In Sync with California

The countdown is on. In less than 18 months, pharma manufacturers have to be in compliance with a California state law that requires drug companies to use an electronic pedigree system if they want to distribute drugs in the state. California isn't the first state to require a drug pedigree, but its law significantly raises the bar for companies. It demands "an electronic record, containing information regarding each transaction resulting in a change of ownership of a prescription drug, from sale by manufacturer, through acquisition and sale by a wholesaler, until final sale to a pharmacy or person furnishing, administering, or dispensing the prescription drug." Where the burden of creating a pedigree previously fell on distributors, under the California law, manufacturers are responsible. The California Board of Pharmacists also mandated that manufacturers be required to serialize their products—that is, to uniquely distinguish one physical item from another, even if they all come from the same lot and batch.

"The California Board of Pharmacists inspectors expect to be able to walk into any distributing node—a manufacturer's warehouse, a distribution center, a chain of drug stores—and be able to point to an item and ask for, on the spot, a record for the drug's chain of custody," says Jamie Hintlian, a partner in Accenture's health and life sciences practice.

Some manufacturers, such as Pfizer, Purdue, and GlaxoSmithKline, have been working on e-pedigree programs for years, but many are playing last-minute catch-up.

"The industry is mobilizing, and there are some companies that are more ahead and some that are just beginning their journey," says Hintlian. "By and large, across the board, the industry is paying attention to what it needs to do fundamentally to comply with the most daunting and imminent legislation in the state of California."

Chain of Custody

The standards organization for bar coding is called EPCglobal. It ratified an electronic pedigree standard in January 2007, and it is currently certifying a number of pharmaceutical companies to engage in e-pedigree.

According to SupplyScape, a software vendor specializing in the pharmaceutical supply chain, the EPCglobal standard accommodates a variety of approaches in use today for drug distribution. The company notes the following:

• Electronic pedigrees are encouraged, but the standard also specifies how paper pedigrees can be scanned and embedded into the electronic record.

• Numerous product-serialization approaches can be used, including radio frequency identification (RFID) and many types of bar code.

• The diverse operational demands of pharmaceutical manufacturers, wholesalers, distributors, pharmacies, and third-party logistics providers are addressed.

There is, of course, far more to a working e-pedigree system than technology. When you join EPCglobal, you get a book called Revolution at the Checkout Counter. It explains the give-and-take between retailers and manufacturers that led to the widespread use of bar codes in the 1970s and 1980s.

"We see the same kind of conversations today with FDA, EPC [electronic product code], and RFID," says Bob Celeste, the standards group's director of healthcare. "Manufacturers are saying that they don't want to go through tagging items if no one is going to read them, and retailers are saying that they don't want to buy the reader infrastructure if no one is going to tag things."

To encourage others to adopt the new technology, companies such as Purdue and Pfizer are starting to become more verbal about the benefits they are reaping from RFID. "The issue here is a basic business question," Celeste says. "Who is going to get the benefit throughout the supply chain? And who is going to pay for it? What is promising is how much cooperation you are seeing between the trading partners. There is cooperation between every company, and that is real progress."

Pedigree is not a new concept. Chain-of-custody documents have been used for years, but they're not easy to use: Documents get lost, signatures can be forged, and the vast amount of paperwork generated can be difficult to deal with when it comes time for an audit.

"With the volume of product that we move through our facility, there would be no possible way for us to handle a paper pedigree," says Shay Reid, vice president of integrated solutions at the distributor AmerisourceBergen.

In Florida, AmerisourceBergen implemented an e-pedigree system using an electronic data interchange (EDI) connection to facilitate the transfer of the e-pedigree. The connection, however, proved cumbersome and slow. "Typically," Reid says "it took us anywhere from six to eight weeks to establish an initial connection with trading partners and transmit an electronic pedigree."

AmerisourceBergen's pedigree was basically an electronic version of a paper document. It was a PDF that could be printed out, but recipients weren't able to sign it or update it for a transaction. When it came time to set up a system to meet the California mandate, the wholesaler opted for a more advanced electronic product code information system (EPCIS). Unlike an EDI connection, EPCIS does not rely on a single point of connection; instead, it is a Web-services connection, much like a traditional Internet connection.

