Pharma RFID  Rolls Out

California is the new frontier in electronic pedigrees

by Stephen Barlas

There is another gold rush in California, but this time the prospectors are ’09ers — as in 2009 — and they aren’t panning for chips; instead, they are bringing their own chips, in the form of RFID tags, which they hope will win them a lucrative share of the Golden State pharmaceutical market. That is because California’s 2009 ePedigree mandate for all drug packages coming into the state explicitly requires package serialization. That can be done with either a 2D or RSS barcode, or via a radiofrequency identification (RFID) tag underneath the label on the drug container or embedded in the package.

However, while 96-bit serial numbers can be added to barcodes, nearly everyone agrees companies will use RFID tags to meet the California requirement. That is because wholesalers and distributors say they will not handle cartons going into California which contain individual containers with barcodes; it would be much too expensive for them to have to open the cartons one-by-one and read each barcode.

Paul Fowler, Axway’s vice president of healthcare strategy, said, “California is pushing very, very hard, and it will be the test case for whether RFID gets launched in U.S.”

Paul Chang, RFID/Pharma executive, IBM Software Group, added that every drug company that is mid-sized and larger will be working to put RFID tags on at least one SKU by mid-2008.

Shay Reid, vice president of integrated solutions at AmerisourceBergen, remarked that California’s ePedigree mandate is important not just because of the item-level serialization requirement, but because it does not prescribe the kind of technology wholesalers and manufacturers will have to use, as is the case in Florida, which requires more limited drug container information. “The system we built for Florida is not scalable nationally, because the technology was prescribed,” he explained. “We will be able to use our California system in every other state.”

The prospecting for market share gold in California has already begun. AmerisourceBergen will be running a trial out of its Sacramento distribution center starting in May. As opposed to Cardinal’s pilot completed last November, which had both successes and failures, AmerisourceBergen will read item-level tags already applied to labels on product sent to its distribution center by 10-20 manufacturers whose identities Mr. Reid declined to disclose.

In its test, Cardinal applied UHF Gen2 tags on its own packaging line on products supplied by a heretofore unidentified manufacturer, and encoded them with EPC data. Read rates were good in some places, but not so good with regard to item-level reads when product was inside cartons placed on pallets. Julie Kuhn, vice president of operation technologies for Cardinal Health, pointed out that a big plus from the pilot was the fact the packaging line did not have to be modified very much — there is a hardware investment, of course — to accommodate tagging and encoding of product. Nor did the packaging line speed have to decrease.

Amerisource Bergen will be testing both 13.56 MHz high-frequency item-level tags and 915 UHF Gen2 UHF tags. Mr. Reid said the debate over whether HF or Gen2 UHF tags are best for item level tagging still rages on, despite what were high 90% read rates found by Cardinal when it applied the Gen2 tags on its packaging line. “Cardinal is pretty adamant that UHF is the technology,” Mr. Reid said. “We don’t have the same view necessarily.”

The pro-HF forces got something of a boost in March when TAGSYS announced it was offering pharmaceutical manufacturers a “Six Sigma” guarantee on read rates for HF tags applied on the packaging line. TAGSYS has teamed up with a group of its regular suppliers who include ODIN Technologies, SYSTECH International, West Pharmaceutical Services, NXP and Alcan Pharmaceutical Plastics.

John Jordon, president of worldwide field operations for TAGSYS RFID, said the guarantee is based on actual results TAGSYS has achieved for one of its clients, whom he declined to identify. He emphasized those results have been achieved in a production environment, not a test or pilot environment. Mr. Jordon noted that Cardinal, using the UHF Gen2 item-level tags, got read rates for two different products on the packaging line of 97.7% and 94.8%, which Cardinal called “highly reliable.”

“We are guaranteeing 99.5%, or five or less failures in 1000 packages tagged at the first quality control point. We then guarantee no more than five in 10,000 failures on the case consolidation and six sigma coming off the manufacturing line and into the client’s own distribution center,” Mr. Jordon explained. “That is dramatically better than anyone has seen.”

