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Blockchain in the Life Sciences & Healthcare Sectors

Biotech 13 min
February 25, 2020

Blockchain is perhaps best known as the technology on which Bitcoin and other digital cryptocurrencies are built. Adoption of blockchain technology – especially in the financial services sector – has been rapid but in the life sciences and healthcare sectors it is still in its infancy. That said, companies and other organisations in the life sciences and healthcare sectors are increasingly exploring and deploying blockchain solutions.

To help companies operating in the life sciences and healthcare sectors understand how blockchain works and how it can be exploited to create efficiencies, Bird & Bird has issued a report entitled “Blockchains uncut: risks, rewards and regulations” which seeks to answer the key questions companies have about blockchain. It is a must-read for anyone considering engaging in a blockchain project in the UK or Europe. You can register to download the report by clicking here.

So, what is blockchain?

A blockchain is a distributed or shared database or ledger that sets out a list of the transactions that have been validated by a peer-to-peer network. For example, for Bitcoin, the list of validated transactions are the payment instructions validated by the network (e.g. A sent X Bitcoins to B). The peers in the peer-to-peer network are often referred to as “nodes”. Nodes are computers that have downloaded and implemented the relevant blockchain software. Once the software has been successfully implemented, each node connects to other nodes in the relevant blockchain network over the internet. The collection of connected nodes is the blockchain network. Once connected, each node downloads and stores a copy of the database (hence it is referred to as a distributed or shared database as every node holds a copy of the database) and can perform other tasks such as sending transactions for recording on the blockchain.

There is no one blockchain network just as there is no one database or one network. There are different blockchain networks available that can be deployed to solve different problems.

On one end of the spectrum, are public blockchain networks like Bitcoin or Ethereum. Public blockchains share some common features. For example:

  • there is no central authority in charge of running the blockchain. This means blockchain participants have limited recourse against anyone if things go wrong;
  • any participant can download the blockchain software, implement it and join the network. Once they have joined, they can see all the data recorded on the blockchain and send new transactions to the blockchain for recording on the distributed database; and
  • as the network is truly decentralised with no central authority in charge, there are limited or no contracts in place governing the rights and remedies of participants.

For these reasons, organisations (including those operating in the life sciences and healthcare sectors) who want to run or participate in a blockchain network will be more attracted to blockchains on the other end of the spectrum, also referred to as private blockchains. Private blockchains also share some common features:

  • there is a trusted intermediary (e.g. a regulator, industry body or consortium of interested parties) that runs the blockchain network. If anything goes wrong, a participant has recourse against this entity;
  • the trusted intermediary decides which entities can join the blockchain network and become a participant and the trusted intermediary/participant decides what data recorded on the blockchain can be viewed by other participants; and
  • as there is more control over who can join the network, contracts governing the rights and remedies of the relevant parties play a much more integral role. This provides greater certainty for participants.

How is blockchain being used in the life sciences sector?

The life sciences and healthcare sectors stand to benefit from blockchain technologies in a number of ways, for example:

