Distributors Seek E-Pedigrees
Once RFID-tagged pharmaceuticals are produced and packaged, they will be most often sold to distributors or wholesalers. Distributors may ship whole cases to retail drug chains or, more often than not, they may have to open a case and distribute only a certain number of vials to a chain and the rest to a hospital or a series of other healthcare facilities. Distributors often pack a variety of different prescription medications into "totes"—plastic bins that can be securely sealed. Every day, distributors deliver some of the 9 million different prescription drugs sold in the United States to more than 130,000 retail pharmacies, hospitals, clinics and other providers scattered through the 50 states.

Pharmaceutical distributors have to meet new state regulations to provide some type of pedigree documenting the chain of command, lot number and expiration date of each drug sold in the state. A Florida law requires that these pedigrees be provided to pharmacists on paper by July 1, 2006. A similar California law goes into effect in January 2008.



The HDMA, which has the nation's 46 full-service healthcare distributors as members, has been urging states to accept electronic documentation for these pedigrees. RFID "holds the most promise" for helping distributors provide these pedigrees, because readings would generate electronic data every time the product changes hands, says Lisa Clowers, HDMA's senior vice president of industry relations. In addition, RFID would help distributors track the lot numbers and expiration dates of every pharmaceutical product they sell. It will take a "huge system-wide change" to comply, says Clowers, because distributors do not track that information today.

Cardinal Health—which, along, with AmerisourceBergen and McKesson, distribute more than three-quarters of the pharmaceuticals sold in the United States—repackages pharmaceuticals for manufacturers. The company is piloting RFID in combination with 2-D bar codes in both its packaging and warehouse operations. The pilot will include tagging items on the assembly line, reading tags as items move into the distribution operations and then reading the tags when the items are shipped to Cardinal Health's subsidiary, the Medicine Shoppe Pharmacies.

"Our main goal for [deploying RFID] will be initially strictly on the regulatory side to achieve compliance; the electronic track and trace that will reduce the risk of counterfeit drugs," says Gary Dolch, executive vice president of quality and regulatory affairs for Cardinal Health. "It's just that until RFID is adopted across the entire pharmaceutical spectrum—that includes tablets, injectables, solutions and both branded and generic items—we will not be able to see the efficiencies. Its ability to offer an economic advantage in our business is extremely limited."

Distributors are struggling with technical and business process issues that must be overcome prior to widespread RFID adoption. They need to configure antennas and readers at distribution centers so that all tagged pallets, cases and individual bottles can be read as they are brought in through the door of a loading dock.

Distributors also need to address a "cultural business change," says Clowers. HDMA is urging its members to face the fact that, if manufacturers are going to handle the bulk of tagging pharmaceuticals, distributors will need to share with the manufacturers some of the data they have traditionally kept about who they sell to, how much and what products. Some distributors fear that by sharing the information, they could lose customers because the manufacturers could sell directly to retail chains, but Clowers maintains that distributors provide far more service by delivering what pharmacies want on a daily basis.

Drugstores Grapple With Costs
Drugstore chains are looking at RFID to enhance compliance with the new state pedigree regulations, although in Florida, the CVS and Walgreens pharmacy chains and the trade association National Retail Federation have joined forces to try to head off the pedigree law, which would require that each pharmacy receive and store the paper pedigree. That could cost drugstores millions of dollars in paperwork, document management and other related expenses. Jamie Hintlian, a partner in Accenture's Health and Life Sciences practice, says RFID could help pharmacies achieve regulatory compliance.

Aside from Wal-Mart, retail pharmacy chains have stopped short of issuing tagging mandates to their suppliers, but they have been actively participating in pilot programs to test RFID technology in their supply chain. In addition, the technology has the potential for in-store use to help drugstores better manage inventory and gain operational efficiencies, says Steve Perlowski, vice president for regulatory affairs of the NACDS, which represents the nation's leading chain pharmacies and suppliers. NACDS members operate more than 32,000 pharmacies and fill more than 2.1 billion prescriptions yearly.