenges

Data fragmentation that affects critical SC processes significantly challenges the existing information and
product flow in healthcare SC. For example, non-standard product identifiers are commonly used in
healthcare SC, making it difficult to unambiguously identify products or validate procurement transactions.
Additionally, the use of multiple product identifiers by various stakeholders in healthcare SC encumbers the
implementation of an effective track-and-trace solution as products are sourced, transported, stored and
consumed globally. Figure 1 depicts the use of custom product identifiers by various stakeholders in
healthcare SC. In existing systems and transactions the manufacturer, distributor and third-party logistics
(3PL) use custom numbering to recognize products internally and convert to a transacting party’s identifier in
SC transactions such as purchase order, invoice or advanced shipping notice. Distributors and 3PL

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companies identify and transact products using their own custom stock-keeping unit (SKU) or warehouse ID
that is internal to their operations. In addition, when hospitals, pharmacies and retailers order and receive
products directly from manufacturers, they have to interface custom identifier (hospital ID) with the
manufacturer’s identifier, which might be a Universal Product Code (UPC) or National Drug Code (NDC).
As well, most entities in healthcare SC currently do not record and store secondary product characteristics
such as batch, lot or serial numbers and expiration dates due to IS/IT limitations, volume and the variety of
products that are purchased. For surgical kits or pharmaceutical compounding where identification of
individual products used in the kit is unknown to other transacting entities, the SC monitoring problem
simply multiplied.

Figure 1: Use of multiple product identifiers in healthcare supply chains

A secondary cause of fragmented data and information disaggregation in healthcare SC is due to

mixed lots product delivery. Figure 2 describes a simple scenario pertaining to a three-tier SC comprising
manufacturers, distributors, and providers. Here, product flow begins with the manufacturer creating a
product batch, released as several small lots to enable better inspection and quality control or different
packaging. Each lot is then repacked into several cartons that are further assembled on one or more shipping
pallets for delivery to the next SC stage (e.g., the distributor). Oftentimes, the lowest unit of product measure
(i.e., each item), as in the case of a medical device, receives a serial number in addition to the manufacturer
assigned batch, lot number and expiration dates. Individual identities of these products are established via
the manufacturer’s catalog number, batch and lot number; for example, in a carton of products containing a
dozen individual items, each of these are referenced uniquely via a serial number by the manufacturer. When
one or more pallets are shipped to an intermediary such as a distributor’s or 3PL warehouse, a pallet from the
manufacturer can contain cartons from the same lot although this may not always be the case. Moreover,
while the 3PL providers are not expected to store lot information, except for specialty products such as
medical devices and vaccines, they must verify quantities shipped and supplied.

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 First, the manufacturer uses the barcode of each carton for internal inventory tracking but beyond the
manufacturer, individual items are not tracked. Second, the distributor, as an intermediary in the SC,
typically splits the pallet into smaller units and temporarily stores the cartons until a wholesaler or healthcare
provider sends a purchase order. When this happens, the required number of cartons will be assembled and
placed by the distributor on a pallet or in a box, depending on the size and quantity of the order vis-à-vis a
first-in-first-out (FIFO) sequence, which in turn implies that the shipment may no longer contain cartons
from the same lot. The distributor scans the barcode of each carton packed for shipping to be transported by
a 3PL without storing properties of batch, lot and expiration dates. Third, when a healthcare provider
receives a mixed lot shipment, the individual cartons may be scanned, but oftentimes quantities are simply
counted to ensure the correct purchase order is received. The provider temporarily stores the shipment in
their central stores until a clinical unit requests the item, or it is sent during periodic replenishment.
Sometimes the items are taken out of the cartons and stored together with the existing products. Finally,
most internal distribution also uses a FIFO sequence, which means items are taken out of the cartons without
regard to the actual batch, lot identifier, so items reaching the clinical unit can come from different lots and
batches.

