FDA Backs RFID Tags for Tracking Prescription Drugs

Calls for drug makers to use them on shipping pallets and cases by 2007

The U.S. Food and Drug Administration last week called for the widespread use of radio frequency identification technology to track the distribution of prescription drugs within three years, a plan that's expected to cost companies in the health care industry hundreds of millions of dollars, if not more.

In a report on its strategy for combating the spread of counterfeit drugs, the FDA said it views the use of RFID tags and readers as the best way for health care companies, hospitals and pharmacies to ensure that medicines are legitimate. The agency envisions a program under which prescription drug shipments will be assigned unique electronic product codes and RFID devices will be used to record data about all supply chain transactions involving the products.

RFID tags should start being used at the case and pallet levels throughout the pharmaceutical supply chain by 2007, the FDA said, adding that feasibility studies are scheduled for this year.

The National Association of Chain Drug Stores and some key drug makers and distributors announced their support for the FDA's plan, and a group of nine companies said they have signed a deal to have Accenture Ltd. serve as the program manager for a unified RFID effort.

Wal-Mart Stores Inc., which has mandated that its top suppliers begin using RFID tags on pallets and cases by next January, plans to adopt the wireless technology to track all the narcotics and other controlled substances dispensed by its pharmacies, according to the FDA.

A Wal-Mart spokeswoman said the retailer is working with 18 pharmaceutical suppliers to put tags on controlled-substance warehouse packs at a single distribution center by March 31. She didn't identify the companies involved in the effort nor the location of the distribution center.

San Francisco-based drug distributor McKesson Corp. said it believes that electronic tracking capabilities "will significantly enhance counterfeit-prevention efforts and negate the need for an ineffective and potentially fraudulent paper pedigree trail." McKesson added that it has already started to use RFID technology in its own distribution operations.

A Second Opinion

The FDA expects RFID tags to help in the fight against counterfeit drugs.
The FDA expects RFID tags to help in the fight against counterfeit drugs.
But Dr. Jean-Pierre Garnier, CEO of pharmaceutical maker GlaxoSmithKline PLC in London, sounded a more cautious note. Garnier said in a statement that his company's "long-term goal is the development of an electronic product code that will help track, trace and authenticate medicines through the whole distribution system." He added, though, that the RFID initiative "is a daunting technological task that could take at least three to five years."

Garnier said one of the biggest hurdles faced by companies that want to install RFID-based systems is the need to agree on industry standards and a common IT infrastructure so medicines can be tracked across the entire supply chain.

Detailed cost figures for the RFID initiative weren't available last week. But Gartner Inc. analyst Barry Heib estimated that the 34,000 chain drugstores in the U.S. would need to install an average of five RFID readers, which now sell for about $2,500 each. That would amount to total expenses of $425 million at the pharmacy level.

Heib said he thinks that each of the country's 6,000 hospitals would have to install at least 10 readers, amounting to another $150 million. Those investments would also have to be backed up by substantial spending on networks, databases and the RFID tags themselves, he added.

Copyright © 2004 IDG Communications, Inc.

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