RFID in the BioPharmaceutical Supply Chain

April 1, 2005
Mikael Ahlund, PhD

Volume 18, Issue 4

Mass serialization, or the ability to store a unique serial number for each item, is the most useful feature of RFID tags.

Pharmaceutical organizations, including the biopharm segment, have repeatedly learned that their very existence rides on safety concerns. Tracking products through the supply chain, from the shipping dock to the medicine cabinet would be desirable. There are good reasons to believe that radio frequency identification (RFID) technology is one of the most promising approaches to reliably authenticate, track, and trace pharmaceutical products.

Mikael Ahlund

We will cover three aspects of RFID solutions in this article: the drivers for adopting RFID, the state of adoption, and technology options. We will show that RFID can mitigate enterprise risk through tighter counterfeit and diversion controls, ensure compliance with electronic pedigree tracking and reporting requirements, and enable more efficient recalls.


The promise of a safer and more accountable supply chain combined with FDA support for the technology is driving the interest and demand for RFID in the pharmaceutical industry. Manufacturers, distributors, and dispensers are poised to take advantage of the technology's many benefits and are beginning to conduct pilot studies in their own organizations and as part of industry groups.

FDA is recommending widespread use of RFID in the pharmaceutical supply chain at the item level by 2007.1 FDA has a task force investigating methods to secure the pharmaceutical supply chain by examining new technologies incorporating RFID. Last November, FDA published a Compliance Policy Guide (CPG) for implementing RFID feasibility studies and pilot programs.2 The agency believes the CPG will clear the way for more pilot programs that involve RFID tagging.

One of the ways to start thinking about an investment in RFID is for risk mitigation, which can fall into a number of categories including: brand protection, compliance, recall and returns management, diversion control, re-importation control, and inventory visibility. Unless otherwise noted, the data used to support the benefits of RFID come from Reference 3, one of the most detailed studies to date on RFID in the pharmaceutical market.

Brand Protection. Counterfeit products, product tampering incidents, and product recalls can damage a company's reputation over a long period of time and affect market share. According to World Health Organization estimates, 5 to 8 percent of drugs worldwide are counterfeit, meaning that such drugs could represent from $7 billion to $26 billion of the $327 billion global market.4 In 2003, FDA had 23 cartons of counterfeit products after averaging five cartons per year in the late 1990s. Research from the University of Wisconsin suggests a loss in shareholder value after a drug recall is approximately 12 times the estimated total cost brought about through litigation, recall, or replacement. The impact on shareholder value could be as high as one to two percent. Based on a two percent annual risk for a company that manufactures high-risk drugs, A.T. Kearney estimates a yearly brand-protection benefit of RFID of $10 to 20 million.

Compliance. Although FDA has not mandated RFID, it is expected that it and other regulatory agencies will be a driving force behind implementation. The states are so concerned about counterfeit drugs entering the supply chain that some have implemented or are considering proposals that require all distributors to create a pedigree (in paper or electronic form) on all prescription drugs they handle. The costs to develop a paper-based system are substantial when compared with electronic systems. Paper records can easily be counterfeited, which means they are not an effective deterrent to prevent product tampering.

Recalls and Returns Management. Recalls of items tracked by RFID can be more targeted, resulting in less returned and wasted product. A.T. Kearney estimates the savings range to be from $50,000 to $100,000 per year per $10 billion in revenue. This estimate is based on manufacturers having 50 to 100 percent of tagging penetration at the item or unit level and also includes time saved on administering recalls and returns.

Control of Diversion and Re-importation. Authentication of products at the item level, and maintaining chain-of-custody information will reduce the number of diverted products and improve the ability to detect them in real time. In terms of re-importation of prescription drugs, RFID can address safety issues through the global tagging of pharmaceuticals. However, this will require international governmental cooperation to improve.

Inventory Visibility. RFID can improve inventory visibility and control by providing very accurate and streamlined information on inventory levels and location, inbound shipments, transfers, and replenishments, thereby reducing stock outs. A.T. Kearney's findings suggest that RFID can reduce distributor stock outs, thereby generating benefits of $800,000 to $1.5 million per year, per $10 billion in revenue. This estimate assumes a 93 percent fill rate, and that 1 in 20 stock outs result in a lost sale. The economic impact is calculated as a loss of gross margin contribution (estimated at 5 percent) on number of lost sales.

RFID has several advantages over bar codes (see box), a technology that initially triggered a revolution in automatic identification systems in a wide range of industries. Storage of re-programmable data on a silicon chip that can be accessed through a wireless interface is a robust solution for automatic identification systems. RFID can store 30 times more data than bar codes, allowing the tag to carry a range of real-time information about an item at multiple points in the supply chain.

Advantages of RFID Compared to Bar Codes


Early results from pilot studies are validating the benefits of RFID, which include making it easier to ensure the authenticity of a drug and creating an electronic pedigree (record) of the chain of custody from the point of manufacture to the point of dispensing. In one industry pilot that took place last year, several companies implemented RFID tags at manufacturing facilities on 13,500 packages of pharmaceuticals over an eight-week period in real-world supply chains.