Figure 2: Product delivery with mixed batch and lots

Information disconnect and intractability can happen both internally with the providers and externally
among SC stakeholders. To be able to implement an efficient traceable solution such as product pedigree,
usage at the patient level needs to be recorded. Providers who wish to track the batch, lot, expiration and

Page 5 of 20
other relevant product characteristics will have to re-barcode the individual item with a provider’s custom
identifier and other dynamic attributes. Except for frequent manual inventory counts or the creation of a
provider’s custom identifier, the provider has very limited means to track its products in inventory. In turn
the use of custom numbers and mixed lots delivery combined with the lack of supporting systems to store
secondary identifiers presents challenging situations for product management in healthcare SC. Using only
the product labels containing standard identifiers such as UPC or NDC pose the following challenges:

• The dynamic attributes of a product such as lot, batch and expiration dates are imprinted on the item
and are not recorded by any transacting entity across the SC
• A shipment may contain products with different batch and lot
• At every stage of the SC, stakeholders can receive shipments containing mixed lots
• Clinical units of healthcare providers may also receive individual items from different lots

3. Managing Product Recall, Expiration, Shortages and Counterfeits

In this section, the analysis of current product and information flow for recall, expiration, shortages and
counterfeits management processes in the healthcare SC is presented. Analyzing existing practice is useful to
tracing process details about the tasks, and to identify gaps and the order in which information is processed
and accessed by various stakeholders. The aforementioned use of custom product identifiers and mixed lots
delivery also has broader implications in healthcare SC leading to pricing discrepancies, poor inventory
practices, and data errors in medical records. Process automation and the use of standard UPC identification
(e.g., GS1 healthcare standards1 or HIBCC standard2) provide unambiguous means to tagging products
throughout a SC. Such benefits of healthcare SC standards adoption have been widely noted (e.g., Wilson et.
al. 2015; Drozda et. al. 2016, 2017; Beck et. al. 2017; and Bayrak & Copur, 2017).

3.1 Managing Product Recalls

Recall management in health care requires timely and accurate information communication across all
stakeholders in a healthcare SC. The most common issue encountered by care providers and distributors is
the absence of a searchable product purchase history due to storage limitations in the associated ERP/MMIS
systems. Even so, care providers remain the most affected as a recall often compromises patient safety.
Figure 3 presents the information process flow between various stakeholders in the event of a product recall.
In such an event, foregoing acceptable coding standards and secondary data on batch, lot, serial number and
expiration complicates product identification.

In recent years, the frequency of healthcare product recalls has increased. This has significant
consequences on both the safety of patients and treatment outcomes. In the US, the manufacturer recalls a
healthcare product by notifying the regulatory agency about the nature of the product risk and the

1
URL: https://www.gs1.org/healthcare
2
URL: http://www.hibcc.org/

Page 6 of 20
contingency plans for product recovery across healthcare SC. Manually searching for recalled products in a
provider’s internal inventory can often result in weeks for action to be taken and recall notices received to be
closed.

Another challenge for care providers includes receiving recall communication at the wrong clinical or
business unit and, in many cases, not receiving any recall information at all. Most recall communication to
providers is sent via the FDA safety information and adverse event reporting system (RES, MedWatch),
other subscription-based information notification services (RASMAS, ECRI AlertTracker), direct
communication from manufacturers, distributors, and in some rare cases through a logistics service provider.
Hall et. al. (2016) report that the total number of FDA initiated recalls between June, 20 2012 to December,
31 2014 was 21,120; of this 3,045 (14.4%) were healthcare related products. In their analysis, Hall et. al.
(2016) also identified the five most common reasons for healthcare product recalls: contamination,
mislabeling, adverse reaction, product defects and incorrect potency. Tirumalai & Sinha (2011) studied the
financial consequences due to product recalls for the medical device industry.

