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Pharma RFID Adoption Still Slow

A survey by Health Industry Insights shows few drug makers and distributors are implementing the technology, or even evaluating it.
By Beth Bacheldor
Apr 23, 2007Despite several leading pharmaceutical companies' positive experiences in testing RFID, as well as encouragement from the U.S. Food and Drug Administration (FDA) to investigate the technology, a new study indicates RFID adoption in the pharmaceutical industry has been slower than expected.

Conducted by Health Industry Insights, an IDC company, the survey found that only 16 percent of pharmaceutical companies are currently evaluating the benefits of RFID technology, and that three quarters of those evaluations have an annual budget of less than $50,000. The survey queried 143 industry leaders with pharmaceutical manufacturers and distributors.

The survey results showed that only 12 percent of companies have actually moved beyond evaluation and are presently adopting RFID, mostly on a limited scale. Nearly 10 percent of respondents aren't even aware of the technology, and a surprising 40 percent are aware of the technology but not evaluating it at all. Just a tiny portion of respondents—3 percent—are actually implementing RFID in what they characterize as widespread adoption, with average budgets of more than $3.3 million allocated for the technology.

Health Industry Insights attributes the lagging adoption to technology costs and an as yet unclear return on investment (ROI), as well as standards concerns and a lack of industry unification behind a single technology, either high-frequency (HF) or ultra-high frequency (UHF) RFID. While the HF-versus-UHF debate has diminished, it still exists (see RFID Vendors Unite to Promote UHF for Items). Additionally, no consensus has yet been reached as to which technology is best suited for item-level tracking in the pharmaceutical sector.

"We hear a lot of conversations as to why RFID adoption hasn't caught on," says Eric Newmark, senior research analyst with Health Industry Insights, who has been tracking RFID in the pharmaceutical industry for more than a year. "Larger companies have had the luxury of moving forward with RFID, but others are more in the position of having to justify the investments needed to get evaluations started, and they are waiting for a more valid ROI. Secondly, there's still ambiguity around the item-level frequency. I've personally talked to more than a dozen people who have project funding on hold because they are afraid to invest in the wrong infrastructure."

Newmark says that may be a mistake, noting, "Realistically, only about 10 percent of total RFID spending goes into frequency-related infrastructure."

Survey respondents cited tag costs and unproven ROI as the primary roadblock to RFID implementation. The lack of a frequency standard took second place, with security and privacy concerns coming in third. "People tend to group security and privacy together," Newmark says.

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