As hospitals get comfortable with the idea of bar-coding at the bedside, a long-awaited study has made a compelling business case for next-generation technology: electronic product codes with radio-frequency identification tags.
RFID is the modern technology that allows cars to zip through toll plazas-chips that are embedded in products and emit radio signals so that they can be tracked. When embedded in drugs, the benefits of EPC/RFID outweigh the costs, potentially saving pharmaceutical manufacturers as much as $1 billion and healthcare distributors as much as $400 million annually, according to the study released by the Healthcare Distribution Management Association's Healthcare Foundation last week. The report, conducted by A.T. Kearney and sponsored by Pfizer and six Johnson & Johnson companies, found an additional $400 million could be saved in the avoidance of counterfeit drugs.
Innovators such as Wal-Mart and the U.S. Defense Department are adopting the technology and alerting top suppliers that RFID tags will soon be a requirement for doing business with them. Far behind, hospitals are just now facing the reality that the Food and Drug Administration expects bar-coding to be at the patient's bedside by Jan. 1, 2007. That raises the question whether it might be more practical to leapfrog over the older technology directly to RFID. Nevertheless, all three major pharmaceutical distributors are heavily invested in bringing bar-code technology to patients' bedsides (July 12, p. 38).
Though the cost benefits are striking at the manufacturing and distribution levels, the study did not drill down to the hospital level. "Bar-coding will be around for quite some time, especially at the unit-dose and patient point-of-care level," said Tracy Casteuble, vice president of research and information for the Healthcare Distribution Management Association and executive director of the group's Healthcare Foundation. "For the near to medium term, (bar-coding and RFID) are going to coexist in some fashion for quite some time."
At the same time, the distribution industry recognizes RFID "as the best safeguard in the system to make (the drug distribution system) as secure as possible," Casteuble said.
Most of the benefits of EPC/RFID adoption are accomplished in securing the supply chain, improved accounting accuracy, and greater warehouse and inventory efficiency, the study found. The benefits increase as more products are tagged at the unit-of-sale level.
The report found that startup costs for adopting the technology, including hardware, tags and software, are as much as $20 million for both large manufacturers and distributors. High-priced prescription drugs that are at a greater risk of being counterfeited should be tagged first, followed by drugs with high-to-medium dollar values and drugs with special handling needs.