Product Recall Management

Notify Stake
Manufacturer

Notify market holders with Monitor and

Initiate a product regulator action plan & update status Terminate recall
recall regarding the information( report
nature of defect identifier, batch
and lot number)
Withdrawals, &
Recalls, Market

Safety Alerts
Regulator

Monitor and
Database

Review, classify
Receive recall Terminate Class I
and approve the obtain status
notification recalls
recall notification report
Distributor, 3 PL

Validate
Receive recall
purchase Update status
notification
history

Receive Information
GPO

& Validate purchase

history
Healthcare

Check purchase
Provider

Receive recall history, PAR & Return/ Safe Update

notification Inventory Disposal Stakeholders
locations

Figure 3: Information and product process flow for recall management

Page 7 of 20
3.2 Managing Product Expiration
No standard practice currently exists across the healthcare SC to handle product expiration. Effectively
managing product outdates and expiration is critical to eliminate SC process redundancy and reduce waste.
In healthcare SC, each stakeholder defines ad hoc practice to manage product expiration, for example,
distributors commonly recommend care providers to return products that are close to expiration for a
replacement or refund within a 30-day expiration window.

Expiration management requires proactive inventory management and product rotation by care
providers in order to ensure medication safety and treatment efficacy. Figure 4 depicts existing information
and product flow for expiration management among multiple stakeholders. Currently, care providers identify
products that are close to expiration through periodic inspection of inventory manually at various periodic
automatic replenishments (PAR) locations, and either tag those to be used first (stock rotation) or process a
return. However, it is impossible to manually track every product across the healthcare facility when dealing
with thousands of SKUs. The unavailability of a system that can match product purchase with actual
consumption makes it difficult to handle expiration management. Karaesmen et. al. (2011) assert that
improvements in automated inventory management and ordering through materials management and
information systems (MMIS) and auto-identification technology will help in reducing product expiration.
Today, a common strategy to deal with product expiration is simply to increase the number of purchase
orders and quantity to ensure product availability. Although manufacturers are required to maintain a log of
products distributed, tracking for expiration beyond a manufacturer’s dispatch is not recorded nor shared
among SC stakeholders.

3.3 Managing Product Shortages

Product shortages in healthcare adversely affect treatment outcomes and patient safety with the added
responsibility for SC stakeholders to find substitute products quickly. Shortages in healthcare product(s) can
occur for many reasons including production disruption, manufacturing quality issues, poor inventory
management, the unexpected demand of products, shortage of raw material, and unforeseen disasters, among
others (Fox et al., 2014, Rosoff et al., 2012). Lack of inventory visibility among SC transacting entities with
pricing variations creates an artificial demand that can affect the entire healthcare SC. Figure 5 shows the
information flow across the healthcare SC to manage product shortages.

A system that enables proactive information exchange and inventory visibility between stakeholders
is most effective for product shortage management. Care providers are the most affected due to shortages –
overcoming this may require substantial changes to the IS/IT being deployed to accommodate substitute
products, a modification to dispensing practices, and better inventory management. A multidisciplinary team
of pharmacists, clinicians, nursing, and SC managers is also required to effectively manage shortages.

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 Product Expiration Management
MANUFACTURER

Maintain Receive expired

Production orders in Order product products for Product
Lot/Batches Fulfillment refund or disposal
distribution
replacement
log
WH, DISTRIBUTOR

Receive Verify Order Return / Product

products for product Return Storage Disposal disposal
Fulfillment
Storage expiration
REPACKAGER

Receive bulk
materials for
repackaging
THIRD PARTY
LOGISTICS

Process forward
and reverse
logistics
HEALTHCARE PROVIDER

Verify Storage with Periodic Process returns

Receive Return /
product internal WH expiration for replacement
Products Storage
expiration and PAR units monitoring or refund

