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# A new challenge in the pharmaceutical supply chain

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Posted: 27 March 2007 |

Current trends show that the Radiofrequency Identification (RFID) technology and Electronic Product Code (EPC) are experiencing increasing diffusion. Several business applications adopting RFID are currently expected to grow strongly. Bar codes and RFID will coexist for many years, although the former is likely to progressively replace the latter in some sectors faster than in others.

Current trends show that the Radiofrequency Identification (RFID) technology and Electronic Product Code (EPC) are experiencing increasing diffusion. Several business applications adopting RFID are currently expected to grow strongly. Bar codes and RFID will coexist for many years, although the former is likely to progressively replace the latter in some sectors faster than in others.

Current trends show that the Radiofrequency Identification (RFID) technology and Electronic Product Code (EPC) are experiencing increasing diffusion. Several business applications adopting RFID are currently expected to grow strongly. Bar codes and RFID will coexist for many years, although the former is likely to progressively replace the latter in some sectors faster than in others. The pharmaceutical sector is probably one of the industries most significantly impacted by RFID technology and will benefit greatly from its adoption. RFID can provide the track and trace functions essential to the public health chain and the prevention of drug counterfeiting too. Nevertheless, the extensive item-level tagging of products must go along with a reduction in technology costs, diffusion of standards and an improvement of end-user knowledge.

## An overview of RFID technology and its impact on the pharmaceutical supply chain is presented in this article.

The adoption of Radio Frequency Identification (RFID) and Electronic Product Code (EPC) (Niemeyer and Pak, 2003) for product identification, as well as of EPCglobal Network (EPC Global, 2004) for information management, has recently been experiencing increasing diffusion in several business applications, such as transport and logistics, supply chain management, medicine and pharmaceuticals, manufacturing and processing, access control, real time location and agriculture, due to several reasons. From the technological point of view, RFID tags provide more accurate, punctual and updated information about products than traditional barcodes (Jones et al., 2004). For instance, manufacturing site, production lot, expiry date and component types are some of the information that can be linked to individual EPCs programmed in the tag chip. Such information can be usefully exploited to improve traceability of logistics processes, as well as monitor the performance related. Moreover, tags do not need line-of-sight scanning in order to be read, since they act as passive tracking devices, broadcasting a radio frequency when they pass within yards of a reader (Karkkainen, 2003).

RFID tags also solve some of the inefficiencies associated with traditional barcodes. For example, reading barcodes requires manual operations on packages, that is, either the packages with barcodes or the reading devices should be manually handled to read the codes (Boxall, 2000; Bylinsky, 2000; Jones, 1999). This may result in time consumption and difficult data capture if large amounts of goods are being handled. In some cases, readability of barcodes can be problematic too, due to dirt and bending, bringing about reduced accuracy and low reading rate (Ollivier, 1995; Moore, 1999). Based on these premises, RFID technology is expected to have a major impact on labour efficiency, automation and accuracy of many supply chain and logistics processes (Agarwal, 2001; McFarlane, 2002; Karkkainen and Holmstrom, 2002), in particular in such harsh environments as warehouses or distribution centers, where manual operations are critical. Although RFID technology significantly impacts on business process optimisation, the bottom line benefits for the supply chain are achieved through secure data sharing and punctual, real time and accurate visibility of EPC data through the logistics pipeline. The EPCglobal Network is the tool that enables paradigms for supply chain management (Cooper et al., 1997), as well as leanness and agility (Christopher and Towill, 2000) to become reality through faster and better-informed decisions. Focusing on the supply chain, real-time availability and sharing of EPC data through the EPCglobal Network are recognised as the main benefits of RFID and EPC implementations (Prater et al., 2005).

Real-time information availability implies additional outcomes, such as increased inventory visibility and stock-out reduction. Hardgrave (RFID Journal, October 14th, 2005) quotes that approximately 16 per cent stock out reduction have been achieved by Wal Mart through RFID deployment. Additional improvements enabled by EPC data sharing, quoted by scientific literature, are real-time access and update of current store inventory levels; automated Proof Of Delivery (POD) (Robertson, 2005); availability of accurate points of sale data; reduction of labour associated with performing inventory counts of shelved goods; improved theft prevention and shrinkage and better control of the whole supply chain (Bushnell, 2000). As far as the pharmaceutical supply chain is concerned, it must be noted that there are several additional aspects. RFID-enabled electronic product codes (EPCs) may be used to improve patient safety and process efficiency in the development of drugs and the running of clinical trials of drugs. Moreover, the new technology may also manage critical-care assets and hospital equipment and reduce counterfeiting and diversion of pharmaceutical products. Nowadays, counterfeiting is a growing and common problem affecting both governments and manufacturers around the world and is particularly dangerous when it involves medications (Figure 1).

