The biggest obstacle to the spread of RFID is not the cost of its tags but the cost of the infrastructure it requires, making it unattractive for distributors who usually have tiny profit margins, yet manufacturers are slowly changing this by making non-adoption a liability issue, John Jordon, Tagsys's president of US operations, told In-PharmaTechnologist.com at the Smart Labels Europe 2006 conference in London.
All the manufacturer has to do is put a tag on the drug's packaging and therefore has to worry only about the cost of the tag, whether it is 20 or 25 US cents, but manufacturers like McKesson and Cardinal, already operating under a tight economic model, have to consider the cost of implementation in terms of equipment and logistics throughout their part of their supply chain.
However, if a mistake occurs, and an RFID tag was available but not read, then the jury in a court takes note when a manufacturer points the finger to the distributor.
Although the US Food and Drug Administration (FDA) is now asking drugmakers for a pedigree, authorised distributors which get their medicines directly from the manufacturers are excluded from such requirements, leaving out companies such as McKesson and Cardinal.
Moreover, only few manufacturers, such as GlaxoSmithKline, Pfizer and PurduePharma, have adopted the technology, and even then only for particularly commercially successful and vulnerable products, such as Viagra, and only in just some markets.
"RFID offers help in reverse logistics and expiry date management, this is important in the US because most drugs go through three wholesalers, so they have to be repackaged and reauthanticated," Jordon said.
"In Europe, they look at barcodes as the way to go in pharmaceuticals, and adopt RFID slowly in healthcare, but who knows, maybe they are the smart guys waiting for the US to solve the problems of implementation and cost before they join the bandwagon."
Of course, two-dimensional barcodes do not scale like RFID that can scan a thousand tags at the blink of an eye.
In addition, more and more drugmakers are managing to use RFID in packaging at line speed and, by looking at the Electronic Product Code (EPC) numerology, companies like Pfizer have managed to deal with privacy concerns that can arise when an unauthorised RFID reader is used to identify the medicines someone uses.
"There is no chip standard in the numbering, however a solution is now possible in every line speed," Jordon said.
"Also the debate about UHF and HF appears to be over when it comes to RFID in pharmaceuticals, UHF is accepted at case level and HF is expected at item level."
As many companies are currently subsidising UHF so it appears cheaper than HF, they do so by selling at negative gross margins and the costs of the two frequencies are in fact about the same.
Like the FM differs with the AM radio, HF operates within a defined boundary and is reliable, as opposed to UHF which can work at long distance but there are gaps in its coverage.
As the cost of tags is expected to further decrease over time, the biggest issue in RFID implementation now appears to be who pays for adoption throughout the supply chain.