  1. Medical records – Electronic health records (EHRs) could be securely operated on a blockchain, protecting patient data and privacy while allowing doctors to access their patients’ medical histories and empowering researchers to use shared data to further scientific research.Blockchain solutions enable permission layers to be built into the system. So, while patients are unable to change or delete medical information input by doctors on to their profiles, they can control access by granting full or partial visibility to different stakeholders. For example, patients could grant doctors full access to their medical histories but only share anonymised (or non-identifiable) medical data to pharmaceutical companies and other researchers. As mentioned above, this type of structure is best suited to a private blockchain network.In Estonia, the Estonian health authorities have developed online e-Health records using Guardtime’s keyless signature infrastructure (KSI) blockchain technology. This gives each person an online e-Health record which retrieves data from different providers and then presents it in a standard format accessible via an e-Patient portal. The UK Government recognised in January 2016 in its Office for Science report on technology that the NHS could be a big beneficiary of blockchain by enabling secure sharing of EHRs.
  2. Supply chain – The integrity of a supply chain is of fundamental importance to pharmaceutical companies. Indeed, so-called “track and trace” regulations, such as the U.S. Drug Supply Chain Security Act and the EU Falsified Medicines Directive, require companies to verify the provenance of a medicine – including where ingredients were made, where the drug was manufactured and how the medicine was handled through the supply chain, all the way through to the patient.Blockchain solutions may also help to more closely monitor the unique supply chain required for new personalised medicines, such as Chimeric antigen receptor (CAR) T-cell therapy (or CAR T-cell therapy). This therapy involves adding new proteins to a patient’s own immune cells and then placing those cells back in the body. Accurately tracking a unique patient specific supply chain will become increasingly important as more personalised medicines hit the market.In time, blockchain technology should help to reduce the incidence of counterfeit drugs, which some estimate to cover 30% of all drugs in circulation. Blockchain – combined with other technologies like smart contracts and the Internet of Things – will also help to accurately monitor pharmaceutical products which should only be administered if stored under certain conditions (for example, certain vaccines need to be kept at a verifiable temperature before being administered). And the blockchain could assist with the recall process by sending alerts to manufacturers, distributors, dispensers and ultimately patients, thereby helping to minimise the impact of product recalls (for example by reducing the time it takes to recall and dispose of recalled products).A Pfizer and Biogen-led organisation called the Clinical Supply Blockchain Working Group has completed a proof of concept project for a digital inventory and event tracking record in the pharmaceutical clinical supply chain. This solution tracks shipments of packaged medicines which are sent by the pharmaceutical companies, with parties then able to verify when deliveries are sent and received.
  3. Value based payments – Existing treatments for many diseases involve treatment on a regular basis (e.g. taking drugs on a daily basis), resulting in health care providers paying fees on a recurring basis. However, certain new treatments – such as gene therapies – increasingly involve one-time treatments which are often expensive, with some treatments costing hundreds of thousands or even millions of pounds.Given constrained healthcare budgets, it is more difficult for governments and insurers to fund the full cost of these innovative but expensive treatments upfront. Blockchain solutions could form part of a suite of platforms that will link payment to clinical results. For example, a monthly payment could be released to a pharmaceutical company if the patient’s clinical outcomes hit certain minimum thresholds following treatment. The monitoring required to make this work could in some cases even be undertaken remotely via wearable technologies.
  4. Collections of clinical trial data – Pharmaceutical companies have already started using blockchain applications for collecting clinical trial data, which has a number of benefits. For example, once data is added to the blockchain, it is very hard for researchers to amend the results without the change being obvious to all parties. This is why blockchains are referred to as being immutable. As a result, it is extremely difficult for researchers to change their initial clinical trial hypothesis after analysing their research data (known as “p-hacking” or “data dredging”). This practice is generally prohibited as it often results in false-positives (i.e. the test results incorrectly indicate presence of a disease).Similarly, clinical trials often involve different organisations and locations. Time-stamping can provide the many stakeholders involved in a clinical trial with indisputable proof that data has been recorded at a set time under a verifiable condition. This information is particularly helpful for inclusion in reports to regulators.More broadly, the collection of data on a blockchain, together with other technologies such as data analytics and wearable technologies, is enabling researchers to collect ever more medical information from patients in real time. This has potentially significant benefits for patients as the uploaded medical data can then be analysed in real time – using AI – to more accurately identify potential conditions that a patient may be suffering from or may be at risk of getting in the future.
  5. Incentivising patient behaviour – Companies are increasingly exploring the use of smart contracts to incentivise specific patient behaviours. For example, micropayments or other rewards (such as tokens or points) could be made to patients if they share their personal health data for clinical research or follow a dedicated treatment plan.

Contracting for private blockchains

As mentioned earlier, organisations will be attracted to private blockchains over public blockchains for a number of reasons, including because there is greater certainty as to the rules governing how the blockchain network operates. These rules will be set out in contracts.

In our experience, there are two main contracts:

  • Blockchain services contract: this is the contract between the blockchain developer that has developed the blockchain software and the trusted intermediary running the network. The trusted intermediary will license the right to use the blockchain developer’s software and will engage the blockchain developer to provide it with ancillary services related to the support of the network, as the trusted intermediary’s subcontractor; and
  • Participation contract: this is the contract between the trusted intermediary and each participant that wants to gain access to the blockchain network. This contract governs the obligations of the trusted intermediary (e.g. to make the network available) and the participant (e.g. to keep the data held on the blockchain confidential and not to upload infringing data to the blockchain).

These contracts may often be heavily negotiated. It is important that any commitments made by the trusted intermediary under the participation contract are appropriately backed off under the terms of the blockchain services contract. Key issues that come up include liability (what happens if data is lost or corrupted), security (what security measures does the trusted intermediary have in place to ensure the integrity of the network), service levels (uptime of the network) and intellectual property (who owns the IP in any bespoke developments – more on this below).

Who owns IP in the blockchain?