Drug counterfeiting is not only an economic fraud, it also denies patients the therapies that can alleviate suffering and save lives. In February 2004, the Food and Drug Administrator (FDA) of the United States released a report entitled “Combating Counterfeit Drugs”. This comprehensive report highlighted the need for a combination of rapidly improving ‘track and trace’ technologies and product authentication technologies in order to provide a much greater level of security for drug products in the years ahead. In the same report, FDA highlighted that RFID tagging of products by manufacturers, wholesalers and retailers appears to be the most promising approach to reliable product tracking and tracing. Reliable RFID technology will make the copying of medications either extremely difficult or unprofitable. In the February 2004 report, FDA pointed out the importance of the adoption and common use of reliable ‘track and trace’ which would be feasible in 2007 and help secure the integrity of the drug supply chain by providing an accurate drug ‘pedigree’, i.e. a secure record documenting the drug was manufactured and distributed under safe and secure conditions. Given these premises, the present paper introduces an overview of RFID technology, its applications, the state of adoption and finally a case study: the RFID Lab project, recently set up at the University of Parma.

## RFID technology basics

• Class 1: tags are read-only passive identity tags
• Class 2: tags are passive tags with additional functionality such as memory or encryption
• Class 3: tags are semi-passive RFID tags. They may support broadband communication
• Class 4: tags are active tags. They may be capable of broadband peer-to-peer communication with other active tags in the same frequency band, and with readers
• Class 5: tags are essentially readers. They can power other Class 1, 2 and 3 tags, as well as communicate with other Class 4 tags and with each other wirelessly

## Modern mobile life

From the combination of RFID and mobile handsets of the last generation, many existing services can bring benefits and a multitude of innovative applications can be deployed. Joining payments to mobile phones, automatically transferring a call to the office or meeting room where the phone’s owner is, monitoring visitors, monitoring the location of documents, retrieving product specifications from tagged goods or street posters (leading to online sales of products such as flowers, film tickets, DVDs, holiday trips) and guidance of poor-sighted citizens are some of the more evident examples in modern mobile life (European Commission – Information Society and Media, 2006).

The increased interest and demand from the pharmaceutical industry is based on the promise of a safer and more accountable supply chain together with FDA support for technology (Ahlund, 2005). This feeling was substantiated by the European Commission, which in 2006 supported building the RFID solutions for the global environment (BRIDGE) project in the sixth framework program for research and technological development with €7.5 million. In recent years several pilots have been implemented by pharmaceutical manufacturers with different objectives and outcomes. In order to verify drug authenticity, Proude Pharma and the drug wholesaler H.D. Smith have implemented a pilot program based on RFID technology (G. Koroneos, 2005), whereas Cardinal Health in their pilot have demonstrated that it is feasible for UHF RFID tags to be inlaid into existing FDA-approved pharmaceutical label stock, and applied and encoded on case or pallet level for track and trace purposes at normal operational speed (McCormick, 2006). IMB have developed a complete product in order to supply a comprehensive system for tracking and tracing pharmaceutical products by combining RFID software, technology and services. Both Cardinal Health (Rios, 2006) and GSK (Van Arnum, 2006) have shown their interest in implementing pilot programs together with IBM. Finally, in order to combat the counterfeit product and enable pharmacies and wholesalers to verify the unique electronic product code, Pfizer have announced their intention to include an RFID tag on product packaging (Koroneos, 2006). In particular, in January 2007, Pfizer Inc began to ship Viagra® (sildenafil citrate) containing RFID tags to customers across the United States (Pfizer, 2007). In order to support these pilot programs and research activities, several RFID labs have been implemented in the last few years. Research activities reflect different interests in both theoretical and applied areas. Major typical topics concern Business Process Reengineering (BPR), technological tests and the evaluation of RFID impact on logistics and supply chain processes. Generally, in order to support these activities, RFID labs are equipped with both common logistic equipment, in order to reproduce real context in scale 1:1, and RFID equipment to test the actual response and performance of the new technology. RFID Labs usually join and partner academics, institutional and media partners, RFID technology providers, end users and stakeholders to foster research and technology transfer. In the next paragraph, the RFID Lab of Parma University, its structure, equipment, partners, current projects and activities are presented.