These companies included representatives from the pharmaceutical manufacturing, wholesaler, and dispensing communities. The study found that the ability to provide continual real-time access to a tagged pedigree resulted in significantly improved visibility into where the product was at all times, and also enabled any missing product to be tracked down.

In 2005, a large systems integrator will be conducting a pilot RFID program with the goal of facilitating independent adoption of RFID for each participating company.6 The pilot will involve item- and case-level tagging of products as they move from manufacturer to wholesaler to retail pharmacy or the hospital, and the integration of RFID data into middleware solutions and systems applications such as WMS (warehouse management systems). Other goals of the pilot, expected to be completed before the end of the year, are to provide industry and government organizations with a reference design that can be easily scaled to commercial implementation, enable trading partners the ability to provide accurate and complete electronic pedigree in real-time, support anti-counterfeiting initiatives, and facilitate downstream inventory visibility.

In November 2004, several pharmaceutical manufacturers publicly announced RFID initiatives, including Pfizer, GlaxoSmithKline, and Purdue Pharma.7 Pfizer plans to place RFID tags on all bottles of Viagra sold in the US as early as this year. GlaxoSmithKline intends to begin using RFID tags in the next 12 to 18 months on at least one product deemed susceptible to counterfeiting. Purdue Pharma will tag bottles of OxyContin with RFID to make it easier to authenticate as well as track and trace.


In its most basic form, RFID uses a semiconductor (microchip) in a tag or label to store data. The data are transmitted from or written to the tag or label when it is exposed to radio waves (within a defined range) of the correct frequency and with the correct communications protocols.

The RFID reader broadcasts a radio signal through an antenna to a transponder (consisting of the aforementioned microchip and antenna), which receives the signal and is charged with enough energy to send back an identifying response. The reader sends the information or data to a computer system for collecting, logging, and processing.

RFID transponders are available in different types (active, passive, semi-active, and semi-passive); frequencies (low, high, and ultra-high) and form factors (pressure-sensitive labels, cards, or embedded into packaging or products). The transponder can be a read-only tag; a write once, read many (acronym: worm) tag that is field programmable, then locked; or a read and write tag that can be updated with new data many times. Readers and antennas can be stationary or handheld, weatherproof, or industrialized. There are readers that operate at multiple frequencies and antennas that are fixed or tunable.

The pharmaceutical industry is primarily interested in passive RFID technology in the high frequency (HF) and ultra-high frequency (UHF) ranges of the electromagnetic spectrum. Passive RFID does not contain a battery and is relatively low cost. Data can be read from passive chips in a range of distances from several inches to up to 30 ft (9 m).

RFID's Unique ID

Mass serialization, or the ability to store a unique serial number for each item is the most useful feature of RFID tags. It cannot be done on a bar code. The storage of data on an RFID tag can be segmented into different blocks or segments of memory — one is reserved for the unique identifier (UID) and one is reserved for the product manufacturer identification (PMID). This UID consists of a number that identifies the tag manufacturer and a number unique to the individual product. The PMID uniquely identifies the manufacturer of the product. These data are etched into the silicon and encrypted or locked at the point of manufacturing so they cannot be changed or cloned.

Combining the UID and PMID in a Public-key Infrastructure (PKI) security algorithm to create a tag-specific signature allows each tag to be digitally certified and positively authenticated via an authorized RFID encoder (RFID reader-writer) that is a part of an enterprise-wide network security architecture. The RFID chip's UID, PMID, and the digital certificate-enabled RFID tag operating within a PKI infrastructure authenticate a product and securely enable all pharmaceutical industry participants to conduct transactions in a safe and secure supply chain.

In a read-write chip, the re-programmability of the additional memory segments allows data to be written to and locked within the tag by pharmaceutical manufacturers (lot number, expiration date), wholesalers, and distributors (shipping and receiving), and dispensers (receiving and sales). RFID-based product information linked within a secure LAN and Intranet or Internet-based networking infrastructure provides an electronic chain of custody to authenticate and track products as they move throughout the supply chain.

As part of a layered approach to pharmaceutical security and authentication, other methods within a security value chain include inks, holograms, and watermarks that can be embedded into the labels as well as physical methods that can be used to secure the bottle or label which contains an RFID inlay (Figure 1).

Figure 1. Pharma Security Value Chain. The progression of security layers starts with the RF silicon chip, which then is incorporated into a label. The label can also have inks, watermarks, and holograms. The bottle can have a label outside and a chip embedded in the packaging. There is data and network level security in the IT system.

HF Versus UHF

Both HF and UHF frequencies have their advantages and disadvantages. Up until now, much of the focus has been on passive tags in the UHF band due to the Wal-Mart Stores, Inc.'s mandate for case and pallet-level supply chain tracking requiring the use of RFID UHF technology.

