In 2003, Paul Chang noticed a series of Washington Post articles about counterfeit drugs entering the convoluted US pharmaceutical supply chain. As he began to think about how RFID
could reveal illicit points of entry for counterfeit medications, he learned more about the industry's complicated pricing
schemes, distinct distribution channels, and poorly monitored chargeback procedures.What he realized: RFID could drive business
value even as it combatted counterfeiting. Chang began talking to FDA about RFID, and has been actively discussing anti-counterfeiting
initiatives with the agency ever since.
Pharm Exec: You've spent a lot of time talking to FDA. What problems will RFID solve for the agency that, say, barcodes won't?
Paul Chang: The primary concern of FDA is to promote unique serialization, which means that every bottle of medication should have a
unique ID number to identify it. The problem with barcode is that it's too easy to counterfeit. Counterfeiters can already
mimic the bottle, the pills, the cap, the filling system, and the label. So for them to counterfeit a barcode would be fairly
easy, right? They merely scan and print, and they can counterfeit. And then if the data carrier for that unique ID is counterfeited,
the system reading the barcodes won't know the difference.
And RFID can't be counterfeited?
RFID has some inherent features that make it very, very challenging to counterfeit. The memory chip itself has a unique number
that the manufacturer burns in at the silicon foundry. Let's assume Philips processes a wafer and creates 10,000 chips. For
each chip, they burn in a unique number, like ABCD. Later, the drug manufacturer writes an electronic product code (EPC),
another unique number on that chip. Let's say that number is 1234. So the chip's number reads "ABCD1234."
When a counterfeiter buys RFID tags, they can write the EPC, 1234, on a chip. But what they cannot do is replicate the foundry
number, ABCD. So by matching those two numbers, you've created a unique number in the supply chain. The manufacturer has
a record of the EPC number and its matching serial number for every bottle of medication, so when someone in the supply chain
reads the RFID tag, it would ping back to the manufacturer's database. They would realize, "Hey, 1234 should have been written
on the ABCD chip, but this one says EFGH."
This sounds like a very expensive system.
It depends on what you mean by expensive. Actually, RFID is expensive to apply but cheap to read, and barcode is cheap to
apply but expensive to read. The RFID tags have inherent costs. Let's say it's 20 cents a tag. Barcode is pretty much free—one
or two cents. But barcode forces all of the supply-chain partners to have line-of-sight readers and read bottles one at a
time, which is expensive.
The big-three wholesalers are moving about 2.5 million bottles a day through the supply chain. That would be a significant
burden if they had to read every bottle with line of sight. With RFID, they can take cases of bottles and just run them through
a tunnel. They get over 99-percent accurate reads from all of the individual bottles in a matter of seconds. So barcode, while
it costs only two cents to apply, could cost many dollars downstream because people have to manually read the tags. RFID might
cost 20 cents now, but there's virtually no cost downstream to read the events.
The FDA's anti-counterfeiting program is the main driver now, but are there other supply-chain benefits for pharma?