Figure 4: Information and product process flow for expiration management

3.4 Managing Product Counterfeits

Managing counterfeits in healthcare SC has becomes a global challenge for care providers and other SC
stakeholders. The growing number and volume of healthcare products in use make it difficult to evaluate the
economic and other consequences of counterfeits in health care. With new production and supply of care
related products globally, detecting counterfeits is proving to be extremely difficult. A key factor
contributing to counterfeiting is the lack of strong regulatory oversight, for example, unregulated online
pharmacies can provide easy access for counterfeit products to enter the market (Blackstone et al. 2014;
Mackey & Liang 2011). Implementing IS/IT solutions that provide traceability and product authentication at
various stages of the SC is therefore essential for healthcare counterfeits management. El-Jardali et. al.
(2015) present a systematic review of various strategies and anti-counterfeit measures. Bansal et. al. (2013)
provide a pharmaceutical industry perspective to highlight the need for track-and-trace solutions and
serialization in preventing counterfeits. Jackson et. al. (2012) note several European pilot projects in regard
to the use of a product verification system to prevent the entry of counterfeits in healthcare SC. Recently,
Mackey & Nayyar, (2017) review existing and emerging technologies to handle counterfeits. The multi-

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layered procurement process in the healthcare SC combined with a lack of pedigrees, significantly
contributed to counterfeiting risks across the SC. More recently, Toyoda et. al. (2017) propose a blockchain-
based product ownership management system to prevent counterfeits in the post SC. Their proposed
framework can be extended to the healthcare products counterfeits management.

Product Shortage Management

MANUFACTURER

Inform known upcoming Is the product in Ramp up production - Update inventory Monitor and
shortage to customers & Essential Medication locally or at global status update SC
regulator List facilities periodically stakeholders
REGULATOR

Identify Monitor the

Information Close shortage &
Therapeutic status and
about impending update SC
equivalents and periodic
shortage stakeholders
communicate updates
WH, DISTRIBUTOR

Information Identify opportunities

Monitor Stock
about impending for redistribution and
Levels
shortage Inventory Pooling

Evaluate Changes to
Establish rules for
Healthcare Provider

Information Evaluate Stock alternative MMIS and Monitor and

dispensing and Communicate
about impending on Hand & supply source access to update SC
shortage and equivalent prioritize high risk to clinicians stakeholders
impact duration inventory
products patients
information

Figure 5: Information process flow for shortage management

One strategy in addressing the aforementioned problems is the use of a blockchain distributed ledger,
which may offer a verifiable trail of product movement across the healthcare SC. The use of UPC standards
(i.e., GS1 or HIBCC-based standards) enables various stakeholders to identify products unambiguously. The
real potential is in the deployment of IoT-empowered blockchain across the healthcare SC that benefits
various stakeholders in handling products. Briefly, blockchain is digitally identifiable, offers a quick
resolution of recalls, manages expiration and shortages effectively, and prevents the entry of counterfeit
products within the healthcare SC. In the next section, we conceptualize the application of IoT blockchain
for end-to-end product tracking and authentication, which in turn will enable trust and ensure transparency
among various stakeholders.

Page 10 of 20
4. IoT Blockchain Technologies for Healthcare SC
Currently, blockchain in healthcare is increasingly perceived as a transformational technology, gaining
immense popularity among several communities of researchers and practitioners. Several envisioned
blockchain-based solutions in healthcare include shared clinical trial data, contract management, and
electronic health records (EHRs). The prime advantages of blockchain include decentralized distributed
secure data management, auditable, real-time validation capability, as well as robust and secure access to
various stakeholders. Here, we overview the current literature on blockchain adoption in health care, and
discuss how this technology may be leveraged for efficient healthcare product management.

4.1 Blockchain in Health Care

To date, a limited albeit expanding body of literature on blockchain exists in health care. Kuo et. al. (2017)
review blockchain technologies, and note their benefits and applications in biomedical and healthcare
domains. Azaria et. al. (2016) discuss the Medrec project by MIT media labs that proposes to manage
electronic medical records (EMR) using blockchain technology for authenticated access and interoperability.
Nugent et. al. (2016) present the advantages of using an open source platform, Ethereum, that enables
decentralized distributed application to manage smart contracts strengthening data transparency in clinical
trials. In 2016, the US Department of Health and Human Services (HHS), and the Office of National Health
Coordinator (ONC) conduct a blockchain challenge to explore potential applications in health IT domain.
Fifteen (15) winning entries were selected to demonstrate a variety of blockchain applications such as
strengthening EHRs, alternate payment models, and improvements in the reimbursement claim process.3

