A Prescription for Pharmaceuticals

By Elizabeth Wasserman

June 1, 2005—A customer became suspicious after buying a few bottles of Viagra, the leading treatment for erectile dysfunction, from a Glendale, Calif., pharmacy in June 2004. The labels on the bottles looked slightly off-color, and the logo was odd. After breaking open a tablet, the customer found unusual blue speckles inside; real Viagra tablets have a light blue coating on the outside and are solid white in the center. Tests by Viagra's manufacturer, Pfizer, headquartered in New York City, confirmed that the tablets were fake.

For Pfizer, the stakes were tremendous. Viagra has a 70 percent worldwide market share in its class of prescription drugs, which amounted to $1.68 billion in sales in 2004. So far this year, authorities around the world have confiscated several million counterfeit tablets. The growing illegal trade in knockoff Viagra by unregulated Internet pharmacies, organized crime and overseas bootleggers—which often beckon consumers through unsolicited e-mail—poses potential risks to customer health.


And that was a risk Pfizer couldn't measure in dollars and cents. The company announced in November that it would start adding RFID tags to cases and packaging of Viagra as part of a multipronged, multimillion-dollar anticounterfeiting campaign. It also filed suit against online dealers it claims are peddling fake Viagra.

Pfizer is one of a growing number of pharmaceutical companies in the United States and Europe (see "Europeans Try to Track and Trace Pharmaceuticals" on page 5 of this article) that are turning to RFID technology to crack down on the worldwide trade in fake medicines. The World Health Organization estimates that the sale of counterfeit prescription drugs is potentially a $26 billion-a-year illegal business.

The pharmaceutical industry is one of the most advanced in terms of studying the application of RFID in its supply chain—and the first to focus on tagging at the item level. One of the reasons is that it has been under state mandates and the threat of federal rules to secure the supply chain from counterfeit products. Those mandates don't apply just to manufacturers but to the entire pharmaceutical pipeline, which comprises drugmakers, distributors and wholesalers, and the drugstores and hospital pharmacies that actually fill prescriptions.

The $216 billion-a-year pharmaceutical pipeline in the United States has long been the world's most secure market for medicines. But a series of high-profile incidents in 2002 and 2003 involving counterfeit drugs sold in the United States convinced the U.S. Food and Drug Administration (FDA)to take action. An FDA task force issued a report, "Combating Counterfeit Drugs," in February 2004, in which it stated that RFID "appears to be the most promising approach to reliable product tracking and tracing." The report stopped short of proposing regulations, but it spurred a number of feasibility studies and pilot projects by indicating that authentication and tracking technologies realistically could be in place through the U.S. pharmaceutical supply chain by 2007. Last November, the FDA published an online "Compliance Policy Guide" that lifted a range of labeling and manufacturing practice regulations that had been hampering RFID trials.

The FDA endorsement emboldened several states—California, Florida, Nevada and Virginia, among them—to adopt laws requiring some form of a pedigree for every pharmaceutical product sold in the state. That pedigree would record the chain of custody of drugs, from production to dispensing. Proponents believe that these records will improve patient safety by allowing wholesalers and retailers to quickly identify, remove and report suspected phony drugs and better target recalls. But distributors are concerned that 50 different states might develop 50 different rules that would end up being a compliance nightmare for the industry, and they are lobbying state and federal lawmakers to discourage such state-by-state rules.

Manufacturers, distributors and retailers see RFID as a way to create an electronic pedigree, by placing tags with an Electronic Product Code, or unique serial number, on every bottle and vial of prescription medication. The tags could be read and the validity of the drugs authenticated at every step in the pharmaceutical supply chain.

The pharmaceutical industry is also getting pushed into RFID by mandates from Wal-Mart, which has a pharmacy division, and the U.S. Department of Defense (DOD). The retailer and DOD have ordered their largest pharmaceutical suppliers to start tagging products as a cost of doing business.