The blockchain network will comprise two key elements: the back-end blockchain software that determines how data is recorded on the distributed database and the user-facing app. The back-end blockchain software will often be pre-existing software that is used by the blockchain developer to service multiple clients. The user-facing app will often be bespoke software developed by the blockchain developer for the trusted intermediary to solve its particular use case.

The user-facing app is what each participant accesses (on a software-as-a-service basis) to send transactions for recording onto the blockchain (the recording of the transaction on the blockchain is undertaken by the back-end blockchain software). The user-facing app will interoperate with the back-end blockchain software via APIs. One of the key IP battlegrounds between the blockchain developer and trusted intermediary is who owns the IP in the user-facing app.

On the one hand the blockchain developer will argue that it should own the IP as it has been built specifically to be compatible with its back-end solution. On the other, the trusted intermediary will argue that it has paid for the work specific to its use case and should own the IP. Regardless of whether the trusted intermediary owns the IP in the user-facing app or has a wide licence to use the IP in the user-facing app, the user-facing app should, where possible, be developed in such a way that it can be possible (with minor changes) for it to interoperate with other blockchain solutions, otherwise the trusted intermediary will be “locked-in” to the blockchain developer’s solution.

What are the legal challenges with blockchain?

One of the key challenges for all cutting-edge technology is that regulation is always playing catch up. For example, the General Data Protection Regulation (GDPR), which sets out the European legal framework for processing personal data, was not drafted with blockchain technologies in mind.

As a result, there are a number of key principles of the GDPR which conflict with the fundamental features of any blockchain. For example, the GDPR requires companies operating in the EU to be able to delete or update personal data. Individuals also have the right to be forgotten. However, if personal data is recorded on a blockchain, it is not clear how these requirements can be complied with given the immutable nature of blockchains.

One obvious solution is not to store any personal data on the blockchain; instead, personal data is stored “off ledger” where the data can be freely amended or deleted. Another option, proposed by the French Data Protection Authority, the Commission nationale de l’informatique et des libertés (or CNIL), is to try to use encryption technologies – such as “salt” or “pepper” hashing – to make the underlying personal data practically inaccessible. However, such a proposal does not necessarily solve the conflict but merely mitigates its impact. For now (and until further guidance on this point is published by regulators), the law and technology are in conflict with no regulation in force to determine how to solve this conflict.

Summary

There has been a lot of hype around blockchain over the past few years. Its detractors have referred to it as a “solution in search of a problem.” In 2019, Gartner announced that blockchain technologies had reached the “Trough of Disillusionment” in its Hype Circle.

However, it’s not all doom and gloom. Over the next few years, we expect to experience a “blockchain spring” where organisations, armed with the experience they have learned from previous proof-of-concept blockchain projects, seek to focus on more limited use cases for blockchain centred around better data exchange and better data reliability: how can we better share data from disparate parties using the benefits of blockchain? These benefits include:

  • Immutability: the near immutability of blockchains (once data is recorded on the blockchain it is very difficult to tamper with it) means participants can trust the integrity of recorded data;
  • Digital signatures: the ability to use digital signatures to allow for easier coordination of input from disparate parties by enabling them to approve and send transactions quickly and without any third party involvement; and
  • Blockchain structure: the structure of blockchains where blocks of data are linked together allows for the ability of interested parties to quickly track and trace recorded information.

The life sciences and healthcare sectors are in a great position to take advantage of the benefits of blockchain for these types of focused projects given, as described above, the importance of the integrity of data to their business models whether that’s electronic health records (or EHRs), clinical trial data or information on the pharmaceutical supply chain.

Written by
James Baillieu
James Baillieu
I'm a corporate partner based in London where I use my experience to advise clients - ranging from start-ups to multinationals, investment banks and private equity funds - on mergers and acquisitions (and divestitures), IPO's and other securities offerings, private equity and venture capital investments/exits, joint ventures, strategic collaborations and corporate reorganisations.
Jonathan Emmanuel
Jonathan Emmanuel
I am a partner in the Commercial Group based in London. I assist clients with disruptive digital technology adoption including cloud computing, blockchain, agile software development and open source licensing. I am experienced in commercial law matters advising suppliers and customers in negotiating large complex technology, outsourcing/sourcing projects and consultancy engagements. These can involve drafting and negotiating IT and business process outsourcing arrangements, managed services agreements, collaboration agreements, various technology contracts including SaaS agreements, software licensing/implementation (eg CRM and ERP implementations), maintenance, development and systems integration contracts.

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