He added, “People are throwing a lot of noise up in the air on UHF at item level. It won’t be proven to the same level as this offer in an operating environment for at least two years.”

The pro-UHF forces contest that view. Vince Moretti, vice president of RFID systems, Impinj, said Cardinal was using off-the-shelf readers and antennas when it did its pilot. “Their tagging was not optimized for item level,” he commented. “It was a first cut, and they did pretty well. But there have been a lot of advances since.” Impinj has teamed with Owens-Illinois — RFID supplier-teaming is apparently becoming popular — to offer UHF Gen2 inlays which Mr. Moretti says will have higher read rates on the packaging line than Cardinal’s tags. That is because Impinj is using near-field reader antennas, which maximize power delivery to tags at short range.

Brian Chisholm, new product development engineer at Owens-Illinois, emphasized that the Impinj-OI team can guarantee six sigma rates, too, just as TAGSYS does.

The Impinj/OI guarantee covers outgoing shipments of live tags. “We plan to test every bottle that comes off the molder to ensure that it is live before we ship it,” explained Mr. Chisholm. He points out that because containers are supplied to drug manufacturers with the RFID inlay already encoded and embedded in the bottle (as opposed to the manufacturer having to put the inlay behind the label and write to it as the bottle moves through the packaging line), the tags are more secure and have a more consistent orientation.

Read rates aside, Mr. Moretti underlined the advantage UHF item level chips have on packaging line speed. Companies encoding HF item-level tags on packages cannot run the packaging line at speeds over 120 bottles per minute. The HF protocol simply cannot accommodate a higher speed, he argued. A company could split the line, but that is very expensive and invasive. In contrast, a UHF packaging line can run at 250 bottles a minute.

That may be true. But one industry insider, who does not wish to be identified, argued that comparing UHF Gen2 tags with Gen 1 HF tags, which have more memory and features, is comparing apples and oranges. He says that HF tags that use the current NXP ICODE can run at line speeds higher than 120 bottles per minute. “Additionally, Pfizer, GSK and Wyeth are all moving to NXP ICODE UID OTP,” he said. “This tag has a tag singulation rate five times greater than the current ICODE products being used by Pfizer and others and will allow line speed rates to increase significantly.” He added that the HF Gen 2 standard, which is currently being vetted by EPCGlobal, will allow for the same packaging line production improvements as UHF Gen 2 did, “but NXP ICODE UID OTP will be a solid bridge until these products become available sometime in 2008.”

Aside from what are anywhere from minimal to major packaging line speed and readability advantages, the UHF Gen 2 inlays are about two-thirds cheaper than HF inlays. That is because the HF tags require a multi-layer antenna, which is more complex than a UHF tag design.

But while the debate over read rates on the packaging line continues to rage, an equally significant question concerns read rates of packages on pallets, especially given the needs of wholesalers and distributors who will have to work in California’s hothouse ePedigree climate. Certainly Cardinal’s test showed there were significant problems with regard to pallet reads. Read rate percentages for the two products when they were in cartons on pallets ready to leave the packaging facility were 9.2 and 14.3. The read rates when those pallets arrived at the distribution center were 7.8 and 9.5.

Of course, Cardinal is working hard to increase those rates. Cardinal’s Ms. Kuhn said the company used 10 different “read points” in its pilot, just to get data in order to determine which of those points work best, and ought to become the standard portals for pallets. “We found out that we don’t need a read point at the shrink wrap station and don’t necessarily need one at the dock door,” she explained.

While California’s ePedigree requirement is the major topic of discussion among drug manufacturers and wholesalers with regard to RFID implementation, it is not the only one. The FDA announced last summer that as of December 1, 2006 all secondary wholesalers who are not “authorized distributors of record (ADR)” (meaning they did not have an “ongoing relationship” with a given manufacturer) would have to provide a statement of origin (also known as a pedigree) to each customer in the distribution chain. In laying down that edict, the FDA was essentially throwing up its hands in frustration with the fact that drug manufacturers have been too slow to move into RFID, which the FDA sees as the answer to combating drug counterfeiting. The agency had the authority under the Prescription Drug Marketing Act to require pedigrees but had held off doing so for five years, waiting for the era of RFID to arrive. The December 1, 2006 dictate said that the secondary wholesaler could supply a paper or electronic pedigree; serialization was not required. But it was a national dictate.

