Sidebar: Drug Companies Try to Make RFID Work

Computerworld - Wal-Mart's first RFID deadline applied to only a small subset of its suppliers: pharmaceutical companies that handle prescription drugs classified as Class II narcotics. But their experiences shed some light on the issues that users face as they try to incorporate the technology into their supply chains.
Jonathan Loretto, global technology lead for RFID at Cap Gemini Ernst & Young, noted that the U.S. Food and Drug Administration announced in February its plan for using RFID devices to track the distribution of prescription drugs .
Pharmaceutical companies are still trying to sort out the best way to meet both the FDA and retail mandates, according to Loretto. "You can't just comply with Wal-Mart," he said.
Loretto said Cap Gemini is helping four pharmaceutical clients to meet their legal and commercial requirements while also fulfilling their business goals for RFID, "which is obviously to make a profit and get a return on investment."
He claimed that companies can expect a return within an 18-to-24-month time frame, but it won't come from simply implementing the tags, readers and IT infrastructure for RFID. It will require business process transformation in order for them to see reductions in labor and logistics costs, supply chain assets and out-of-stock items, Loretto said.
"RFID is just getting started," said Bryant Haskins, a spokesman for New York-based Pfizer Inc. "We think RFID offers a lot of opportunities, but there's still a lot of unanswered questions to work through."
Pfizer didn't have to comply with Wal-Mart's March 31 deadline because it doesn't ship Class II narcotics to the retailer, according to Haskins. But RFID has the potential to help pharmaceutical companies such as Pfizer curb counterfeiting by enabling them to track drugs through the supply chain, he said.
The FDA is calling for the widespread use of RFID technology by 2007. Pfizer has joined other major pharmaceutical companies in a program called Jump Start, which Accenture Ltd. forged to help drug makers get started with RFID projects.
"We are certainly supportive of the FDA's efforts, and we are moving ahead," said Haskins. "But we don't think it's going to be a quick and easy process."
Kara Romanow, an analyst at AMR Research Inc., said the pharmaceutical companies she's working with are making good progress on RFID, although most didn't meet the Wal-Mart deadline. "The technology is just not ready -- 10% to 12% of tags dead on arrival, and 5% to 10% more dying en route to Wal-Mart," she explained. "These guys have an extra challenge in that thebottles are relatively small compared to large cases, and the FDA is very particular about labels, so they can't just cover anything on the bottle."
Wal-Mart spokesman Gus Whitcomb declined to disclose the number of pharmaceutical suppliers that failed to meet the March 31 deadline. Asked if there will be any consequences for them, he said, "Partners work together privately to solve issues."

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