Can Pharma Move in Lockstep?

By Mark Roberti

Adopting RFID all at once could lower the cost of deployment, deliver business benefits and offset a government mandate to track drugs.

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On Sept. 27, President George W. Bush signed into law H.R. 3580, the Food and Drug Administration Amendments Act of 2007. The law received very little attention in the media, but it contains a provision that charges the U.S. Food and Drug Administration (FDA) with “developing and using improved adverse-event data-collection systems, including information technology systems.” In other words, the U.S. Congress wants the FDA to figure out how to capture information about counterfeit drugs entering the legitimate supply chain.

Randall W. Lutter, the FDA’s deputy commissioner for policy, told a gathering at the U.S. Chamber of Commerce in Washington on Oct. 10 that the FDA indicated that it might call for some kind of pedigree system. “We’re just starting to look at how we will implement the law,” he said.

One of the biggest issues facing the pharmaceutical industry is the cost of implementing a pedigree system. A system that uses two-dimensional bar codes with unique serial numbers requires a great deal of labor. A person is needed to pick up each individual bottle, orient the bar code to the scanner and scan the bar code. Distributors who handle billions of unique items a year have indicated that using 2-D bar codes is not a viable option in their operations.

RFID could save labor by making it possible to read unique serial numbers and gather data for electronic pedigrees with less human involvement. But pharmaceutical manufacturers do not want to bear the cost of putting RFID tags on every bottle of drugs they produce. RFID tags cost at least 8 cents each, whereas 2-D bar codes can be printed on labels with little or no additional costs.

Retailers are also opposed to using RFID tags to gather pedigree data because they would need to install thousands of interrogators throughout their operations. In addition, every pharmacy would need software, hardware and a networking infrastructure to read tags and verify the legitimacy of a drug by looking up the item’s history in a secure database.

While Lutter acknowledged that cost is an obstacle to using RFID to gather pedigree data, he said the cost would be far lower if the entire industry deployed RFID systems for tracking shipments all at once. That’s because companies would make bulk purchases of tags and readers, and the high volumes of purchases would drive costs down.

Still, the FDA is unlikely to mandate the use of RFID because such a move would likely get tied up in the courts for years. Lutter said there is a danger that individual states will enact drug pedigree laws, forcing companies to comply with 50 different requirements (Florida and California have already enacted such laws). The federal government is discussing the issue with the states, but, he said, there is no consensus on how to move forward in a way that would not unduly burden pharmaceutical companies.

One possibility that is gaining currency among pharmaceutical distributors is for the industry to move forward voluntarily with electronic pedigrees for drugs, or at least outline a plan of adoption that would satisfy consumers, politicians and regulators that the industry is committed to securing the drug supply chain. There are several benefits to moving forward voluntarily. One is that the industry could develop a pedigree system and a timetable for deployment that makes business sense, rather than having a federal requirement enacted by Congress that would drive up costs—or worse, having more states enact conflicting laws.

Another benefit is that if industry leaders move forward in lockstep, they could agree on standards and deploy technologies in stages. RFID might be too expensive today to use on every pill bottle, but the industry could deploy RFID at the pallet and case level, and begin building a system that could eventually be used on individual items.

A third benefit is that the industry could focus more effectively on problem areas. Regulation tends to be all or nothing. A voluntary pedigree system could target the points of vulnerabilities in the supply chain. As David Vucurevich, group vice president for pharmaceutical purchasing and pharmacy programs of Rite Aid Corp., a major pharmacy operator, said during the event in Washington, if his company purchases a shipment of drugs directly from Pfizer and no one else touches it, there is very little chance that there will be counterfeit drugs in that shipment. So why waste time and money tracking such shipments? Why not focus on drugs coming through a secondary distributor or from overseas?

There is no easy and inexpensive way to secure the drug supply chain. But if companies rather than regulators drive the process, they can make sure the pedigree system not only secures the drug supply chain but also delivers business benefits. The result is that consumers get drugs that are safer, but not much more expensive.