"We are seeing a tremendous increase in speed of transmission," Reid says. "Ninety-nine percent of the transactions that we transmit occur within five seconds. That's as close to real-time data as it gets when exchanging with trading partners."

The way the system works is straightforward. A manufacturer populates data into a single electronic file that is associated to a product being shipped to the wholesaler. The file is then sent through the Web to Amerisource's EPCIS system, which stores data from the e-pedigree file in a database. When the distributor receives the product, its unique identifier is scanned and associated with the original e-pedigree document. Finally, a transmission is sent notifying the manufacturer of receipt. "As the product is distributed, our downstream customers will be able to send back information as to where the product is going," Reid says. "This process includes the manufacturer through the entire life cycle of the product."

Mass Serialization

As manufacturers rush to install new pedigree systems in California, they also are selecting which form of serialization to use. As it relates to supply chain management, serialization is the placing of a unique number on every unit of sale, whether that is a pill bottle, a case, or a pallet. In Florida, there was no regulation for serialization, and companies, if they serialized at all, tagged cases with basic bar codes or 2D bar codes (advanced bar codes that store more information and are read with a special camera).

Although California has yet to issue requirements regarding which serialization method to use, five major pharma companies are currently piloting RFID technology to track expensive and highly counterfeited drugs. RFID tags include tiny microchips that can store more information than linear bar codes. These chips are costlier than paper labels and require special equipment and software to read and write to them.

Although pricey, serialization with RFID is expected to reduce logistical errors and address some aspects of supply chain security. Companies are using RFID-generated data to measure how efficiently a product is moving through the supply chain and to track a product from the point of manufacture to the pharmacist. "In this industry, you're dealing with medically critical products," Hintlian says. "It isn't soap or consumer goods, where if you have 90 percent product visibility it's OK."

Purdue, whose pain reliever OxyContin (oxycodone) is one of the most counterfeited drugs, was an early adopter of RFID. The company is currently piloting a program with the wholesaler H.D. Smith in which every bottle of OxyContin that passes through the wholesaler is tagged with an RFID chip.

"One could certainly argue that Purdue did all the legwork and spent all the money," says Aaron Graham, vice president of corporate security and chief security officer at Purdue. "Now other companies can just come along and take our lessons learned and implement them for cheaper. That's true, but we felt the urgency to do what we can do to curb counterfeiting and diversion."

Track and Trace

A huge benefit of choosing RFID over traditional linear bar codes is the ability to use it as a track-and-trace solution. Track-and-trace systems are designed to help manufacturers understand how the product moves through their supply chain, where it ends up, and where it is getting stalled or diverted.

For example, Pfizer established an RFID pilot with its distributor, McKesson, in which the software relays information back to Pfizer every time the product hits a certain point in the supply chain. Pfizer can see easily when the shipment leaves the warehouse, when it leaves the distributor, and when it lands at, say, Rite Aid.

"Companies should build their serialization strategy with the idea that they are going to leverage it for all kinds of future-value propositions, such as supply chain visibility, recall management, expiration-date management, deductions, and chargebacks," says Michael Lipton, director of RFID solution management for the life sciences industry at SAP.

Consider a recall. Pharmacies tend to over-return drugs in fear of missing a bad product. And wholesalers often use a recall to clear themselves of old product, knowing that manufacturers will take what they get and issue credit for it. According to Lipton, manufacturers have no way of validating product coming back and can't determine the original invoice price they charged the wholesalers, so they end up giving the current price. "If you can authenticate that the product coming back is the exact product that you are recalling, and if you can match that product against the exact invoice amount that it was shipped out under, that's millions of dollars of value for that process alone," Lipton says.

But for track-and-trace systems to work, the whole supply chain has to adopt the same pedigree technology and method of serialization. "There is a huge need for collaboration across the supply chain for this to be effective," says Peggy Staver, Pfizer's director of trade product integrity. "Technology alone won't solve this issue. The solution requires legislation, better business practices, and enforcement to help make sure that our supply chain is as secure as possible."

