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Pharma's Bitter Pill

The pharmaceuticals industry will adopt track-and-trace technologies—likely including RFID—to shore up its ailing supply chain. But the cure could be hard to swallow unless business benefits, not regulations, pave the way.
By Elizabeth Wasserman
Oct 01, 2008—On March 25, the pharmaceuticals industry—drug manufacturers, distributors and pharmacies—breathed a collective deep sigh of relief. That's because the California State Board of Pharmacy issued a decision to delay implementation of its drug-pedigree law, which would have required that companies maintain electronic records for all medicines sold in the state as of Jan. 1, 2009. The goal was to make sure that counterfeit medicines would not enter the supply chain and better protect patients.

It's a goal shared by the pharmaceuticals industry, the U.S. federal and state governments, even European companies and governments—but that's where the consensus ends. No one can agree on what technology to use—2-D bar codes, RFID or both. There's also disagreement on when and how to collect data for pedigrees—documents that verify the chain of custody of drugs as they move through the supply chain. Unlike California, Florida, which also passed a pedigree law, doesn't require electronic pedigrees. And while California says its e-pedigrees must originate with manufacturers, Florida requires pedigrees to start with distributors. Nevada and Virginia also have e-pedigree systems on a limited scale.

Then there's that sticky question of cost. In June, the National Community Pharmacists Association, in conjunction with the National Association of Chain Drug Stores, issued a study by Accenture that found it would cost individual pharmacies $84,000 to $110,000 to implement a track-and-trace system that uses 2-D bar codes and both high-frequency and ultrahigh-frequency RFID, the three technologies the industry is currently exploring. While the study didn't address distributors, companies that break down large shipments from manufacturers into smaller shipments to pharmacies would face similar costs.

And let's not forget the issue of adoption. In its March 25 decision, the California State Board of Pharmacy said that a large percentage of industry members would simply be unable to meet the 2009 deadline.

Some manufacturers whose drugs have been the target of counterfeiters—such as Pfizer, maker of the erectile dysfunction drug Viagra, and Purdue Pharma, maker of the prescription painkiller OxyContin—have undertaken large-scale trials to track every bottle with RFID tags. Cardinal Health, H.D. Smith, McKesson and other drug distributors also have deployed RFID to track counterfeit-vulnerable drugs distributed to pharmacies across the United States. And Wal-Mart, which has pharmacies within its stores, sent a letter to suppliers to begin to address the issues necessary to meet California's deadline.

But many companies—not sure which technology to adopt, or how to comply with multiple requirements from different states—have taken a wait-and-see attitude. A survey last year by Health Industry Insights, an IDC company, found that only 16 percent of drug manufacturers and distributors were evaluating RFID benefits—and 75 percent of those companies undertaking studies were budgeting $50,000 or less to implement RFID. The survey found that only 3 percent were adopting RFID solutions and allocating multimillion-dollar budgets to the technology.
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