Track and Trace

Even before FDA mobilized its anti-counterfeiting task force two years ago, companies began thinking about the potential of RFID (radio frequency identification) and EPCs (electronic product codes) in pharma. But instead of just formulating more white papers on the topic, Accenture, one of these forward-thinking companies, implemented a project that would take the technology for a test drive.

The company put together a cross-functional working group composed of several organizations: Johnson & Johnson, Pfizer, Procter & Gamble, Cardinal Health, McKesson, CVS, and Rite Aid, as well as trade associations, like the Healthcare Distribution Management Association and the National Association of Chain Drug Stores. In an eight-week test that utilized RFID and EPCs, nearly 13,500 units of real product coming from the different companies were electronically tagged, shipped, received, handled, tracked, and traced through the project's systems.

The impetus to join the project was clear: Companies had realized the error of their ways in jumping on the technology bandwagon—in previous years, firms have invested huge amounts of money into sales force automation (SFA) and customer relationship management (CRM) software, which, for many, didn't realize the promise it offered. Industry wanted to confirm the business value of RFID and EPCs, better understand what kind of equipment was needed to support the technologies, and gain a consensus around an operating model to ensure that the investments being made would be complementary to other partners' efforts in the supply chain.

Now that companies like Purdue Pharma are using RFID tags on Oxycotin, and Pfizer expects to be shipping RFID-tagged bottles of Viagra by the end of 2005—not to mention other companies, such as Wal-Mart and Boeing reporting great success with the technology—Accenture is diving deeper to begin helping companies implement some of the knowledge it picked up during the pilot project.

But avoiding a "VHS and Betamax environment" is just one of the many challenges pharma has, says Jamie Hintlian, lead partner for the Accenture Health & Life Sciences supply chain management practice, who was intimately involved in this project. Here, Hintlian discusses today's state-of-affairs regarding implementation of RFID and EPC technologies—and what issues continue to stand in the way of a more secure supply chain.

Pharm Exec: Where is the industry with its RFID- and EPC-tagging initiatives?

Hintlian: Most companies have at least thought about this, while a few have publicly announced that they have tagging initiatives under way. Pfizer, Purdue Pharma, and GlaxoSmithKline all have publicly stated that they intend to tag product to meet the objective of patient safety and product authentication. Companies are looking to this technology to help prevent leakage in the supply chain because of counterfeit products, or quite simply to allow some degree of authentication to take place in the supply network—ideally, at the point of dispensing.

What questions are companies still facing in regard to implementing this technology?

There are still a variety of questions and challenges. For example, examine the different value drivers in the businesses of branded versus generic companies. Generic products work on different cost models and operating margins; those companies need to take a more critical look at the value such an approach provides. There's also the question of the impact of RF [radio frequency] energy on the strength, potency, purity, and efficacy of biotech products. Although the drugs we tested in the pilot remained unchanged, biologics have not been as fully tested in terms of the impact of RF energy. There are also other challenges around cold chain logistics and supply networks that create challenges and opportunities for manufacturers.

What's the tipping point to RFID?

I'm not sure if there is one tipping point—but there are a few critical issues that still need to be resolved. The first includes the maturity of the technology itself. In our project, we learned that the technology is robust. It can withstand a lot of beating in a supply chain. But the readability of the tags needs to achieve a higher level so that all the partners in the supply chain can rest assured that 100 percent of the time they'll be able to read that innermost bottle of tablets that's nested deep inside a pallet.

Another issue is the price. Right now, the notion of a 30- or 40-cent tag on a bottle is still something hard to imagine because that adds quite a bit of cost to the product. If you think about millions of bottles, if not tens of millions of bottles of product a year, just the tag cost alone is adding $100 or $200 million in terms of your manufacturing operations. And that's just the tag—companies will also need readers, scanners, and some of the application software to integrate their manufacturing and order-management systems. But I think Moore's law [the idea that data density doubles every 18 months] applies here, as it has in a technology environment. And that's starting to translate into the cost coming down a little bit while we are seeing a simultaneous increase in the performance and reliability of the technology.

How is the environment surrounding the adoption of these technologies changing?

As we speak, EPCglobal is working through all of the standards that need to be established in the form of user requirements to make sure that we don't end up with a Betamax and VHS environment.

Then there are the issues of privacy. As real or perceived as they are, they're there. And we need to start thinking about the notion of more broadly educating the healthcare community, patients, and consumers about the reality and the myths of tagged items. They need to know whether or not drive-by scanning (the ability to read RFID tags from afar) is really something they need to worry about in their neighborhoods, or if there are other privacy concerns related to knowing at that level of detail what drugs people are taking home with them. In time, that can probably be addressed with more education and appreciation for what the technology can and cannot enable.

Another huge issue is the pedigree requirements emerging at the state levels, and figuring out to what extent that will actually push back to the manufacturers. California, for example, is now one of the only states that stipulates that pedigree must originate from the manufacturer. Most of the other states would suggest that pedigree only applies to those who are actually selling and distributing product, not necessarily the manufacturer who made it. And there are things going on now where the states are involved with industry participants to try to establish some sense of what we would call "minimum construction standards" around pedigree processes, and data formats or data requirements.

How disruptive are RFID and EPCs ?

It's tough to accurately predict how disruptive it will be. After all, there are different dimensions of what a future environment may involve in relation to how things are done today. But if you think about the shop floor itself, and what it takes to actually tag and commission and launch a product with the tag on it at that point—well, I'm not going to say it's easy. The fact is, it is a label-like type of process. So companies must figure out a way to apply it, and then read that tag, and then associate that tag or that EPC with the information that they care to associate with it.

So there are process changes, there are some technology changes, and some modest infrastructure changes inside the four walls. But nothing so dramatic that requires people to rip out finishing lines to put in new ones to accommodate this type of environment. What's more, solution providers are looking to provide migration paths for the industry. So moving from an existing warehouse-management solution environment that accommodates traditional bar codes to one that can accommodate EPCs and RFID is something that will be more evolutionary than revolutionary.

What new pathways will RFID create?

It opens up a lot of new opportunities for different kinds of trading relationships. The kind of data that's now created, how that's exchanged, and the value that data has to manufacturers is something that will likely create new kinds of relationships with their trading partners.

What should companies be thinking about today?

I think the good news is that the industry really is tuning in and participating in the key activities, like the EPCglobal Health and Life Sciences business action group. In that way, many of the industry associations have established the right forms for understanding all of the issues and challenges. I don't know that this can be any huge surprise, unless, of course, they're not participating in these types of forums, in which case there will be perhaps a very rude awakening for those who just haven't been paying attention.

As with any new technology or a change in processes in business and supply chain relationships, there come different challenges around change management, training, and organizational models. Those are the kinds of things that aren't as talked up right now as some of the other issues around technology, price performance, pedigree consistency, and authentication.

James Hintlian is the lead partner for Accenture's Health & Life Sciences Supply Chain practice, based in Boston. He currently is leading Accenture's pharmaceutical Electronic Product Code (EPC) and ePedigree industry program. He also is a special advisor to the EPCglobal in Healthcare Business Action Group, and is a member of the editorial advisory board for Supply Chain Management Review. He holds a master of engineering and an MBA.