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Drugmakers Dawdle on RFID

As the U.S. Food and Drug Administration pushes ahead with its effort to jumpstart the adoption of RFID in the pharmaceutical industry, IBM Corp. (NYSE: IBM) has launched a new software-and-services suite that will help drugmakers establish a drug's "pedigree" -- the electronic or paper record documenting the chain of custody of medicines as they move from manufacturer to patient.

The new system, called the "IBM RFID System for Pharmaceutical Track and Trace," comes amid widespread disappointment at the pace of progress in implementing electronic product-tracking methods in the $620 billion drug industry. (See RFID Rebound?)

Last week the FDA announced plans to issue technical guidelines in the next several weeks for implementing the drug-pedigree requirements, as well as a final compliance guide for the 1987 Prescription Drug Marketing Act (PDMA), which will take effect Jan. 1, 2007. The PDMA has been on hold for more than two years in the face of drug-industry protests that it would harm small wholesalers -- an objection now widely seen as a ploy to stave off having to account for the movement of all drugs through the supply and distribution chain. The FDA said in June that it would lift the hold on PDMA at the end of this year. Associate FDA commissioner for policy and planning Randall Lutter made it clear that the agency has had enough stalling on RFID and other tracking technologies from Big Pharma.

“Our announcement is based on the view that [pharmaceutical industry] stakeholders have been too slow relative to our earlier expectations," Lutter said in a teleconference announcing the new guidelines last week. "The June announcement was intended to jump-start the stakeholders -- provide a kick in the pants, if you will -- to recognize that this is a real problem and deserves real attention."

The dilatory quality of the drug industry's adoption of RFID is due to three factors: privacy concerns, the complexity of implementing tracking solutions across a supply chain that can involve 10 separate steps, and the cost. A Dutch trial of RFID tags in standard medication packages, sponsored by Novartis, found that the costs for wide adoption are still prohibitive.

A 2004 report from research firm Meta Group Inc. forecast that RFID use in the pharmaceutical industry would surpass that of consumer packaged goods within 18 months. To say the least, that hasn't happened: Last year, according to the Venture Development Corp., consumer packaged goods accounted for 67.2 percent of 2005 shipments of RFID hardware (printer encoders and "applicators"), while pharmaceuticals generated only 1.9 percent.

The IBM suite is designed to address the cost and complexity issues. Embedding RFID tags at the unit, case, and pallet level, the system will automatically capture and track the movement of drugs through the supply chain and collect that information in a secure backend database. Based on IBM's WebSphere software platform, the system will enable drug companies and distributors to keep costs down by reusing existing assets.

IBM will also consult with drug companies to build customized solutions that encompass manufacturing facilities, warehouses, and distribution centers, says Paul Chang, IBM executive for RFID and pharmaceuticals.

"What's significant is that instead of requiring custom-coding, this is now a packaged solution to address the problem," adds Chang. "About 80 percent of the product can be used out of the box, with 20 percent of the coding fitting it into a particular environment."

Cardinal Health, a major provider of pharmaceuticals and medical equipment, is participating in a pilot program of the system. The IBM initiative, says Cardinal Health executive vice president for sales and business development Renard Jackson, is a welcome move toward the spread of RFID in the drug industry -- but it's not enough.

"We believe RFID is a promising technology," comments Jackson. "However, for widespread adoption to occur we will need the acceptance of data standards, an answer to privacy concerns, and most importantly, much more collaboration among key industry stakeholders."

— Richard Martin, Senior Editor, Unstrung

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