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New Law Serves as Warning to RFID Industry

The US Senate last week passed FDA legislation that included a provision of interest to the RFID industry. The provision mandates that internet-based pharmacies include visual anti-counterfeiting technology on all pharmaceuticals sold to US customers. The provision specifically technology like RFID or barcodes.
May 16, 2007This article was originally published by RFID Update.

May 16, 2007—The US Senate last week passed FDA legislation that included a provision of interest to the RFID industry. The provision mandates that internet-based pharmacies include visual anti-counterfeiting technology on all pharmaceuticals sold to US customers. The provision explicitly excludes technology like RFID or barcodes that require a supporting infrastructure of readers, antennas, etc. While the provision by itself does not constitute a major blow to the RFID industry, the mere existence of it might serve as a warning: Engaging with Washington in the formation of public policy can further adoption of RFID; conversely, neglecting Washington can be harmful. RFID Update spoke with Doug Farry, a managing director at McKenna Long & Aldridge and author of the RFID Law Blog, about the provision and what it means for the RFID industry.

The primary reason for the legislation is to perpetuate federal "user fees" charged to pharmaceutical companies, fees that amount to hundreds of millions of dollars and represent a key source of funding for the US Food and Drug Administration. Because the existing legislation that requires these user fees is set to expire in September, passage of the new legislation is a high priority among US lawmakers.

As is common, a number of smaller provisions were tacked on to the larger bill as it made its way across Senators' desks. Farry recounted that Senator Judd Gregg of New Hampshire authored the original version of the provision in question, which would require online pharmacies to use anti-counterfeiting tracking technology. Wyoming Senator Michael Enzi later amended that provision to specify which technology be used: a visual technology similar to what is used in paper currency. The provision explicitly stated that the technology be visible to the naked eye and not require separate readers or scanners for verification.

This highlights a crucial but oft-overlooked point, explained Farry. While advocates of a particular technology generally recognize the benefit of having that technology required by law for a given application, they are less aware of the possibility that their technology could be legislated against. "The RFID industry might have made the case that the mandated technology be RFID," said Farry, "but at minimum they could have fought to keep the door open to RFID." If the law passes as is, that door will close.

Even with the tight September deadline, though, passage of the current draft is not a forgone conclusion. The US House of Representatives has to author and pass its own version of the bill, that would then have to be merged and reconciled with the Senate's to create a final version. At any of these stages, language could be added, amended, or scrapped. Farry cautioned, however, that the anti-counterfeiting provision is of little interest to most lawmakers, so unless there is a lobbying effort the provision has a good chance of surviving. "This is a very low key, little debated provision. No one really knows much about it," he said. He noted that there is an association for visual technology similar to that described by the provision, and that the association has been active and organized for a number of years in trying to affect legislation for its constituents' benefit. While Farry was not sure of the association's participation in this particular provision, he speculated that it seemed likely. "My guess is that they had success in making an argument to lawmakers."

When asked for his opinion on the RFID industry's efforts in Washington to date, Farry compared them with those of other technology industries. "It's consistent with my experience working with other technologies and industries," he said. "Their attention to Washington is almost nonexistent because they're so focused on developing their technology and building their businesses." He cautioned that while common and understandable, such neglect is not advisable, as the anti-counterfeiting provision demonstrates. If an emerging technology industry doesn't pay attention to the lawmaking process, it might be broadsided by legislation that is extremely damaging to the adoption of its technology.

The RFID industry's efforts have improved markedly since a few years ago, to be sure. There have been a number of events in Washington over the past year or so that saw vendors, experts, and industry association AIM Global engaging lawmakers in discussion and education about RFID technology. Just last week there was a luncheon on Capitol Hill about RFID's role in healthcare and emergency preparedness. The event was hosted by the RFID Technology Council, whose stated mission is to support the year-old RFID Caucus co-chaired by Senator Byron Dorgan of North Dakota and Senator John Cornyn of Texas.

Still, Farry asserts that much work remains to be done if the industry is to exert material influence on the development of national public policy that relates to RFID. While this internet pharmacy provision is unlikely to cause long-term detrimental harm to RFID adoption, it can be viewed as a lesson of what can happen if the industry does not more actively engage with Washington.
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