Standardization is part of technology. EPCglobal, Inc., is a not-for-profit standards organization entrusted with driving the global adoption of Electronic Product Code (EPC) technology. The EPCglobal Board of Governors ratified the first global UHF RFID specification, called EPC Generation 2, in December 2004.8,9 EPC Gen 2 is the next generation of UHF technology beyond proprietary UHF RFID protocols classified as Class 0 and Class 1.

EPC Gen 2 overcomes limitations of Classes 0 and 1, providing enhanced features and improved performance including robust operation in high-density reader environments, compliance with global spectrum regulations, superior tag throughput, field re-writeability, and enhanced security and privacy. Manufacturers are developing tag and reader technology based on the new standard.

In addition, EPCglobal, Inc. is now turning its attention to continuing development of existing EPC standards for HF-13.56 MHz technology. There are a number of other established global standards developed by ISO/IEC for HF item-level tracking, including ISO/IEC 18000-310 and ISO/IEC 15693.11

The user's choice of frequency depends on a number of factors including read-range, the type of material you are tagging, the environment surrounding the technology, the maturity of the technology, and a number of other issues. Due to its longer read-range, many consider UHF technology better suited for reading case and pallet tags from portal or conveyor antennas, while HF technology's shorter read-range allows for well-defined read zones that can better enable item-level applications.

In the pharmaceutical market, there is a strong business case for item-level RFID tagging due to the inherent concerns surrounding product and patient safety, as well as the higher value of products and margins relative to retail products. As reported in an RFID industry white paper,12 there are a number of technical and deployment characteristics including read-range, form factor, maturity, global standards, and worldwide frequency availability that make HF the most effective path with the lowest technical and business risk to achieving item-level identification and pedigree tracking. One technical problem, the current generation of tags is much larger than the average pill bottle. This is one reason industry pilots to date have focused on case tracking. RFID tag manufacturers are developing new sizes and form factors to address this.


For safety reasons, both industry and government organizations are driving the imperative that says it is time to act now on RFID. Over the next several years, RFID will be piloted and adopted by innovative pharmaceutical companies looking to improve their bottom line through the mitigation of enterprise risk. As part of the go-forward process, it is important to understand the product authentication ability of RFID within the pharmaceutical security value chain, which includes a layered approach to security.

Manufacturers, distributors, and dispensers can benefit, particularly at the item level. An electronic chain of custody will improve patient safety and protect the public by allowing wholesalers and retailers to rapidly pinpoint, quarantine, and report suspected counterfeit or diverted drugs, and conduct efficient, targeted recalls. The RFID industry — tag manufacturers, software providers, and systems integrators — are in place and ready to move your RFID initiative to the next level. ?

Mikael Ahlund, Ph. D. is director of RFID Healthcare at Texas Instruments Incorporated, 6550 Chase Oaks Blvd., Mail stop 8470, Plano TX 75023, 214.567.2411, fax 214.567.2492, mahlund@ti.com.


1. FDA. Combating Counterfeit Drugs. Rockville MD. 2004 February. Available at:


2. FDA. Radiofrequency Identification Feasibility Studies and Pilot Programs for Drugs; Guidance for FDA Staff and Industry; Compliance Policy Guides, Sec. 400.210. 2004 November. Available at: http://www.fda.gov/oc/initiatives/counterfeit/rfid_cpg.html.

3. Healthcare Foundation and A.T. Kearney. Adopting EPC in Healthcare: Costs and Benefits. Healthcare Distribution Management Association (HDMA). Reston VA 2004 November. Available at: web1.hdma.net/shop/index.htm.

4. International Chamber of Commerce. Fact Sheet. Business Action to Stop Counterfeiting and Piracy. Paris, France. 2004 February. Available at http://www.uscib.org/docs/BASCAP_factsheet.pdf.

5. Malykhina E. RFID Tests Are Positive For CVS And Pharmaceuticals. Information Week 2004 Sept 30. Available at: informationweek.com/story/showArticle.jhtml?articleID=48800464.

6. Proprietary information.

7. FDA commits to use of radio frequency identification (RFID) technology. Pharmaceutical News 2004 16 Nov. Available at www.news-medical.net/?id=6326.

8. Roberti M. EPCglobal Ratifies Gen 2 Standard. Rfid Journal 2004 Dec 16. Available at: www.rfidjournal.com/article/articleview/1293/1/1/

9. EPCglobal Inc. Fact sheet. Available at www.epcglobalinc.com

10. International Standards Organization. 18000 Part 3: Parameters for Air Interface Communications at 13.56 MHz 2004; Geneva Switzerland.

11. International Standards Organization. 15963 Information Technology - AIDC Techniques - RFID for Item Management - Unique Identification for RF Tag. 2001; Geneva Switzerland.

12. Philips Semiconductors, TAGSYS, and Texas Instruments. Item-Level Visibility In The Pharmaceutical Supply Chain: A Comparison of HF and UHF RFID Technologies. July 2004. Available at: http://www.ti.com/rfid/docs/manuals/whtPapers/jointPharma.pdf.