The year 2005 was a pivotal one for pharmaceutical companies as far as anti-counterfeiting initiatives and more specifically, radio-frequency identification (RFID). The World Health Organization (WHO) estimates that as much as 10% of the half-trillion-dollar pharmaceutical market is counterfeit and the FBI estimates the impact on U.S. companies is $200–$250 billion a year. The awareness and concern about counterfeit drugs in the pharmaceutical supply chain reached its peak in 2004. According to an FDA report, the number of drug counterfeiting cases had increased dramatically in 2004 (58 cases up from 30 in 2003). The increased attention on drug counterfeiting may have led to the decline to 32 cases in 2005. Regardless, those in the Pharma industry and public health officials see the recent cases as substantiating a growing problem in this interdependent global economy. Counterfeiting techniques have become more sophisticated, and with high drug prices in some markets making it more tempting for criminals, anti-counterfeiting measures have had to play catch-up.  

While the U.S. drug supply chain remains one of the safest in the world, Pharma companies large and small are taking action with anti-counterfeiting measures such as color-shifting inks, 2D barcodes and the high-powered weapon of RFID technology. In the last year, companies have initiated pilot programs and begun shipping RFID-tagged products. In the meantime, the FDA’s zealous support of RFID has led to technological advances, increased awareness, and new business opportunities for vendors that provide the necessary tools.  

Counterfeiting Challenges 

According to a report from Pfizer, a number of factors have contributed to the rise in criminal counterfeiting activity. Included among them are the growing involvement in the drug supply chain by under-regulated wholesalers and repackagers, the proliferation of Internet pharmacies, and the increased importation of medicines from Canada and other countries.

The pharmaceutical industry today faces many counterfeiting challenges; after all, it is a lucrative business. Everything from organized crime, drug traffickers to run-of-the-mill criminals muscle in. Why? Because there’s an exorbitant amount of money to be made and the penalties for drug counterfeiting are surprisingly light.  Bryant Haskins, director of corporate media relations, Pfizer, commented on a recent drug ring bust in China: “They arrested 12 people, including the ring leader, a guy from the U.S., who we had provided information on to U.S. authorities several years ago, which led to his arrest. He did about a year and a half at Rikers in NY then went back to China and has now been busted again. Even after doing a year or two in jail, he was willing to take the risk because the return is so great.”

After the Lipitor incident several years back, involving 18 million tablets of potentially counterfeit Lipitor that had to be removed from distribution, Pfizer is aggressively fighting drug counterfeiting and has implemented a number of anti-counterfeiting technologies on their product. Additionally, Pfizer is involved in the fight against counterfeit drugs and unauthorized generics sold over the Internet.  

Pfizer is utilizing color-shifting inks on several brands, including Viagra, Lipitor, Zoloft, Norvasc and Celebrex in the U.S. market. The company has also recently begun incorporating RFID tags into the labels of Viagra shipments. In addition to the color-shifting inks and the RFID tags, Pfizer is using data matrix barcodes, or 2D barcodes on their Viagra labels. These barcodes include the electronic product code and can serve as a backup in case an RFID tag can’t be read. It also confirms that the serial number is authentic. To top all of that off, the company uses covert features as well.  

Additionally, Pfizer is involved in an initiative with Microsoft to go after domain names and shut down web sites that sell illegal or unapproved products. Mr. Haskins said, “The Internet is one of the most difficult venues for us to monitor and have an effect on. We’ll close down a site this week and it will be under a different name next week. The Internet is really a moving target for us and unfortunately a major source of counterfeit drugs.” Although the quantity of the drugs is typically smaller, online pharmacies present an easy way to introduce counterfeit product into the normal supply chain. Peggy Staver, Pfizer’s director of trade product integrity, said the company is focusing more on technology and the legitimate supply chain and not on the Internet: “What we’re doing with RFID is centered around making changes to our packaging to try to impact business practices in the U.S. to further secure the supply chain.”  

The gray market (secondary wholesalers) is where the legitimate supply chain crumbles. An unauthorized source—using fraudulent pedigrees to sell tampered with or counterfeit drugs in legitimate channels of commerce—is where it becomes dangerous. For instance, a pharmacy believes it has purchased an authentic product from a wholesaler and the patient in turn believes he/she has purchased an authentic product. In fact, the origin is unknown or disguised and the safety and efficacy is compromised.

