Pharma RFIDs: Efforts aim at simplifying complications

FRAMINGHAM (03/04/2004) - The U.S. Food and Drug Administration is stepping up its efforts to get pharmaceutical companies to use radio frequency ID (RFID) technology to improve the safety of drugs throughout the supply chain.

But pharmaceutical companies are quickly discovering that applying RFID technology to drugs is more complicated than using it on other retail products. And pharmaceutical managers are finding it takes more than slapping an RFID tag on a product to reap any benefits like improved operational efficiencies.

Still, there is great interest in RFIDs, as they apply to pharmaceutical products, due to the FDA's renewed efforts in this area. Last month, the agency released a report on combating counterfeit drugs. The report noted that RFID technology could be very useful to ensure the safety of drugs. In the executive summary of the report, the FDA noted: "Radio frequency (RFID) tagging of products by manufacturers, wholesalers, and retailers appears to be the most promising approach to reliable product tracking and tracing."

A move to RFID technology has wide-ranging implications for the industry. It extends to the manufacturing of drugs, tracking their shipments through supply chains, and even includes tracking the drugs used in clinical trials.

The FDA believes that wide-scale use of electronic tracking and tracing technology is feasible by 2007. But many industry experts expect RFID adoption to happen much sooner due to the efforts of some large distributors (e.g., Wal-Mart Stores Inc.), who are pushing their suppliers into quickly deploying RFID technology across the board for all of their products.

However, while other industries and suppliers might be able to quickly adopt RFIDs and reap the benefits of using them, there are several factors that complicate matters for pharmaceuticals companies when moving to RFIDs.

Problems with labels

Companies that manufacturer clothing, hardware, or cosmetics can simply slap RFID tags on their products and meet their distributors' requirements. But that's not the case with drugs.

Many distributors are looking for rapid adoption of RFIDs at the pallet-level; some distributors are pushing pharmaceutical companies to implement RFIDs at the bottle level for class 2 drugs (e.g., addictive pain killers and other prescription narcotics) within the next year or two years. Implementing RFID tags at the label level takes on added complexity because the tags cannot obstruct prescription information.

This is an area that Acsis Inc., a supply chain solution provider, is focusing on. Acsis helps companies deploy ERP (enterprise resource planning) systems and has expertise in the area of using RFID in the supply chain. Monday, Acsis announced it is teaming with National Label in a partnership that will provide RFID integration and consulting services to pharmaceutical companies. (National Label prints labels for many pharmaceutical manufacturers.)

The two will work to embed RFID technology within drug labels. Specifically, they will combine National Label's knowledge of pressure sensitive labeling techniques with Acsis' expertise on RFID technology.

"The way pharmaceuticals are tracked and traced through the supply chain will be transformed by the RFID rollout," said Steve Brown, vice president of marketing and business development for Acsis Inc. (Brown's comments appeared in a prepared statement released today.) "Through our partnership with National Label we are able to offer a solution that meets the specific needs of pharmaceutical companies today, and ensures that they have the foundation to capitalize on larger opportunities to leverage RFID for business benefits tomorrow."

Pharma's weak link: Supply chains

Unfortunately, industry experts believe pharmaceutical companies have another obstacle to overcome before they reap these additional business benefits. Namely, most pharmaceutical companies do not have the end-to-end infrastructure in place to get the full benefits of using an RFID system.

"In many large, distributed companies, to get more benefits than simply better tracking (capabilities), you need to fix the foundation first," says Terri Adelstein, supply chain practice manager at the technology consulting and systems integration firm Intrasphere Technologies Inc. "Companies that are further along in using RFID (say, on one product) are the ones who have implemented a fully integrated backbone that extends into their distribution centers and manufacturing plants."

Some industries (e.g., many consumer product manufacturing industries) have already integrated their supply chain processes throughout their entire operation. Adelstein notes that life science companies have for the most part addressed the integration issue in their R&D efforts, but such efforts have not been extended to their operational sides.

In fact, in its report on combating counterfeit drugs, the FDA noted it is pushing RFID adoption because it believes electronic tracking of drugs using RFIDs is more reliable than the paper-based tracking methods commonly used today by pharmaceutical companies and distributors.

"Some companies do product planning on spreadsheets," says Adelstein. With truly integrated systems, companies could do much better business planning. For instance, information derived from RFID data about products received and used could be fed back into an inventory control system. If demand takes an unexpected upturn, this information could automatically be passed to a manufacturing system instructing plants to produce more product.

Others share Adelstein's view that more needs to be done to integrate the parts of the supply chain system.

"The industry is taking a balanced approach (to RFIDs)," says Jamie Hintlian, a partner in the heath and life sciences practice of the consultancy firm Accenture Ltd. "Companies are leading with safety, but are looking for other business incentives as well." So a pharmaceutical company may adopt RFIDs to meet the FDA's mandate to secure drugs in the supply chain, but at the same time, if done properly, the company could also leverage the information collected with an RFID system to improve internal operations.

To that end, Accenture last month announced the formation of a new industry group that will evaluate RFID for the life sciences. The group includes drug manufacturers, distributors, and retail drug stores. In addition to Accenture, members include Abbott Laboratories, Barr Pharmaceuticals Inc., Cardinal Health Inc., CVS Pharmacy Corp., Johnson & Johnson, McKesson Corp., Pfizer Inc., The Procter & Gamble Co., Rite Aid Corp., and others.

The group will examine RFID deployment with an eye toward integration of RFID data into distribution and operations tracking systems like ERP systems. "We'll look at hardware and software without having to reinvent the wheel," says Hintlian.

The group plans to test how RFID technology can improve expiration date management; lot and batch tracking; returns management processing; shipping and receiving accuracy; operational integrity; and product security and consumer safety.

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