Except that a group of secondary wholesalers went to court in NY State and convinced Federal Judge Joanna Seybert to issue a preliminary injunction forbidding the FDA from requiring certain information be included in a pedigree. The court’s order enjoins FDA from requiring a pedigree to identify each prior sale, purchase, or trade of a drug back to the drug’s original manufacturer, or from specifying the different type of information, including lot numbers, dosage, container size, or number of containers on a pedigree.

What this means is that non-ADRs across the country do have to supply pedigrees tracking back the product to the manufacturer or the last authorized distributor that handled the drugs. All pedigrees also have to include the dates of the listed transactions and the names and addresses of all parties to those transactions.

Crystal Rice, an FDA spokeswoman, declines to discuss what the FDA is thinking about doing vis-a-vis pedigrees in the wake of the New York Court decision. However, the agency apparently has something else cooking which could have a major impact on RFID adoption. That would be the upcoming Federal Register notice asking for industry’s thoughts on the barcode requirement for drugs going to hospitals, a mandate which went into effect in April 2006. Companies must now include the National Drug Code (NDC) number in a linear barcode on each drug package going to a hospital, with some exceptions. When the agency issued a compliance guide to explain the specifics of the final rule’s requirements, it admitted that some companies had asked the agency for permission to use RFID to encode the NDC number on the item package. The agency said “no” but added companies could use RFID to encode the lot number and expiration date. But with the California mandate on the horizon — remember, wholesalers say barcodes on packages will be a “no-no” — the FDA may be considering allowing companies to put the NDC on the RFID tag, too, eliminating the need for a barcode on the drug package. When it issued a revision of its hospital barcode compliance guide in October 2006, the FDA said, “We will consider revising the rule to accommodate new technologies and may begin examining other automatic identification technologies. . .” That apparently is about to happen. The serial number required by California could probably be linked via software to the NDC code number. The impetus for this reconsideration is the fact that the earlier compliance guide expires on December 1, 2007, and the FDA has to get the lead out if it intends to have a revised compliance guide in place by then.

There is a second political development in the offing which, too, may force the FDA to take another step on RFID and drugs. That is congressional legislation allowing wholesalers to import pharmaceuticals from Canada, Europe and other developed countries. Legislation to that effect floundered in past Republican-controlled Congresses. And while a veto still hangs over that bill, the Democratic Congress, with some support from Republicans, apparently has more than enough votes to override a presidential veto in 2007.

The reason drug importation legislation would undoubtedly spur RFID adoption in the pharmaceutical industry — beyond the California stimulus — is that the Pharmaceutical Market Access and Drug Safety Act of 2007 specifies than any wholesaler who wants to be registered by the FDA to import drugs — either from U.S. manufacturing facilities abroad, or from foreign company facilities — would have to identify the chain of custody of the drug “throughout the wholesale distribution of the drug to a pharmacist who intends to sell the drug at retail. . .” That can be done via standardized anti-counterfeiting or track and trace technologies, which would employ a standardized numerical identifier “unique to each package of such drug,” which parallels the California ePedigree requirement. But the bill goes further. In addition to that technology, the package must have overt optically variable counterfeit-resistant technologies that meet a number of specified requirements.

Barbara Brungess, director, corporate & investor relations at AmerisourceBergen, notes that the major drug wholesalers oppose drug reimportation. She also wonders whether European countries, which subsidize the low selling prices of pharmaceuticals manufactured there, will just allow those cheaper drugs to be exported to the U.S. “Those countries could certainly put up barriers,” she explained.

Stephen Barlas is a freelance writer based in Arlington, VA.