Purdue Pharma is not willing to take that risk. Aaron Graham, vice president and chief security officer at Purdue, contends, “The key is to have multiple layers to anti-counterfeiting measures, ‘James Bond-type solutions’ that nobody knows about. By putting so many deterrents into your product, you want the criminals to go to bed at night wondering if they have found them all.” The company’s multi-tier approach to deter counterfeiting involves overt and covert features such as color-shifting inks incorporating multiple solutions, which require a sophisticated device to interrogate. More significantly, for over a year now, Purdue has been using RFID tags on its lead product, OxyContin, a narcotic drug approved for the treatment of moderate to severe pain.

How do counterfeiters exploit the crime, and how does RFID solve the mystery? According to Mr. Graham, this technology has the potential to stop counterfeiters in their tracks. RFID involves track-and-trace and, when read, the tag will show where the product is at any given time. For example, it will show the product moving from the manufacturer to distributors, and everywhere else in between, until it reaches the pharmacy. “That’s a great way to preclude the bad guys from introducing counterfeit products into legitimate commerce,” said, Mr. Graham. “If the product doesn’t have an RFID tag that can be interrogated, and it doesn’t show the electronic pedigree all the way from the walls of the manufacturing site through each of the transaction points, with encrypted signatures, then it’s not our product.” When used properly, it would be a very difficult system for counterfeiters to overcome.

RFID Moving Forward

RFID is emerging as a key anti-counterfeiting ally in the pharmaceutical industry. Companies are no longer just talking about RFID technology; they are implementing it and their vendors have made immeasurable contributions to pilot programs as well. In the past year, products with RFID tags have successfully been shipped. RFID incorporates the use of small radio frequency tags on product packaging that can be electronically scanned to authenticate and track products through the distribution system. The technology is difficult to replicate and—with widespread adoption—will help protect the pharmaceutical supply chain, and ultimately consumers. Also, standards are in the process of being developed, the technology is accelerating and the cost of RFID tags is coming down.

Purdue is very pleased thus far with the success of their RFID pilot with OxyContin, and with the quality of the tags. They are assured that their partners both at the manufacturing site and at the label-converting site have an extensive quality assurance process. “We’ve experienced very few tag failures. I think we’re in the neighborhood of scanning and data collecting somewhere between 200,000 and 300,000 tags and we’ve had approximately 10-15 confirmed tag failures, so it’s been extremely minimal,” said Mr. Graham.

“Some of the changes we’ve seen occur are improvements in the performance of tag readability. The cost of the tags is coming down and what has changed in the past year is that there are a number of companies actually beginning to tag and ship products in the market. Pfizer is now using RFID on Viagra and GlaxoSmithKline will be shipping products (at least one) that contain RFID. That’s a change from a year ago when we were talking about it and announcing our plans to begin to test the technology further,” said Ms. Staver at Pfizer.

Consequently, EPC Global, a business action group, is working diligently with the life science and healthcare industry to define the standards around RFID technology that will suit the pharmaceutical environment appropriately. Currently the standardization issues concern frequencies. There are questions as to which class—HF (high frequency) and UHF (ultra high frequency)—performs better under most conditions, as well as issues about item level serialization, getting EPC—a number designed to uniquely identify a specific item in the supply chain—on the RFID tag down to the unit of sale (which in most cases is the bottle). According to EPC Global, Generation-2 UHF RFID conformance requirements specify the 860 MHz – 960 MHz frequency range as representing UHF protocol for communications, while HF operates at 13.56 MHz. So how does a company determine which frequency to use? Mike Celentano, associate director, supply chain systems at Purdue, indicated that the company employs UHF – 915 at the item level and this format was agreed upon with Purdue’s first customer in the RFID game: WalMart.

