RFID in Healthcare--A Whole Industry of Value

  • Written By: Lucy West
  • Published: October 20 2004


The FDA is not only responsible for the protection of citizens and consumers, but also is an active partner with industries such as food, pharmaceuticals, medical devices, etc., in pursuit of industry best practices.

$49 billion of imports of pharmaceuticals enter this country every year.

The pressure is on from consumers and industry to protect their own interests. These represent sometimes conflicting goals of protection. Protect the consumer, yet protect brand integrity and the more political objectives (protect my profit margins). FDA and its stakeholders and lobbyists, and the ecosystems of industries around it have been actively pursuing how various information technology initiatives can enable and mutually support these goals.

Consider these:

  • Feb. 18, 2004—the U.S. Food and Drug Administration released its final report today on ways to reduce the counterfeiting of prescription drugs. The report's recommendations include the use of RFID technology to create a "pedigree"—a secure record documenting that the drug was manufactured and distributed under safe and secure conditions.

  • FDA said: "The adoption and common use of reliable track and trace technology would help secure the integrity of the drug supply chain by providing an accurate drug "pedigree" which is a secure record documenting that the drug was manufactured and distributed under safe and secure conditions." The implication? The industry needs to track information like drug name, dosage, container number and size, lot and control numbers, transaction history, etc.

  • HDMA said: "The Healthcare Distribution Management Association (HDMA) strongly supports the U.S. Food and Drug Administration's Final Report on combating counterfeit drugs, particularly the agency's recommendations for technology-based solutions for the electronic tracking, tracing, and authenticating of pharmaceuticals."

  • Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Title III, Subtitle A Protection of Food Supply) requires establishment and maintenance of records to identify immediate previous sources and immediate subsequent recipients of food.

The whole industry, from manufacturers, distributors, providers, retailers, and even patients, has a world of value that can be addressed from RFID solutions.

  • FDA mandates for non-tampering of products.

  • Brand protection—big pharmaceutical concern about US imports of drugs from cheaper overseas sources.

  • Product pedigree tracking—lifetime tracking of product from batch or lot through final sale, use, and disposal.

  • Supply chain efficiencies, such as ordering and replenishment, stockroom management, FIFO use of expiring products, disposal of medical damaged, spoiled, and expired products.

  • Information quality.

  • Medical grade network and healthcare provider effectiveness and costs, which includes keeping expensive equipment repaired and in use (and locatable!); doctor productivity (the average doctor touches 600 documents a day!); and moving paperwork and information through the entire healthcare network to speed up admin processes.

  • Worker productivity and efficiencies.

  • Patient care and protection.

  • FDA has quadrupled its counterfeiting investigations from 1998 to 2002.

  • $12 billion annual loss to counterfeit pharmaceuticals.

  • Pharmaceutical counterfeiting range from 2 to 7 percent rising to 80 percent in some countries.

  • Approximately 1,300 recalls were processed in 2001.

  • Distributors and manufacturers cited out-of-stock for 8 percent that could not be fulfilled.

  • Industry-wide returns worth $2 billion occur annually.

  • Cost of diverted medications: $1 billion annually.

  • Number of on-line pharmacies registered and verified by the National Board of Pharmacy's VIPPS program: 1.3 percent.

"The rapid adoption of RFID technology in the healthcare market is a major strategic initiative for HDMA and its members", said Lisa Clowers, Vice President of Supply Chain Processes and Technology at the Healthcare Distribution Management Association (HDMA).


Think about it. The government inspection process' has always been a bit scandalous, with inspection processes being years behind. But RF-enabled business processes allow the item count and scope of what can be inspected, understood, etc., to go exponentially higher, protecting citizens, and yet adding value to business as well.

RFID Power in the Value Chain

The real power of RFID is unleashed in industry-wide implementations. And healthcare products—FDA-regulated products—are sold through retailers as well, so these food, pharmaceutical, and device companies have multiple value chains and customers to serve, and are already getting on the band wagon, from supply chain applications, to deal with FIFO effectiveness and product pedigree issues. New FDA mandates will just enhance and escalate the interest and value for this industry.

This article is from Parallax View, ChainLink Research's on-line magazine, read by over 150,000 supply chain and IT professionals each month. Thought-provoking and actionable articles from ChainLink's analysts, top industry executives, researchers, and fellow practitioners. To view the entire magazine, click here.

ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.

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