Cracks in the Pharmaceutical Supply Chain

Cracks in the Pharmaceutical Supply Chain

Faced with a rising tide of counterfeit and mispriced drugs, pharmaceutical companies are turning to technologies such as RFID to better track medications through a convoluted supply chain

The Oxycontin Story

Even before the FDA came out with its statement in favour of RFID, supply chain executives at Purdue Pharma were working to meet a 2004 mandate from Wal-Mart that all shipments of "Class 2" narcotics, including the highly addictive Oxycontin, be labelled with RFID tags. While Purdue executives were wrestling with the new technology, they saw that it could also help them in the battle against counterfeit drugs in the supply chain.

Mike Celantano, Purdue's associate director of supply chain systems and RFID, says that when his group first started to investigate RFID tagging, the technology was immature and there were few examples to follow. "Wal-Mart specified the frequency and the type of tags it wanted, and it was up to us to find a solution," Celantano says. Purdue figured out a way to tag the product as it moved along a high-speed production line before it ended up in cases that each contain 48 bottles of Oxycontin. Purdue met Wal-Mart's mandate and at the same time was able to gain experience with data collection and RFID's track-and-trace capabilities. Celantano used SAP's Aii middleware software to collect the information from the RFID labels.

Starting earlier this year, Purdue began testing an electronic drug pedigree using RFID tags to match each bottle of Oxycontin with a corresponding record that shows the drug's movement through the distribution chain. The idea, says Celantano, was to look at ways to pass along data from the manufacturer to the distributor and eventually to a hospital or pharmacy.

Before shipping a case of Oxycontin to its distributor, HD Smith, Purdue scans the shipment and records data that includes a unique electronic product code as well as a batch or lot number and expiration date. So, when HD Smith receives a shipment of Oxycontin from Purdue, the distributor can authenticate it, certify the pedigree and make sure its serial number — the electronic product code number — for each bottle of medication matches the corresponding number on the bottle's RFID tag. Celantano says the pilot shows that it's possible to create an electronic pedigree using RFID. In the future, he says, the process could extend beyond the distributor down to the retailer.

"The potential is tremendous from both an efficiency and a safety standpoint because you're introducing that ability to manage the product supply chain at a level of granularity that has never been seen before," Celantano says. When you can track and manage each case of pills, he says, it will be easier to match document cases as they flow through the supply chain. And distributors will no longer be able to disguise where the product comes from.

The Problem with RFID

Celantano acknowledges that anyone trying out RFID in the pharmaceutical industry is facing some serious challenges. "RFID is one way to tighten the supply chain, but it's not a panacea," he says. First of all, compared with the consumer packaged-goods industry, which is using RFID to tag cases and pallets, pharmaceutical companies need to label each bottle to create a system that will allow for authentication. There are also questions about how radio frequency will affect biological products. According to McKesson's Bone, the industry still needs to be reassured that their liquid and biological medications won't be affected by RFID tags, although tests have shown that solid medications aren't damaged by the radio waves.

The cost of building the infrastructure needed for RFID and the lack of agreed-upon industry standards are also holding back mass RFID adoption. But Graham and Celantano say they are encouraged by the results of their initial trials. "At this point, no one knows the durability of the tags," Graham says. But he says that once the tags have been applied to the bottles, the tags are tested and if found defective removed before issued to the packaging line. As a result, the failure rate is low; only seven out of 200,000 RFID tags have failed inside the plant. (Purdue pays Symbol Technologies between 30 cents and 35 cents a tag and each tag is applied to a bottle containing 100 tablets.) Graham says they could scale up at any time if more in the industry decided to invest in RFID infrastructure and technology. But if more distributors and retailers don't sign on, there will be very few distributors able to read the tags.

Graham adds that electronic pedigree technologies like the one they are testing with HD Smith, Unisys and SupplyScape would "wipe out" a significant number of "grey market" wholesalers, thus tightening the supply chain. If manufacturers are able to track their drugs through the supply chain, then the smaller wholesalers will no longer be able to sell drugs they have purchased illegally.

While Purdue and other large drug manufacturers are experimenting with RFID, other companies are waiting to see what standards will be developed and how feasible the technology is. "I believe that the pharmaceutical industry as a whole is waiting for proof that RFID can work," says Dennis Kim, senior manager of supply chain operations at Tap Pharmaceuticals. At Tap, Kim says supply chain and IT leaders are working to understand how the technology can be applied and are reviewing pilot opportunities so they will be ready if they need to be. "RFID is expensive and the technology is becoming more robust, but it's not quite there yet," Kim says. "Most people are saying they're not going to commercial deployment until they have to."

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