The sky is the limit for vendors to provide an array of solutions for RFID applications, and West Pharma-ceutical Services has responded by offering security solutions through customizing existing packaging components. For example, West’s vial closures with RFID technology incorporate the tag into their plastic flip-off button, which protects it from damage. Additionally, the company’s West Specra with RFID offers simultaneous read, write and non-line-of-site verification of sealed drug products. Don McMillan, president, North America, pharmaceutical systems division at West, said, “In 2006, we expect to complete our initial pilot programs and expect this technology to expand as the technical challenges are overcome.”

Some providers are positioning themselves to work with RFID technology in the near future. For example, Indianapolis-based Sentry Logistics Solutions has selected an ERP software platform capable of handling RFID technology in alignment with the direction the FDA and the industry are going in.   

How To Get Started?

Mr. Celentano described the process involved in setting up a pilot. For a minimal regional pilot, a company must have the ability to apply the tags (pre-encoded tags). Pre-encoded tags, which are widely available, refers to a tag (or inlay) that comes with the EPC number (the unique serial number) already encoded in it by the tag manufacturer. “This should be able to be done largely through conventional means. We’ve proven that here! We didn’t need to do anything elaborate to change our system,” Mr. Celentano said. A company will also need readers, antennas and data collection equipment/software. “I think most companies would find it wise to collect a pyramid of information. For example, it’s important to establish what tag to send out with what serial numbers on them. That’s a preliminary starting point,” he concluded.

“Reward” On Investment

Regardless of whether or not RFID has been deemed the solution to all drug counterfeiting ills, the benefits of the technology cannot be denied. RFID remains the most promising technology, to date, for securing the supply chain. Also, RFID operational efficiencies represent enormous potential. Foremost, the technology doesn’t require line-of-sight, which allows for multiple items to be read rather than scanning individual items one by one. According to Ms. Staver, that’s why there is interest in looking at this specific technology versus a more mature technology such as barcodes, which are otherwise cheaper and easier to implement. With 2D barcodes, a person is required to scan each individual item, while multiple items can be read in seconds with RFID.

Most of the attention around RFID has been largely about security and anti-counterfeiting, which is obviously very important, but there is the added benefit of increased inventory control and distribution efficiency that RFID offers. “For several reasons RFID presents a more efficient model than 2D barcodes and other types of technologies. The key thing there is the line of sight factor, which is a major consideration and a major im-provement over 2D bar codes. Moreover, you can read and trust the information on the tag,” said Mr. Graham. “In our particular case, we scan 48 bottles in a case in five seconds. You can imagine how much quicker that is than reading each bottle individually!”

In the end, for Pharma, safety is the essential reasoning behind using RFID technology. “Most importantly, we can now guarantee the safety and efficacy of our product—OxyContin in particular—in the legitimate supply chain, and guarantee a patient’s drug is safe,” said Mr. Graham. From the Pharma standpoint, the industry will benefit from RFID through the protection of the supply chain and the integrity of branded products. It’s not about ROI for Purdue; it’s about patient safety. “Being able to guarantee to our patients that our drug is safe is our ROI. There’s a more countable ROI at the wholesale level—managing inventory control more efficiently.”  

“Risk” On Investment

Despite advances with RFID, several issues need to be resolved before widespread adoption is possible. Without established standards, many companies are reluctant to invest in the technology. Furthermore, the implementation of RFID technology affects many different areas of a business and can become quite costly to execute.

So why is the adoption of RFID, particularly as an anti-counterfeiting tool, progressing slowly in the pharmaceutical industry? Ms. Staver remarked, “There are still a lot of issues that need to be resolved. A critical piece to the puzzle is the development of standards around data exchange, numbering schemes, and tag frequencies.” Additionally, there is the cost factor. Although the price of tags has come down over the past year, implementation of the technology as a whole remains expensive. For example, Purdue spent $2 million on infrastructure, and spends 30-35 cents a tag per unit, said Mr. Graham, who added, “So you have to do the math and ask yourself if it’s worth it.” Many people still have questions and are taking a wait-and-see approach.

The big factor is standards, Mr. Graham continued, “It is a challenge to try and select vendors to work with, as many vendors offer incompatible products in terms of frequency.” Despite the industry-wide effort to establish standards, they are evolving in parallel, not prior to hardware and software development.