A significant impediment for seamless healthcare data sharing relates to data privacy and protected
information about individual patients among stakeholders. Zyskind & Nathan (2015) develop a personalized
decentralized data management system implemented using a protocol that enables blockchain application to
be used for trusted data sharing problems. Yue et. al. (2016) propose a data gateway app based on
blockchain concept to enable patients to manage, control and securely share healthcare data. Xia et. al.
(2017) suggest a blockchain-based data sharing for EMR in a cloud environment using a permissioned
blockchain. Benchoufi & Ravaud (2017) reflect on the application of blockchain technology for sharing
clinical trial data to enable transparency and reproducibility in a secure manner. Zhao et. al. (2017) address
the critical aspect of privacy protection using efficient key management in healthcare blockchain using a
body sensor network validating the effective use of data sharing in healthcare. Xia et. al. (2017) describe a
patient-centric blockchain healthcare data management system for privacy protection. Finally, Al Omar et.
al. (2017) detail a blockchain-based patient data management system addressing privacy using cryptographic
functions.

3
URL: https://wayback.archive-it.org/3926/20170127190114/https://www.hhs.gov/about/news/2016/08/29/onc-announces-
blockchain-challenge-winners.html

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 In related healthcare informatics areas, Hoy (2017) emphasizes the potential use of blockchain
technology by medical practitioners and libraries. Mytis-Gkometh et. al. (2018) demonstrate the use of
blockchain technology with digital signatures to create smart digital contracts of query data from biomedical
repositories. Ahram et. al. (2017) discuss blockchain technology innovation applied to the lifecycle of
protected health information for a care provider network via IBM’s hyperledger. Mettler (2016) presents an
overview of healthcare applications using blockchain technology. Dubovitskaya et. al. (2017) describe a
prototype for sharing EMR data in radiation oncology using blockchain technology and highlight the
advantages of blockchain-based healthcare data management. Zhang et. al. (2016) present the application of
pervasive social network (PSN) based health care, developing two protocols to enable comparison. The first
protocol was a modified version of IEEE 802.15.6 standards while the second protocol was based on
blockchain technique to share health data with PSN nodes. Together, their results show a significant
potential for data sharing in PSN applications using blockchain.

Recent industry efforts in blockchain implementation include a BlockRx4 project to enable visibility,
verification and validation of drug development using blockchain. In the United Kingdom (UK), Google’s
deep mind5 plans to deploy blockchain technology for hospitals, the regulator National Health Service
(NHS), and ultimately for patients to enable realtime tracking of personal health records. IBMs hyper-ledger
project has a dedicated working group to study potential open source software development problems for
health care. IBM Watson Health6 and the Food and Drug Administration (FDA) are collaborating to pilot the
exchange of mediated oncology data from several sources including genomics, patient records, clinical trials,
and wearable devices using blockchain technology. Interested readers may further survey the growing
number of healthcare-oriented blockchain applications documented in www.the-blockchain.com.

4.2 An approach to Blockchain Implementation in Healthcare SC

When a product manufacturer offers the sale of a product in the SC, a block is created and each transaction
concerning the product is recorded. The information contained in the block includes universal product ID
such as UPC and dynamic attributes of the product including batch, lot, serial number, quantity, unit of
measure, expiration dates. Transaction blocks are accessible and validated by business partners acting as
transiting nodes as depicted in Figure 6.

