RFID Strategy -- Pharmaceutical E-Pedigree -- Biggest Supply Chain Topic of 2008

You may think that the importance of pharmaceutical e-pedigrees has withered away, but it should become one of the hottest topics this year. The term "e-pedigree," as used in the pharmaceutical industry, means an auditable electronic record of every step taken by a retail package of prescription drugs as it moves from the factory to the final point of sale. This chain-of-custody record will be used to assure the integrity and safety of the nation's drug supply.

In an earlier column, RFID Strategy -- Pharmaceutical E-Pedigrees and RFID, I explored some of the proposed RFID solutions to the e-pedigree problem. While the FDA's requirements in this area are still suspended due to a pending Federal lawsuit, the California e-pedigree laws remain on-track for a mandatory January 1st, 2009 compliance deadline. The ramifications of this law will make e-pedigree the major supply chain story throughout 2008.

The Current Situation

As it stands today, the law governing pharmaceutical pedigrees is a patchwork consisting of individual State laws and the Federal Prescription Drug Marketing Act of 1987 (the FDA's PDMA rules). State and Federal laws require wholesalers or distributors who engage in interstate commerce to provide auditable, paper-based chain-of-custody documentation as part of the sale of any pharmaceutical. The records include the quantity and manufacturing lot number of a particular pharmaceutical transaction, as well as such standard supply-chain information as purchase order number and advance shipping notice number (when available). Since paper-based records are cumbersome and subject to falsification, the Federal law proposed the development of a secure electronic version of the chain-of-custody requirement. This Federal e-pedigree system has been stalled by various technical and legal challenges.

Recognizing the benefit of an e-Pedigree, the State of Florida enacted its own electronic pedigree requirements in 2006. The Florida requirements duplicate the paper-based records within an EDI (electronic data interchange) transaction. This EDI solution, while an improvement over a paper-based system, has two weaknesses:

1. EDI data and transactions are not necessarily uniform across all suppliers, and
2. Data exchange rates, in practice, have been found to be slow.

Therefore, the Florida approach is at best an evolutionary step towards a full e-pedigree solution.

The State of California took a different approach to the e-pedigree problem. California is the first state to require manufacturers to create a unique serial number for each saleable unit within a manufacturing run. If you go to your local pharmacy today and look at a package of medication, you will typically see a lot number and expiration date stamped on the box or inner-pack. Beginning in January 1, 2009, each retail unit (box or inner-pack) of pharmaceuticals sold within the State of California will have its own serial number to distinguish it from others within the same manufacturing lot. This serial number will act as the key item of data to record each step in the chain of custody throughout the supply chain. Hence, the California e-pedigree requirements represent a change from the current paradigm of using lot, date, and purchase order information to track pharmaceutical sales. And given the size of the California market, these requirements will represent a de-facto national standard until the FDA is able to move forward with its own regulations.

Challenges of Serialization

Serialization represents an order-of-magnitude increase in the data handling requirements for an e-pedigree solution. Previously, a manufacturer or distributor could handle batch and date codes by the pallet-load, as is done in many industries outside of the pharmaceutical market. The new California requirements create a need to maintain data on every "each" sold from the point of manufacture onward. This drives a need for new systems and practices in the following areas:

• Creation of a serial numbering scheme suitable to the massive quantities of individual drugs sold by any given company (such numbers should be unique within the timespan of several years).
• Development of ways to capture the serial number data at each step in the supply chain where physical and legal custody of the drugs changes hands.
• Data handling modifications to existing corporate IT systems to record and manipulate the increased volume of serialized transaction data.

The California law allows for innovation because it does not stipulate the exact form of the electronic record or technologies used in the e-pedigree process. Therefore the pharmaceutical manufacturers and other companies have examined various technologies throughout 2006 and 2007 to get the job done. One obvious candidate for developing an e-pedigree solution is the technology infrastructure built up around the RFID retail supply chain industry. But this industry also faces the challenges of generating, capturing, and handling unique data on huge volumes of serialized units.