Mr. Graham contended, “The knee-jerk response to RFID is the standards aren’t well defined and it costs too much. It’s one of those things that I think will fall into the hands of companies willing to show some leadership and we are fortunate at Purdue to be able to do that and show the industry that a certain level of achievement is possible.”

Ms. Staver added, “It takes a cross-functional effort to implement RFID technology and a lot of dedicated resources because it isn’t an off-the-shelf technology. You have to go out and find the experts to help with various components of the implementation, everything from provisioning of numbers to writing, to tags that move across the packaging line at certain speeds, etc.” Implementing the technology involves many different functions within a pharmaceutical organization because it is such a highly regulated business. It impacts IT, packaging processes, logistics operation, customer service, trade operations and manufacturing sites, to name a few.

“Although pilot programs are actively being managed, as a whole, the Pharma industry is conservative and the challenge of incorporating the technology and managing the data across the entire supply chain is formidable,” according to Mr. McMillan at West Pharmaceutical Services. While the industry sees the need to implement anti-counterfeiting technologies, many companies are also waiting for anti-counterfeit products to be commercialized by others prior to implementing the solutions for their drug products.

Regulatory Stance

The FDA fully supports RFID as an anti-counterfeiting tool. In a speech given by the FDA’s associate commissioner, Randall Lutter, Ph.D., he summarized the steps that FDA has taken to remedy the problem of counterfeiting. This included the February 2004 Report on Combating Counterfeit Drugs, the May 18, 2005 Annual Update, and the FDA’s efforts to encourage the voluntary adoption of RFID during the stay until December 2006, of the pedigree regulations issued under the Prescription Drug Marketing Act (PDMA). The key concern expressed in the PDMA is the secondary wholesale distribution of pharmaceuticals, which has been evolving for almost two decades without FDA oversight. According to Mr. Graham, the PDMA is being exploited because it has never been fully enacted.

In 2005, the FDA encouraged pharmaceutical manufacturers to begin tagging products susceptible to counterfeiting. To this end, the FDA is helping to drive adoption of an electronic pedigree and RFID to ensure that Americans have the greatest possible assurance that their medications are safe and effective. Perhaps the PDMA is fueling the FDA’s support of RFID; after all, this technology would help ensure drug safety through that secondary wholesale distribution chain.

Electronic pedigrees are emerging as regulatory requirements in several states in the U.S., including CA and FL. An electronic pedigree is a legal chain of custody detailing a drug’s movement through the supply chain and can include a variety of technologies. By July of 2006, all products shipped in Florida must have electronic pedigree. “In a paper-based system, that would be extremely difficult. RFID technology offers an opportunity to make that electronic document and facilitate the implementation of electronic pedigree,” according to Ms. Staver. “The FDA has left the implementation of RFID technology voluntary because they want us (industry) to come up with an appropriate solution and many feel that this is precisely how it should be. However, it is apparent the FDA has some sense of urgency to have the industry move forward with RFID, and with so few of us actually using it, they are concerned. They need more people to get involved with track and trace technology.”

From manufacturers and wholesalers, to retailers and pharmacies, the supply chain can be a logistics nightmare. It has become necessary to deter counterfeiters from compromising legitimate distribution channels. “Important life sustaining medicines are being counterfeited with much greater frequency,” according to Mr. Graham. With the proliferation of counterfeiting, at what point will RFID be considered a necessity? It is certain that ‘track and trace’ will be essential to Pharma distribution in the future. Whether or not RFID provides that solution remains to be seen, but at this point it presents enormous potential. Mr. Graham contends, “The need for some sort of technology to protect the supply chain is long overdue. No longer can the industry say counterfeiting is a problem with no solution. Today there are technological solutions, such as RFID, and it’s important to raise awareness.”

Perhaps once we have seen standards established and data sharing issues resolved, industry-wide implementation of RFID will follow suit in the world of pharmaceuticals. The industry analyst firm IDC predicted that, spurred on by the FDA recommendations, RFID adoption will increase rapidly in the pharmaceutical industry during the next three years. It’s never a smooth path for implementing a new technology, but RFID’s dual promises of increased security and efficiency should spur the industry to speed the process.

Kristin Brooks is associate editor at Contract Pharma. She can be reached at kbrooks@rodpub.com.