Just What the Doctor Ordered

The trade in fake and illegally-diverted medicines is an
industry that is worth tens of billions of dollars a year worldwide, and kills a
significant but unknown number of people, according to the World Health
Organization. Most victims are in developing countries, but the industrialized
world is suffering too. Theft and the illegal diversion of drugs destined for
other markets is as much a problem in the industrialized world as the outright
faking that plagues poorer countries. For example, 25% of GlaxoSmithKline's
discounted AIDS drugs bound for Africa never reached their intended destinations
between June 2001 and July 2002. Much was "laundered" for sale in the
developed world.

The number of counterfeiting cases being investigated by the
US Food and Drug Administration has risen to about 20 a year since 2001 from
about five a year during the 1990s. The US FDA wants RFID tags to be in
widespread use throughout the pharmaceutical industry by 2007, and it is
promoting trials of technology similar to the Aegate system in the US. According
to a release by US FDA approx 88% of the drugs coming into USA are unapproved
out of which India accounts for 14.3%, Thailand 13.8% and Philippines 8.0%. The
World Health Organization estimates that the sale of counterfeit prescription
drugs is potentially a $26 bn a year illegal business.

The US FDA has recommended RFID technology as the best way to
thwart illegal drug trafficking, and several states, including Florida &
California, have passed laws requiring pharmaceutical companies to track drug
shipments as they move through the supply chain. In its report titled
"COMBATING COUNTERFEIT DRUGS: A Report of the Food and Drug
Administration," February 2004, FDA clearly brings out RFID as the killer
solution to combat the Counterfeit problem. (Report available at www.fda.gov/oc/initiatives/counterfeit/report02_04.html)

As a major exporter and manufacturer of pharma drugs and
other medical products the counterfeiting industry has a significant impact on
the brand equity of the Indian pharmaceutical industry and Brand India in global
markets. It is time that it turned to the RFID technology for solutions.

Globally, the pharmaceutical industry is one of the most
advanced in terms of studying the applications of RFID in its supply chain and
the first to focus on tagging at the item level. One of the reasons is that it
has been under state mandates and Federal rules to secure the supply chain from
counterfeit products. Those mandates don't apply just to manufacturers but to
the entire pharmaceutical pipeline, which comprises drug makers, distributors
and wholesalers, and the drugstores and hospital pharmacies that actually fill
prescriptions. Chemists/druggists, Stockists and most importantly, consumers.

EPC based RFID technology uses Radio Frequency Identification
(RFID) tags affixed on cases/consignments and a serialized "Electronic
Product Code"(EPC) for identification to facilitate detection and
subsequent segregation of genuine and counterfeit pharma drugs and medical
supplies globally with obvious benefits to all stakeholders — pharma
manufacturers, Health regulators and the pharma distribution chain covering

EPC (Electronic Product Code) is innovated out of research
undertaken by Auto-ID Center, Massachusetts Institute of Technology (MIT),
Boston which was funded and sponsored by US Food & Drug Administration (USFDA),
Baxter, Reckitt Benckiser, Abbott Labs, Pfizer, Johnson & Johnson, etc
amongst 100 other leading companies across industry segments.

Manufacturers, distributors and retailers see RFID as a way
to create an electronic pedigree, by placing tags with an Electronic Product
Code-a unique product identifier on every bottle and vial of prescription
medication. The tags could be read and the validity of the drugs authenticated
at every step in the pharmaceutical supply chain.

In the pharma sector an action group has been formed by
EPCglobal, called Healthcare Life Sciences Business Action Group (HLS BAG),
comprising leading manufacturers such as Abbott Laboratories, Barr Laboratories,
and Johnson & Johnson, two pharmaceutical wholesalers, Cardinal Health and
McKesson; and two retail pharmacies, CVS Pharmacy and Rite Aid, Industry trade
associations including the Healthcare Distribution Management Association (HDMA)
and National Association of Chain Drug Stores (NACDS). Sanofi-Synthelabo,
Walgreen and Wyeth have also joined the group recently. It has been formed to
facilitate the adoption and implementation of EPC based RFID technology in this
sector. Participation in this is open to all EPCglobal member companies
worldwide.

Accenture coordinated an RFID pilot, beginning in October
2003, in which a number of manufacturers (Abbott Laboratories, Barr
Laboratories, Johnson & Johnson, Pfizer and Procter & Gamble),
distributors (Cardinal Health and McKesson) and retailers (CVS and Rite Aid), as
well as the Healthcare Distribution Management Association (HDMA) and the
National Association of Chain Drug Stores (NACDS) cooperated to tag, ship,
receive, handle and trace nearly 13,500 prescription drug bottles.

Improving the Supply Chain

Optimizing the supply chain has always been one of the biggest challenges of
the Healthcare sector. It globally loses $2 bn due to overstock and expiry. RFID
helps in optimizing supply chain which would enable to achieve 30% stock
reduction, 30% increase in value added time and 7% reduction in supply chain
costs.

It also helps in FIFO management, recalls of expired drugs,
real-time tracking of expensive and critical instruments, restrict the access of
drugs to authorized staff, accurate matching of test specimens to the patients,
reduction in medical errors.

RFID Deployment in India

Since India has positioned itself as a major supplier of pharma drugs,
Indian companies need to initiate deployment of EPC/ RFID technology by
understanding the technology, running pilots etc well before it becomes a
mandate.

Within India, Ranbaxy has become the first company to affix
EPC/RFID tags in response to Wal-Mart directive effective from January 1, 2005.

Also, Dr Reddy's is looking at using RFID tags domestically
although it is already using the technology on a trail basis for what it sells
in North America.

Recently, Bartronics, a Hyderabad based company that vends RFID
tags in India also announced that it has signed deals with 4 pharma companies
ready to implement it on a project basis and is in talks with 9 others.

Ravi Mathur

The Author is CEO, GS1 India