The High Cost of RFID

The ability to track a drug across a supply chain is appealing, but is RFID really catching on? According to some industry experts, the technology is being piloted by only a handful of companies, for less than a dozen drugs.

And although RFID chips have dropped in price (the average tag costs 25 cents), the technology is still much more expensive than basic, linear bar codes or their 2D counterparts.

Besides the actual chips, every link in the supply chain must be outfitted with RFID scanners, a software infrastructure, and data storage units. This upgrade is a costly proposition for warehouses that are using decades-old legacy systems.

Glossary of terms

"More of our customers have been leaning toward 2D bar codes because of the concern about whether it will be possible to get RFID to work in terms of scanning a pallet and being able to read everything that is on it," says Edge Dynamics President and CEO Henry Olson. "They are more comfortable with 2D bar codes, and the cost factor is appealing as well."

Some distributors also noted that their biotech customers are concerned about RFID and whether the radio frequency waves affect the stability of the product. FDA and manufacturers can't answer that question yet, but to be on the safe side, most manufacturers are tagging biotech products with 2D bar codes. "We have systems set up so that we can tell if there is any difference if RFID tags are mixed with products that have foil packaging or liquid content," Reid says. "A lot of the RFID tag manufacturers will tell you that their tags have less effect with liquid or foils, but we have yet to collect enough data to determine that."

There is also debate on whether ultrahigh frequency (UHF) or high frequency (HF) RFID chips offer better read rates. Most companies said that they are agnostic between the two at the item level, but are requiring UHF at the case level.

According to some experts, it is difficult to read standard UHF chips when they are near liquid or certain metals. An alternative is the 13.56-MHz HF tags, which have a higher read rate and more features and functionality but don't have an EPC standard.

"We view RFID simply as the data carrier, and what it is carrying is a serial number," Staver says. "From a compliance viewpoint, whether we choose RFID or 2D bar codes is not as critical as it is to move forward with serialization." Pfizer is currently piloting Gen2 UHF chips for Viagra (sildenafil) at the case level. At the item level, Pfizer is tagging packages with HF tags. The company is now beginning to implement RFID on its Celebrex (celecoxib) packaging, although the tagged product won't be on the market until 2008.

In the United States, several of Pfizer's trading partners have expressed interest in RFID over 2D bar codes because of the operational efficiencies associated with RFID. "We've been trying to work with our trading partners to understand what the cost/benefit is," Staver says. "But we still aren't there yet."

Rather than waiting for a standard to be ratified, manufacturers such as Pfizer are using a risk-based approach to serialization. High-cost items are getting an RFID tag, while the bulk of the products are receiving traditional paper bar codes. For example, of Pfizer's 100-plus prescription drug products, only five or six either have been counterfeited in the past or have high revenue capabilities. Those items are more likely to receive a higher level of serialization.

The serialization of individual packages is a serious endeavor, Staver says. "Because of the cost and complexity involved in implementing serialization on packaging lines across the US market, this is not an insignificant event that can be done in a short amount of time," she adds.

The race to meet California's e-pedigree deadline is tight, but it's only the first leg of a marathon. More than 20 other states, including New York, are currently signing off on legislation mandating pedigrees. The big question: When is the federal government going to step in? Fifty different supply chain pedigrees for 50 different states is not the answer, says one industry expert. As of right now, FDA is waiting and watching what happens in California. "It's only a matter of time before FDA comes out with a mandate, but I think the government is giving the pharma industry some time to develop products and solutions that are workable for the industry," says Bill Allen, group director for RFID at CMP Technology, a publisher and media company.

There is also the chance that the California deadline might get pushed back to 2011—after all, the date has already been moved once from 2007 to 2009. At press time, neither FDA nor the California Board of Pharmacists could be reached for comment.

"The California legislation anticipates that by 2009 there will be serialized products being sold in California," says Paul Fowler of Axway Software. "Realistically, you are talking to manufacturers that are just now looking at pilots, and none of those [programs] are anywhere near production. Many are questioning how this is going to work by 2009. If no one is able to comply with California's law, they might have to rethink the plan."