As shown in the diagram, every transaction about the product gets uploaded to the blockchain and
becomes instantly accessible to all participating nodes. When a distributor performs a sales transaction of a
product with care providers, every SC partner can trace and validate those transactions. Additionally,
information about all transactions gets logged, creating an immutable record. This essentially maintains an
auditable trail to verify past purchases. Any attempt to modify or delete the information in the block
becomes impossible, offering necessary trust between transacting entities. Stored information relevant to
4
URL: http://www.blockrx.com/
5
URL: https://www.theguardian.com/technology/2017/mar/09/google-deepmind-health-records-tracking-blockchain-nhs-
hospitals
6
http://www.the-blockchain.com/2017/01/12/ibm-watson-health-and-us-fda-announce-blockchain-healthcare-data-project/

Page 12 of 20
healthcare transactions recorded on the blockchain can now be readily traced, thereby providing inventory
visibility of the data with high integrity, accuracy, and fidelity. As detailed previously in Figures 4 and 5,
the lack of inventory visibility is largely the result of existing limited SC information and product flow. The
blockchain-enabled SC can help verify the actual inventory availability across various stages in the SC,
thereby preventing product diversion, counterfeits, shortages and expiration.

Figure 6: Transaction block creation and validation in healthcare supply chain

Blockchain-based healthcare SC can further enable inventory sharing and resource pooling among
stakeholders. In the event of a product recall, blockchain-enabled SC permits the manufacturer to identify
and notify specific trading partners, enabling a targeted recall preventing widespread panic across the SC.
The use of blockchain technology in the recall process can effectively reduce time to close a recall, offering
proactive product management in addition to saving costs. Another key advantage of blockchain is that it
helps to validate the authenticity of products transacted across the healthcare SC. In the current practice, the
absence of a verifiable database makes it very easy for counterfeit products to be traded as each stakeholder
is unaware of what product and quantity was available for sale. Blockchain-based smart contracts can be
extended to verify and set pricing eligibility of providers for the various tiers as negotiated by group purchase
organizations vis-à-vis the manufacturers.

Product tracking using IoT blockchains can be implemented in two ways: first, the volume based, and
then, the secondary (batch and lot number) characteristics that empowers recall, expiration, shortages and
counterfeits management in healthcare SC. First, the blockchain solution can be applied in volume-based
product sale tracking. As an example, when a manufacturer produces 1000 units of a product and makes it
available for sales, the distributors or other transacting entities may not be able to sell more than 1000
quantity to downstream SC stakeholders, including care providers. A sale transaction of over 1000 units of
the product would be invalidated by the blockchain ledger as every participating node is aware of the 1000
units of the product quantity limitation. In the event of a back order fulfillment, the transacting entities can

Page 13 of 20
still verify if the manufacturer had released additional quantity of product and validate the corresponding
batch and lot numbers, to prevent counterfeits. Since inventory status across the SC can be obtained in the
event of product shortages or products nearing their expiration, all participating nodes can easily share the
product information preventing shortages and wastage due to expiration. The second implementation of
blockchain solutions involves product tracking, with secondary characteristics referring to finding the exact
transacting entity that was ordered, and received a specific product using universal product identifiers
together with secondary characteristics such as batch, lot and serial numbers. In a recall situation the
manufacturer can cross-validate the specific batch and lot number of the product against all transacting nodes
in identifying all past transaction blocks to identify the current possessor of the product, enabling a targeted
recall.

Moreover, SC-related applications of healthcare blockchain can be expanded to authenticate medical

devices and organ donor registries. Care providers and other stakeholders hoarding supplies might not want
other participating nodes to know about their purchasing trends. In order to enhance the end-to-end
efficiency of healthcare SC processes, blockchain technology should ideally be deployed to link the actual
consumption data from patient records. Another potential application to blockchain use in healthcare SCM is
to improve the management of procurement data such as the equivalent of a purchase order or invoice with
patient records system. By so doing, the blockchain-distributed ledger can be a significantly more effective
and efficient platform to integrate disparate procurement, financial and clinical systems along the entire
healthcare SC informatics and management continuum.

4.3 IoT Blockchain for Healthcare Supply Chain

Blockchain is the technology backbone employed in digital currencies such as Bitcoin and other
cryptocurrencies; over the years, it has been successfully deployed in several transaction-related business
applications including banking, insurance, property, logistics, food safety and others due to its purported
ability to validate in realtime the authenticity of products and services. SCM via cloud-based IoT, combined
with blockchain technology, offers an efficient and scalable solution for track-and-trace in healthcare.
Blockchain is a distributed ledger system that offers a secure, decentralized approach to information sharing,
while supporting the validation of authentic transactions among stakeholders. Essentially, blockchain
comprises a chain of blocks whereby the header of the new block has the hash of the content of the previous
block. This is the primary reason that data and transactions stored on the blockchain ledger are immutable
and cannot be changed once entered and stored into the ledger.

