RFID is prescription for drug companies

The front lines of technology are typically unfamiliar But the chain is making an exception for radio frequency identification (RFID).

BOSTON – The front lines of technology are typically unfamiliar territory for drugstore giant CVS.

“We’re not on the bleeding edge of any technology, nor do we want to be,” said Jack DeAlmo, vice president of inventory management and merchandise operations at CVS in Woonsocket, R.I.

But the chain is making an exception for radio frequency identification (RFID). With RFID, CVS isn’t content to sit back “and have our destiny decided for us,” said DeAlmo, who spoke last week at an IDC-sponsored event.

RFID is not a new technology, but its application in the consumer packaged goods (CPG) supply chain is a recent phenomenon led by industry heavyweights such as Wal-Mart, Gillette and Procter & Gamble.

Pharmaceuticals is a different animal, however. It’s a complex, highly regulated environment, DeAlmo said. “This is not a CPG supply chain. It’s a very convoluted supply chain with people who don’t talk to each other and don’t want to share information,” he said.

But a common drive to combat drug counterfeiting and streamline operations could help open the lines of communication in the pharmaceuticals industry.

Today between 2% and 7% of pharmaceuticals are counterfeit – a figure that is drastically higher in emerging markets, said Jamie Hintlian, a partner in the health and life sciences practice at Accenture, at the IDC event. In some countries more than 50% of the drug supply could consist of counterfeit drugs, according to a recent report from the U.S. Food and Drug Administration.

Experts say RFID’s “track and trace” capabilities can make drug counterfeiting more difficult by enabling more thorough documentation than bar codes allow during the various links in the pharmaceutical supply chain. RFID tags placed on pallets, cases or individual items would contain an electronic product code, which is essentially a serial number used to identify a specific item in a supply chain.

The theory is that as drugs move between manufacturing facilities, wholesalers’ distribution centers, retailers’ warehouses and in-store pharmacies, RFID readers can capture and log item location. Middleware responsible for analyzing reader data can then peg any operational discrepancies.

RFID won’t eliminate counterfeiting, but it will make it harder on those trying to thwart the system, said Lyle Ginsburg, managing partner at Accenture. “It’s going to take the net and make it a little bit tighter for the bad guys,” he said.

RFID’s anti-counterfeiting assistance is not the only appeal of the technology to drug companies. It also could help companies better track product expiration dates, said Michael Scrase, director of information systems and business integration at Cardinal Health.

The $40 billion Dublin, Ohio, company manufactures and distributes healthcare products, including pharmaceuticals. Some of Cardinal Health’s 24 distribution centers carry close to $1 billion in inventory – much of it perishable – from any of 2,000 different vendors at any one time. With its current bar-code technology, Cardinal Health can’t track items by lot and expiration date. With RFID, it could, Scrase said.

The ability to track drugs by their manufacturing lot number would be particularly helpful in the event of a drug recall.

Pat Rizzotto, a vice president of global customer initiatives at Johnson & Johnson, convinced upper management at the New Brunswick, N.J., company that RFID was worth investigating simply by explaining how the technology might have helped avoid the logistical nightmare of recalling more than 30 million Tylenol bottles after the tampering incident in 1982.

“If we had this technology, our business case would have been very different,” Rizzotto said. That’s all it took for Rizzotto to get the go-ahead.