FDA wants RFID along on drug trips

Unlike the Department of Defense and Wal-Mart, which jump-started their radio-frequency identification (RFID) initiatives by issuing do-or-die mandates, the federal Food and Drug Administration (FDA) has taken a more subtle approach. In hopes of stimulating pharmaceutical companies to rev up their RFID pilots, the agency issued what it calls its "Compliance Policy Guide" late last year. The new guidelines will make it easier for pharmaceutical companies to begin testing RFID. For example, under the new policy, drug makers no longer need to request special authorization before proceeding with RFID pilots. The agency has also suspended some of its manufacturing and labeling requirements until 2007.

The agency's interest in promoting RFID is no mystery. The FDA considers RFID technology to be its best hope for halting the growing problem of counterfeiting and fraud in the drug supply chain. Advances in RF technology have allowed manufacturers to embed "smart chips" into the labels of millions of bulk medicine bottles; each chip contains a unique electronic product code that allows the shipment to be tracked seamlessly throughout the supply chain. Besides discouraging theft, that enhanced tracking ability is expected to cut down on counterfeiting and make drug recalls more efficient. "The FDA wants pharmaceutical firms to go experiment and get this done," says John Blanchard, a principal analyst with ARC Advisory Group. "That's a very positive thing."

But the larger pharmaceutical companies, at least, haven't been waiting around for the FDA to act. Many drug manufacturers had been experimenting with RFID prior to the FDA's announcement in order to comply with mandates from Wal-Mart and other retailers.

In fact, the industry's adoption of RFID gained traction last month when Purdue Pharma LP, the manufacturer of OxyContin, began using RFID to track shipments of the theft-prone painkiller. Purdue is placing RFID tags on 100-tablet bottles of OxyContin to make it easier to track and authenticate shipments of the drug bound for Wal-Mart and H.D. Smith Wholesale Drug Co.

Two other drug makers have also outlined plans to implement the technology. Pfizer Inc. says it will begin placing RFID tags on bottles containing bulk quantities of Viagra intended for sale in the United States sometime this year.And GlaxoSmithKline plc says it will start using RFID in the next 12 to 18 months on at least one of its drugs that's susceptible to counterfeiting. For companies like Pfizer and GlaxoSmithKline, the RFID revolution can't come soon enough. Drug counterfeiting and theft currently cost the industry $30 billion a year.