RFID and The Pharmaceutical Industry

While there are a number of compelling applications that exist for RFID solutions in the pharmaceutical industry, the primary focus at this time is on leveraging item level RFID tags on pharmaceutical products to address issues such as counterfeiting and diversion. Unlike typical track & trace applications where the business case is based on financial considerations using terms like "supply chain optimization", the pharmaceutical industry is primarily concerned with patient safety. While the pharmaceutical industry must consider the financial component of anything associated with the manufacture and distribution of their products, consumer safety is of paramount concern.

While counterfeiting is generally easy to understand (e.g. made in imitation of something else with intent to deceive), diversion is a bit more complicated. Diversion can occur in any industry where organizations pay different prices for the same product(s). In the pharmaceutical industry diversion occurs because hospitals, government agencies, pharmaceutical distributors, etc. all pay different prices for the same pharmaceutical products. Diversion occurs when organizations that pay a lower price for products order more than they need and then profit by re-selling the excess to organizations at a price lower than they would pay if they bought directly from the manufacturer. For example:

• Mfg sells to Company "A" for $5
• Mfg sells to Company "B" for $10
• "A" buys more than they need at $5 and sells the excess to "B" for $7.

In addition to the revenue loss opportunity cost diversion generates for pharmaceutical manufacturers, diversion creates "gray markets" that compromise the integrity of the supply chain. These gray markets are generally the point of entry for counterfeit products which pose the greatest threat to patient safety.

Once the appropriate IT infrastructure is in place, applying RFID tags to pharmaceutical items (bottles of pills, blister packs, etc.) will enable manufacturers to better track products as they move through the supply chain, identify diversion points and sources of counterfeit products, and enable product authentication at the point of dispensation (e.g. hospitals, pharmacies, etc.).

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