With the issue of the report 'Combating Counterfeit Drugs' by the US Food & Drug Administration (FDA) in February 2004, RFID technology has entered the business area of the global drug-manufacturing industry. The general idea behind this is that, when every single dosage form is equipped with an RFID tag, it will be possible to generate a supply chain end-to-end track history, the e-pedigree, for individual drugs or dosage forms and hence provide an authentication procedure.
While the pharmaceutical industry has generally been regarded to as laggardly with respect to manufacturing and supply chain innovations, these developments have enabled the industry to shift into the position of 'early adaptors', when it comes to item-level RFID tagging.
The pharmaceutical industry, currently facing tremendous challenges to keep up with external changes, recognises in RFID technology not only the technology that could help to deal with issues such as counterfeiting or tracking and tracing, but also as an innovation that could support the industry as it improves its internal processes and tackles major supply chain challenges.
RFID as technology is nothing new. It has been used for more than 20 years to control closed logistics and manufacturing processes. The typical characteristics of RFID technology enable various ways of object-to-machine communication without human intervention.
With the growing interest of large retailers and consumer packaged goods (CPG) manufacturers at the end of the last decade, RFID faced tremendous innovations. With larger reading distances, higher read rates and ever decreasing prices for RFID tags and equipment, the technology became ready for application in complex supply chains.
In the consumer goods supply chain, the major hype around RFID is primarily related to the idea of tracking all (or at least the greater part of) goods, creating a new quality of supply chain transparency. Transparency primarily results in better product availability at the point of sale. This will lead to higher customer satisfaction and loyalty and ultimately to increased sales volumes. More efficient replenishment and shorter lead times along the supply chain will reduce bound capital in stock and warehouse capacity. And on top of this, there is a gain in productivity and security. Most of these benefits will be realised by retailers. The case for a consumer goods manufacturer, who has to pay for the RFID tags, is far less obvious.
In the pharmaceutical industry other key factors appear. More people die every year from medication errors than from automobile accidents, while an estimated 5% of pharmaceutical drugs on the global marketplace are counterfeit and, in the USA, $40bn worth of drugs disappear annually in the supply chain. A sector particularly exposed to loss, fraud and regulatory pressures, pharmaceutical manufacturing will stand to benefit enormously from RFID implementation if the technology provides means to guarantee a transparent, and hence secure supply chain for pharmaceuticals at item level.
For distributors, pharmacies and hospitals, a business case is made because RFID supports the operational processes. Even though this requires a significant integration into the operational IT and material flow systems, without the need to purchase and apply the tags themselves, they will benefit from increased process security and efficiency. With tagged single items the improvement is even more significant than in the CPG and retail supply chain.
LEGISLATIVE DRIVE FOR AN E-PEDIGREE
The objective of the FDA report in drug counterfeiting is to provide an e-pedigree, a complete track history for each drug package. The e-pedigree has become legislation already in the states of Florida, California, Nevada, Indiana and Virginia. In 13 other states, such legislation is under discussion. Besides authentication, this also provides a way to fight drug trafficking and grey markets.
RFID is not required by either the FDA or the US states. Yet, it is the only technology that allows an automated identification process, working through packaging material and for bulks of items. Thus the FDA has recommended the use of RFID to efficiently comply with the imposed e-pedigree measures. As a response, almost all large pharmaceutical companies are running various RFID trials and pilots, from small-scale closed-loop warehouse or manufacturing applications to full-blown end-to-end type projects.
In order for item-level tagging to breakthrough globally, technology providers, together with the important players in the pharmaceutical supply chain, are focusing on five major issues:
Price. In the past, it was prohibitive to use RFID tagging on any other than high-value drugs. But at the recent EPC Global conference in Atlanta, tag prices where announced around 12¢, and prices for the inlays dropped to as low as 7.9¢. This is a continuing trend that gives way for RFID application on a wider range of pharmaceuticals.
Standardisation: frequency and communication protocols are still under discussion. But the Electronic Product Code (EPC), a numbering scheme which is already standardised in the consumer goods supply chain, has the potential to prove adequate for the pharmaceutical industry as well.
Environment: RFID reading performance is influenced by materials such as water or metals. This principal limitation cannot be overcome with new RFID technology. However, the use of 13.56MHz technology for primary packages, where lesser read range is permissible, together with clever methods of material handling, such as automated depalletising, conveyors with tunnel readers and so forth, will provide ways to circumvent this problem.
Security: clearly the required level of security determines the type of solution. Levels of about 100% seem to be available only with special security precautions on the RFID tag itself, such as encryption. But even simple tracking improves the security level considerably over the current situation. Being cost effective, it can be considered for general prescription drugs or even over-the-counter drugs, while high-security solutions can be applied to highly valuable blockbuster drugs, selectively.
Privacy: consumer certainly would not like products to be traced after purchase. A lot of attention in the public has been created around this issue. However, patients would welcome secure proof that the drugs they receive in a pharmacy or a hospital are authentic. Drug manufacturers that can guarantee authenticity might even generate a new quality of customer loyalty.
BREAKING THE VICIOUS CYCLE
The supply chain tracking solution requires the participation of all players in the supply chain. Many of the obstacles that have occurred in the consumer goods arena will apply. Given the fragmented infrastructure of the average pharmaceutical supply chain (many producers, many distributors, even more outlets) it will be a tremendous effort to get all necessary parties interested. The awareness of these factors has resulted in the fact that the industry is currently somewhat ambivalent towards a large-scale implementation of RFID.
Siemens, as a company not only with a long history in pharmaceutical and healthcare solutions, but also known as a service provider with deep technological experience, has sought to break this vicious cycle and is now able to provide end-to-end solutions. Together with a network of partners, innovative packaging techniques have been piloted. Industry-grade RFID hardware is available for 13.56MHz as well as for the UHF frequencies. Secure e-pedigree software solutions, scalable from local data capture to visibility of entire supply chains, are available and can be integrated into manufacturing or warehouse operations.
Improving patient safety along with the possibility of combating counterfeit drugs are the keys issues. At the same time, the industry also realises that their business is becoming more and more competitive, issues such as time-to-market, market responsiveness, cost reduction and flexibility are key-drivers. This is why the pharmaceutical industry will become a front-runner among industries when it comes to using RFID technology. The technological innovation, while possibly creating another regulatory hurdle, could be a springboard for the industry to leap forward, innovating its business processes in attempting to keep up with today's general challenges.