IoT (Internet of things) is an interconnected collection of sensors, medical devices, QR (quick

response) codes, RFID (radio-frequency identification) tags, barcode systems and applications through
cloud-based online networks. The data captured from the sensors and products can be stored and analyzed,
providing realtime intelligent decision support to relevant stakeholders across the healthcare SC. Some
examples of current healthcare applications of IoT include remote monitoring, smart sensor and device
integration to trigger notification, medication and treatment plan compliance, workflow process optimization,

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device compatibility, and EHR interoperability, among others. The architecture and standards employed in
blockchain technology and cloud-based IoT have the potential to enhance data security and optimize
background processes. Together, they can also address complexities in product traceability, recalls,
expiration, shortages and counterfeits management in the healthcare SC.

Figure 7 illustrates a conceptualization of the envisioned overall system with healthcare products and
devices equipped with sensors turned into smart connected devices and products, which have connectivity to
IP network as well as to the Ethereum blockchain network. This would allow remote monitoring, control,
and management of the healthcare products. As shown, an IoT computer hardware board with processing
and networking capabilities will interface with the sensors on the product or device for reading and control,
as well as the capability to communicate to the cloud and Ethereum blockchain.

Figure 7: Deployment of Cloud-enabled Blockchain, IoT system in healthcare

A variety of IoT hardware board is publically available with open source hardware-software
including the popular Arduino microcomputer boards as well as Raspberry PI (RPI) (Al-Fuqaha et al., 2015).
The embedded software of these boards can also be modified to support blockchain and cloud functionalities.
Ethereum wallet and services can be integrated into the embedded software to allow for interface and

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communication with the Ethereum network. Application protocols (specifically designed for IoT devices
such as those of constrained application protocol (CoAP) and machine-to-machine IoT connectivity protocol
(MQTT) (Al-Fuqaha et. al., 2015) and cloud services can also be integrated with the IoT embedded software
to allow for seamless, timely, and efficient access to the cloud. Such an integration of IoT blockchain will
aggregate, store, process, and perform analytics on IoT data for further presentation to SC users and
administrators, through web-based dashboards and decentralized apps. These user-level dashboards and
applications can extract information from the Ethereum blockchain ledger (Buterin, 2014; Christidis &
Devetsikiotis, 2016). Open source software libraries and explorers may be integrated into these applications
to provide real-time registry, storage, traceability, and visibility.

Additionally, smart contracts, which are basically code or algorithmic logic that get uploaded and run
on the Ethereum blockchain network (Buterin, 2014; Christidis & Devetsikiotis, 2016), can be written to
govern access and manageability of these aforementioned smart machines. The smart contract code will be
written to provide undisputed, credible, and authenticated control functionalities related to the smart
machine’s identity, access, generated data (e.g., normal readings, push-pull notifications, alerts, and more),
ownership, origination and history, state, transactions, movements, life cycle, and supply chain. The
envisioned model can also consider using and building infrastructure for both private as well as public
Ethereum blockchain to address key issues specifically related to privacy of data and records for the smart
machines.

Blockchain can, for all intent and purposes, be designed and built as: (a) permissioned (or private)
network that can be restricted to a certain group of participants; or, (b) permission-less or public network that
is open for anyone to join. Permissioned blockchains provide more privacy and better access control.
Nonetheless, we expect both types of blockchain networks to be applicable and may be used for healthcare
SC. For example, a blockchain network involved in the exchange of healthcare products at the global level,
with multiple stakeholders distributed geographically in different countries and states will favor a
permission-less blockchain network such as an Ethereum blockchain (Buterin 2014). Importantly, this will
allow anyone to have access to the open ledger and the ability to explore the history of transactions and
characteristics of the product. However, for the healthcare SC involving products or sensors that collect data
of sensitive and private content including the batch, lot and serial numbers, a permissioned blockchain
networks (e.g. Hyperledger blockchain7) may be the better or more preferred approach. This is because only
authorized and registered nodes and stakeholders have access to the ledger and its transactions as well as
content.

