RFID: Ready for prime time in 2006?

December 12, 2005

The widespread adoption of radio frequency identification (RFID) technology may be closer than ever before, thanks to a little nudge from the Food & Drug Administration. Randy Lutter, the FDA's acting associate commissioner for policy and planning, announced that the agency's counterfeit taskforce will conduct a public workshop on RFID technology in January or February of 2006.

The widespread adoption of radio frequency identification (RFID) technology may be closer than ever before, thanks to a little nudge from the Food & Drug Administration. Randy Lutter, the FDA's acting associate commissioner for policy and planning, announced that the agency's counterfeit taskforce will conduct a public workshop on RFID technology in January or February of 2006.

The purpose of the workshop, Lutter explained, is to facilitate RFID standard-setting and to reaffirm the FDA's commitment to driving the adoption of electronic trace technology. He told attendees at the RFID Health Care Industry Adoption Summit, held in Washington, D.C., and sponsored by the National Association of Chain Drug Stores and the Healthcare Distribution Management Association in November, that the FDA is interested in identifying the current barriers to RFID adoption. "We haven't set the agenda for this meeting, but we believe there are issues that merit further discussion."

Lutter added that successful adoption of electronic track-and-trace technology like RFID will require unusually high levels of cooperation among all stakeholders in the manufacturing and distribution of medical products. Lutter noted that in a February 2004 report, the FDA took a voluntary approach toward widespread adoption of electronic track-and-trace technology, which it expected to be feasible by 2007. "We believed at that time that regulatory intervention would stifle innovation and progress in adopting this emerging technology. Yet from our vantage point today, a voluntary approach may not be enough." Lutter said that it's unlikely that the 2007 goal would be met and that the agency has become concerned about the slow progress of RFID and electronic pedigree implementation.

For retail chain pharmacies, the stakes are even higher when it comes to implementing RFID, because adoption is at the individual item level where the cost factor could be significant. "It's a tremendous chicken-and-egg issue. You can't imagine manufacturers-even if those RFID tags cost a couple pennies each-putting them on the product if they're not going to get any benefit out of it," said David Bernauer, chairman and CEO of Walgreens. Bernauer lamented that manufacturers aren't going to get any benefit from RFID until retail pharmacies can use it and incorporate it in their infrastructure. "And we are not going to do that as retailers until virtually all the products have tags on them."

RFID is a burgeoning technology that has been hampered by a lack of standards, prohibitive costs, and slow adoption by stakeholders across the drug supply chain. Many industry insiders believe that RFID will be an effective technology tool only when it is adopted by drug manufacturers, wholesalers, and retail pharmacies. The promise of RFID is that it will help to deter theft and counterfeiting, as well as improve product availability, inventory management, the product recall process, and warehouse efficiency along with enhancing patient safety.

Some of the brand drug companies have been using RFID for several years to track and trace high-risk products. Pfizer, for example, has been using RFID on Viagra (sildenafil), a drug that is frequently diverted and counterfeited.

Jim Dowden, director distribution services for Hoffmann-La Roche, Nutley, N.J., shared data from a successful RFID pilot program. Dowden said he has seen 100% read rate at the pallet level in phase I of the pilot program that began in 2003.

In addition to a lack of standards and high costs, many stakeholders commented on how the slow adoption of RFID has also been attributed to a "perceived" lack of return on investment (ROI). Sanjay Sarma, an industry consultant and former associate professor of mechanical engineering at the Massachusetts Institute of Technology, told attendees that a number of positive ROI studies have been released but that more were needed in order to satisfy skeptical stakeholders.