Specific Solution Paths

The EPCglobal organization has developed solutions to each of the challenges faced by the pharmaceutical industry. These solutions came together as the key information-system specifications were ratified in 2007. They are:

1. A scheme to provide for massive and unique item-level serialization in the form of a Global Trade Identification Number (GTIN) mapped into a 96-bit encodable EPC ID number.
2. The establishment of a global standard for XML-based item transactions, the EPCIS (EPCglobal Information Services standard).
3. The establishment of a specific pedigree standard to work within the EPC ID and EPCIS framework. This e-pedigree standard is the GS1 EPCglobal Electronic Pedigree Standard.

Still, these solutions leave open the question of how the data for each transaction will be captured. Although EPCglobal is most widely known for their promulgation of UHF RFID standards within the retail supply chain, the EPCIS and GS1 E-Pedigree Standards are not limited to using data solely from RFID tags. Pharmaceutical companies are free to use several methods of data capture and incorporate them into the e-pedigree record. These methods include:

• Standard linear barcodes
• 2-d barcodes (which allow for greater data density than linear barcodes)
• HF and UHF RFID transactions
• Manually-entered data

One advantage of the EPCIS standard is that it is designed for speedy transactions (under five seconds per record) using modern XML data exchange. This makes it more suitable to a unified national standard than previous EDI-based transactions. The EPCIS standard also allows backwards-compatibility with paper-based systems, since the existing paper chain-of-custody document can have its data converted into XML and then be scanned into a PDF image and embedded within the transaction message.

Throughout 2007, we saw national brand-name drug companies such as Pfizer announce RFID initiatives for flagship products. Other companies within the pharmaceutical industry are looking at various 2-d barcode methods to serialize less costly products. Finally, at the end of 2007, we saw the announcement of off-the-shelf e-pedigree solutions from a partnership including Hewlett Packard, Nosco, and Systech International. Look for more major product announcements as the 2008 trade show season ramps up.

Implications for the Rest of the Supply Chain

All of this activity within the pharmaceutical industry is driven by law. There is no question of looking for a business case or an ROI -- the companies must either comply or leave the California market by January 1, 2009. Although there are signs that the deadline may be pushed back, there are no guarantees that this will happen. Consequently, companies are scrambling to comply with the California law.

Smart companies, however, realize that the e-pedigree requirement pulls together all of the topics that we think of as modern supply chain best practices. These topics include visibility of the supply chain, velocity of data, and business intelligence to react to changes in demand. Companies that can use the e-pedigree process to improve their supply chain management will provide new sets of best practices for other industries to follow.

To provide just one example, consider the case of pharmaceutical recalls. Companies typically issue recalls for specific manufacturing lot numbers or date ranges. However, due to the paper-based nature of most recordkeeping in the current pharmaceutical supply chain, distributors usually just return their entire inventory of a given pharmaceutical in response to a recall notice. Given the stakes involved in a drug recall, companies have little choice but to accept this product from the distributor. This practice can lead to millions of dollars of unnecessary cost for drug manufacturers. If all parties throughout the supply chain share the same data and information-exchange capabilities, then the process of pharmaceutical recalls can be limited to the serialized product affected by the recall, thus saving millions of dollars.

Conclusion

Each piece of the e-pedigree problem has a solution with broad application beyond the pharmaceutical industry. All industries can benefit from technologies, standards, and best practices that increase the visibility, velocity, and demand planning accuracy within the supply chain. That's why I believe that that e-pedigree solutions will be the major supply chain topic of 2008.

Paul Faber is a Principal with Raleigh, N.C.-based Tompkins Associates, a supply-chain-solutions consulting firm. As the chief manager of RFID equipment implementation at Tompkins Emerging Technology Center, he possesses extensive experience in material handling solutions, systems integration, and installation. Faber has managed field integration and operations activities at material handling sites around the world.

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