Thought Leader: Paul Chang, IBM - Pharmaceutical Executive


Thought Leader: Paul Chang, IBM
RFID technology promises to help FDA stem the tide of phony medicines. But that's just the beginning. It's also a great supply-chain management tool.

Pharmaceutical Executive

The same with expirations. Once the RFID system provides some downstream visibility, everyone in the supply chain can do a better job of tracking the expiration dates of individual bottles. Let's say there's a bottle of medicine that's going to expire and a pharmacy wants to send it back. Well, did they buy it directly from the manufacturer? Or did they buy it from a wholesaler? If they send it all back to the manufacturer or all to the wholesaler, people would have to process returns on products that they never sold in the first place. RFID tags would end the confusion.

At the moment, distributors don't just make money selling the product downstream at a profit, they also sell data about their customers upstream to the manufacturer. Wouldn't RFID cut off this income stream if a manufacturer required wholesalers to open up their RFID records?

I don't think so. Wholesalers and retailers are customers of the manufacturers. So I think the business arrangement is more complicated than just asking them to open up the data stream for manufacturers. What I like to say is that RFID infrastructure will allow full visibility if the business arrangement calls for it. But my sense is that everyone may hold on to some piece of the data themselves and share other pieces of data. Just because the infrastructure is capable of doing it, I don't think that means that everyone's going to sign on and share all the data all the time.

But pharma tends to have a lot of patented products that retailers can't live without. Does the retailer have an argument against giving up the data?

I believe so. While I agree with you that manufacturers have a certain amount of leverage in the pharmaceutical industry, I think the retailer still has the human interface with the consumers. So I don't think the manufacturer can just mandate data sharing.

IBM's primary interest is to promote standards-based infrastructure and data sharing so that members in the supply chain are capable of sharing data. With RFID, they can actually have a good business discussion about how to do that.

At this early stage, I think people are going to keep their existing business relationships intact but just get more granular data in real time and see how that changes the manufacturer's forecasting and planning, or inventory management. Or maybe manufacturers really will need the wholesalers and retailers to charge them less for data.

But every time the RFID reader reads a tag, that information registers on the mother database, right?

Not necessarily.

No, why not?

It doesn't always have to be registered on the mother database. Generally speaking, the data within an enterprise are held by that enterprise. When the wholesaler chooses to share with the manufacturer, that data stream has to be turned on by the wholesaler. Then the manufacturer is allowed to query into a wholesaler's database and see the transactions.

It looks like RFID might be good for business. But FDA is still the driver. Are there signs that FDA is committed to this technology?

I think the fact that the FDA commissioned an internal study to test RFID impact on biologic product is one indication. The FDA wouldn't be putting in all of that effort if they didn't think RFID was going to be a key technology enabler in potentially reducing counterfeit drugs. They're using their own scientists, spending their time to develop the protocol, and they're selecting some commercially available products. They're testing it, and they're going to provide the results to the industry. Which means the FDA to some degree is putting their neck on the line. It looks like a lot of work if they weren't going to really push for adoption of RFID technology.

Paul Chang is associate partner at IBM Business Consulting Services, where he leads the initiative in radio-frequency-identification (RFID) technology for life-sciences industries. He began thinking about possible applications for RFID in pharma's supply chain in 2003, when he worked for Mead Westvaco Intelligent Systems. Before joining IBM, he worked briefly for Texas Instruments. IBM calls him an "informal advisor" to FDA.


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