Need to reinvent Rx supply chain is RFID conference focus

WASHINGTON —With California on the verge of requiring drug retailers, wholesalers and suppliers to establish clearly documented pedigrees for every prescription drug sold in the state, the industry leaders in charge of the nation’s pharmaceutical supply chain know they can no longer afford the luxury of a wait-and-see attitude about track-and-trace technology.

That message came through loud and clear at the 2007 RFID/Track and Trace Health Care Industry Adoption Summit. The mid-November event drew nearly 500 attendees from all three industries, all of them bent on learning more about how RFID and track-and-trace technologies can tighten pharmaceutical supply chain security and enhance business processes.

The National Association of Chain Drug Stores and the Healthcare Distribution Management Association hosted the summit, with IBM serving as the keynote sponsor. The event included nearly 20 education sessions and an exhibit hall of product and service suppliers.

What set this year’s meeting apart was a palpable sense of urgency. California’s state board of pharmacy has announced that beginning Jan. 1, 2009, it will require that all drugs dispensed within its borders must have a fully established electronic pedigree detailing every aspect of its movement through the supply chain, from its point of origin in the manufacturing plant and its movement through the distribution system, to its final destination in the retail or institutional setting.

That fact spurred attendees to redouble their campaign to overhaul and “smarten up” the nation’s pharmaceutical supply chain—either through RFID or through advanced bar-coding techniques that allow product handlers at every step in the process to gather information about the product, and to add new information to the code along the way.

Virginia Herold, executive officer of the California Board of Pharmacy, framed the issue in stark terms at the opening general session. “We’re sitting on a time bomb here,” she said. “Should you not be ready, in California the wholesaler or the retail cannot sell the drug beyond the deadline.”

Also addressing attendees was NACDS president and chief executive officer Steve Anderson. “We need to be engaged with the FDA and the states, resolve our differences and develop a regulatory environment for the future that assures safety and promotes good business practices,” he said.

The real question, added NACDS chairman David Bernauer, is “How can we maximize our ROI [return on investment] on something that’s inevitable?”

With a nod to California and Florida—which, in 2006, became the first state to require electronic pedigrees for pharmaceuticals—Bernauer called on supply-chain executives at the meeting to adopt a comprehensive, uniform system of RFID and track-and-trace technology that could ease all stakeholders into the new era of supply-chain management with as little cost and disruption as possible. He also asked his colleagues to advocate for a clearly defined federal mandate on drug pedigrees, to supersede what could emerge: a patchwork of differing state laws in the wake of Florida and California.

The cost of such a system has slowed progress on RFID, despite the hundreds of millions of dollars Wal-Mart and some manufacturers have already invested to spur its adoption in recent years. According to industry estimates, the cost of embedding a microchip into each pharmaceutical unit dispensed at retail is still 18 cents. Also prohibitive is the cost that retailers and wholesalers will incur for the RFID chip readers needed to make the inventory tracking system work.

RFID or other track-and-trace technologies could usher in a far more efficient supply chain, reducing shrink, out-of-stocks and returns of out-of-date product. Such a system, Bernauer said, would improve order accuracy and also reduce costly inventory levels.

Few if any conference participants disputed the potential benefits of RFID and track-and-trace technology. “I was astounded at the amount of waste that’s in our supply chain, and the amount we could save,” observed Shay Reid, vice president of integrated solutions for AmerisourceBergen.

With 3,000 pharmaceutical customers and 5,000 suppliers in California, the wholesale distribution giant is among the companies that will be most immediately and dramatically affected by the state’s adoption of mandatory e-pedigree requirements in 2009. Thus, it was no accident that Reid’s seminar on how ABC is adapting to track-and-trace technologies in its distribution centers was one of the most heavily attended educational sessions of the event.

ABC has jumped ahead of the curve by piloting next-generation “2D” bar coding technology in its Sacramento DC to track individual units of medication in real time.