Finally, blockchain has the ability to solve multiple problems for smart connected (or IoT-enabled)
healthcare products and devices in a very efficient way. First, blockchain can provide instantly (without the
need of a centralized authority) a GUID (Global Unique Identifier) when assigning and allocating an address

7
IBM Blockchain: https://www.ibm.com/blockchain/platform/
Page 16 of 20
to healthcare products. This is due to the fact that blockchain has a 160-bit address space, as opposed to IPv6
address space, which has 128-bit address space. Second, data transmitted by healthcare products connected
to the blockchain network will, by design, always be cryptographically proofed and signed by the true sender
that holds a unique public key and GUID, thereby ensuring high security and integrity of transmitted data.
Third, smart contracts of Ethereum blockchain allows for superior tracking, management, governance, and
access control of healthcare devices with their data in a decentralized, trusted, and open manner. These key
characteristics or noted features would allow highly efficient solutions to be applied in resolving the various
issues and challenges related to healthcare SC, namely, end-to-end product or service tracking, recalls,
expiration, supply shortages and counterfeiting.

5. Concluding Remarks & Future Research Directions

A distributed ledger using blockchain is a promising technology application for streamlining product recall,
expiration tracking, and mitigating drug shortages. The presented work emphasized the application of IoT
blockchain for product tracking and tracing, which essentially represents a systems approach to bringing
together disparate participants within the healthcare SC. The proposed approach does not replace existing
procurement and supply management systems but enables the blockchain distributed ledger to act as a
supplemental system to track quantities, batch, lot and expiration information as goods are being dispersed
through a SC. The approach also identified potential benefits that would encourage participation from SC
stakeholders for the blockchain to become viable. The process analysis shows that these use cases draw
upon different functionalities associated with a distributed ledger blockchain. The impact and benefits of
IoT-driven Blockchain capabilities and features for healthcare systems, particularly for end-to-end product
tracking were discussed.

Furthermore, the paper summarized and highlighted key challenges and problems related to specific
healthcare SC processes such as product recalls, supply shortages, monitoring expiration, and counterfeits.
We discussed how IoT-driven blockchain with its smart contracts capability, acting as a disruptive
technology, can address such pressing challenges and problems by providing a framework for product
traceability and trusted information sharing amongst SC stakeholders, with high integrity, security, and trust,
and without the need for centralized intermediary, governance or management. The paper highlighted that
IoT and blockchain technologies are poised to revolutionize the future healthcare industry, and in particular
supply healthcare processes.

To date, IoT and blockchain technologies are at an early stage and still emerging. IoT-driven
Blockchain for healthcare system is currently highly experimental with many prototypes and proof-of-
concepts. Further research and development are needed by both researchers, industry partners, and
practitioners to address some key challenges and limitations in order to realize the full potential of both of
these technologies. Currently, IoT-driven blockchain technologies, in general, have obvious limitations and
challenges which need to be addressed by the research community. These challenges include energy
efficiency, compliance, and security for IoT devices. Also the management, access control, trust, and
governance of collected IoT data are key challenges, especially in healthcare SC as data is shared among

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multiple actors. Moreover, blockchain systems as of now suffer from wide adoption and realization, and
have key challenges related to scalability, prolong latency, privacy of transactions, regulations, and
governance. Also variants and new types of blockchain systems are being introduced to overcome such
limitations such IoTA and Alogrand. These new variants remain to be studied, analyzed, and evaluated for
their performance and efficacy for use in general and in healthcare SC systems in particular.

Acknowledgement
The authors wish to express their sincere gratitude to the anonymous reviewers, associate editor and editor-
in- chief for their valuable suggestions and feedback.

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