## Parma RFID Lab

RFID Lab spun off by research carried out at the Department of Industrial Engineering of the University of Parma, in the field of RFID-based systems to manage the supply chain in the Fast Moving Consumer Goods (FMCG) and, more specifically, in the food industry. Starting in 2002, research projects have been studying the potentials of RFID for traceability, a mandatory EU requirement in the food industry (European Community, 2002; Rizzi, 2006), as well as its impact on supply chain processes in the FMCG. The center, founded and headed by Professor Antonio Rizzi, opened in May 2006. It is currently located in a 1,500 sq ft area at the Industrial Engineering Department of the University of Parma. The equipment currently installed at the Lab is mainly composed of a closed loop roller conveyor, a sorting system, a pallet conveyor, a wrapping machine, a storage system, a receiving dock, material handling equipment and IT equipment. The lab is the first Italian facility to be cleared by the Italian Ministry of Defense with a temporary site license to operate RFID equipment in the UHF 865-868 MHz spectrum (RFID Journal, 2006), according to ETSI 302 208 regulations (ETSI, 2006). RFID Lab is co-funded by Id-Solutions (www.id-solutions.it), a spin-off company of the University of Parma. Id-Solutions mission is to supply companies with RFID integrated solutions to automate and optimise logistics and supply chain processes. RFID Lab is thus not only a structure devised for academic research and education in the RFID field, but it also strives to become a national benchmark for technology transfer. With regard to technology providers, leading competitors in hardware and software solutions for RFID deployment have joined and coexist at the RFID Lab. The technology providers are: Id-Solutions, Avery Dennison, Caen RFID, EMS, Eximia, Fastweb, Hi-Pro, Intermec, Lab ID, Procomac Packaging, SAP, Siemens, Sirit, Sun Microsystems, Symbol, Tektronix, Telecom Italia, UPM, Microsoft and Oracle. Technology providers supply the RFID Lab with up-to-date equipment basically for a threefold reason: (i) testing HW and SW performance in a variety of supply chain conditions; (ii) showing the potentials of RFID hardware and software equipment to students attending programs at the RFID Lab, and (iii) having their products included in the research programs developed by the RFID Lab Board of Advisors (BoA). Institutional and Media partners support lab activities to different extents. Institutional partners encompass Emilia-Romagna Region, Parma Province and Parma City Council, Industrial association, AIM Italy. RFID Journal, Data Collection and RFID Italia are Lab Media Partners. A distinctive institution of the RFID lab is the Board of Advisors (BoA). The BoA is a steering committee set up to lead the research activities of the RFID Lab. Potential end users and stakeholders are involved in the BoA, which encompasses approximately 20 major Italian manufacturers, 3PLs and retailers: Apo Conerpo, Auchan, Barilla, Carapelli, Cavalieri Trasporti, Chiesi, Coop Italia, CPR System, Danone, Di-Tech, Grandi Salumifici Italiani, Glaxo Smith Kline, Lavazza, Number1, Parmacotto, Parmalat, Seda and Unilever. BoA members are Information, Logistics and Quality Executive Officers who do the following:

• Collaborate in drawing common research guidelines and programs
• Follow research programs and get research outputs and takeaways
• Have a reference point to learn about the latest trends and developments in the RFID field

As far as the research programs are concerned, two main research projects have been recently launched, namely ‘TT – Technology tests’ and the ‘RFID-DC’ projects. TT stems from BoA activities and basically aims at determining the performance that can be achieved with the adoption of up-to-date RFID technologies for products and packaging identification. Both HF and UHF fields are explored, although particular emphasis is given to UHF tests (EPC Class1 Gen2). The ‘RFID-DC’ research project aims to assess the technical feasibility of reengineered logistics processes of a representative FMCG Distribution Center through RFID technology. The models developed enable the quantitative assessment of the improvements brought in by technology in the FMCG industry. Finally, the RFID DC project strives to develop a proof of concept to substantiate the development of a pilot in the FMCG industry, involving manufacturers, 3PL and retailers’ production sites and distribution centers.

## Conclusion

Nowadays there is some reserve to a wide and rapid diffusion of RFID technology because of its high cost and its potential to endanger consumer privacy and to reduce anonymity. As far as the pharmaceutical sector is concerned, there is still no evidence that the electromagnetic energy utilised by the reader device to read tags does not adversely affect the drugs exposed to it in terms of safety, potency, efficacy or changes in the pharmaceutical product’s composition. Notwithstanding the previous considerations, increased pressure for anti-counterfeiting initiatives comes from a growing number of states around the world and as stated by FDA, RFID product tagging by manufactures, wholesalers and retailers appears to be the most promising approach to reliable product tracking and tracing (Food and Drug Administration, 2004). Besides, over the last three years tag prices have fallen dramatically and this is only the starting point of a long-term trend. It is estimated that tag prices will decline on average 9 per cent per annum (Homs, 2004). RFID technology has the potential to revolutionise the world economy due to a new effective and efficient way to perform widely common operations. A wide range of applications can involve RFID technology and draw benefit from its adoption. Unfortunately, RFID technology currently remains a costly investment, but this is only a time issue.

Figure 1: FDA open investigations 1997-2003 (SOURCE FDA)

Figure 2: A typical RFID system