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Pharma RFID Adoption - Retail All Over Again?

AMR Research's Hussain Mooraj argues in this guest column that the pharmaceutical industry's RFID adoption hurdles resemble those of retail's. Specifically, pharma must be able to achieve real business value -- and not just mandate compliance -- from adoption.
May 08, 2006This article was originally published by RFID Update.

May 8, 2006—During the last few years, a number of pharmaceutical companies have piloted RFID-based e-pedigree projects. Some companies like Purdue Pharma, Pfizer, and GlaxoSmithKline (GSK) have advanced their pilot programs and are expanding them to encompass entire product lines. In March, GSK announced it has begun distributing in the US bottles of Trizivir, an HIV medicine, tagged with RFID technology as part of a pilot project to help protect patient safety. This drug was selected by GSK due to its listing on the National Association of Boards of Pharmacy's list of 32 drugs most susceptible to counterfeiting and diversion.

At the same time, pressure on the pharmaceutical industry to adopt RFID as a means to stop counterfeiting is increasing. Congress is stepping up efforts to stem counterfeit drugs through a bill that would require track-and-trace technology like RFID on all prescription drug packages by 2010. According to this bill, drug firms will need to incorporate tamper-indicating technologies and blister packaging. This bill will also require 30 of the most counterfeited drugs to use track-and-trace technology on their packaging by 2007. If passed, all drugs will also be expected to have complete pedigrees. In addition, the FDA has asked the pharmaceutical industry to develop standards and pilot processes for RFID that may lead to broad adoption and use of the technology. The Agency has indicated that it expects the industry to voluntarily adopt RFID by 2007.

Despite all this, the reality is that even with the more advanced RFID implementations in Pharma, RFID is not yet ready to deliver the capabilities of tracking and tracing pharmaceutical products through the entire distribution system. In order to achieve track-and-trace capabilities, all parts of the supply chain would have to invest in compatible technology and agree to capture and share information about a product's movements in common data formats. The high cost of implementing an industry-wide RFID infrastructure and the lack of agreed-upon industry standards are holding back wide-scale adoption of this technology. This is the classic chicken and egg situation -- critical mass is important to lower the costs of tags and infrastructure and to strengthen standards, yet such critical mass is difficult to achieve unless costs come down and robust standards are implemented.

Pharmaceutical companies are still struggling with building the business case for implementing RFID technology across all their product lines. As long as track-and-trace capability remains an elusive value proposition for RFID, state, federal, and congressional mandates will only serve to enforce a reluctant compliance rather than encouraging a full system change, thus eliminating loopholes which allow for rampant counterfeiting and thriving gray markets.

The consumer packaged goods (CPG) industry has gone down this path several years ago. Pharmaceutical companies can learn from implementations at companies in that space. Unless RFID technology matures, read rates and directionality problems improve, and companies map out their processes in detail, RFID will not efficiently be able to produce e-pedigree across the entire supply chain. Pharmaceutical companies should not look to technology as the silver bullet. Rather, it is the processes and information flows for drug track-and-trace that will leverage RFID opportunities and allow investments to pay off in areas like inventory management and supply chain visibility.
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