Can RFID Tags Give Generics Companies An Edge?

Fresenius Kabi’s decision to add radio frequency-identification (RFID) tags to 24 products used in hospital operating rooms will help the company’s hospital pharmacy customers reduce waste, increase efficiencies and facilitate tighter medication inventory control, executives told In Vivo. COVID-19-related revenue losses may push more hospitals to adopt automated RFID medication management systems to save time and reduce labor costs.

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US hospitals and health systems are a critical customer segment for biopharma companies. But the costs of purchasing specialty products, such as orphan drugs and immunosuppressants, as well as drug shortages and price increases among certain generic products – prior to the COVID-19 pandemic – led one in four hospitals to cut staff between 2015 and 2017, according to a 2019 American Hospital Association (AHA) survey. In 2020, COVID-19 created new havoc on hospital and health system budgets; during the four-month period between March 1 and June 30, American hospitals and health systems lost a total of $202.6bn in revenues, or over $50bn per month, according the AHA. Like many business sectors, hospitals, with decreases in elective procedures and new spending on personal protective equipment, are feeling the pinch.

In many hospitals, medication management, or the process of documenting and tracking drugs and medical supplies from wholesaler delivery, to stocking and inventory, to physician or patient use, is an area where substantial amounts of money can be saved through automation and better inventory controls, according to Gordon Krass, CEO of Intelliguard, a California-based pharmacy automation vendor focused on radio-frequency identification (RFID) use in the hospital supply chain. In the retail goods sector, for example, “Macy’s can tell you the pedigree of a belt from the time it was manufactured, through distribution, through big box store, all the way to the shelf it’s on until someone buys it and walks out of the store,” said Krass. “But hospitals can’t find a $20,000 medication in their facility.”

Most Hospitals Not Using RFID Tracking

Despite higher adoption rates of RFID technology in other industry sectors, just 10% of US hospitals and health systems are currently using RFID product tags for medication management. RFID technology – which gave rise to the concept and phrase “Internet of Things” or IoT – has been available for two decades, and despite periodic bursts of enthusiasm and growing adoption rates scattered across industry sectors like retail and aerospace, adoption among drugmakers and hospital supply chains has lagged. “I’m finding that hospitals don’t invest, they’re still dealing with legacy [pharmacy] systems that have been in place for 30 or 40 years,” said Krass. “They have inventory tracking systems, but they are predominantly manual, predominantly paper-based, and the average accuracy for [hospital] inventory sits around 60% to 65%. I don’t know many businesses that can survive with those levels of inventory accuracy.”

The 10% or roughly 600 US hospitals that currently use RFID tracking systems are adding the tags to drugs and medical products themselves, after the products have been delivered. Hospitals purchase the tags from a vendor, and must install an RFID scanning and tracking system, and absorb the labor costs associated with sticking the tags onto pre-filled syringes, vials and other products they want to track automatically, which can mean sticking tags onto thousands of products each week. “That’s a time consuming and tedious process … hospital customers really want that waste removed from the process,” said Gwen Volpe, director of medication technology at Fresenius Kabi, one of the 10 largest generic products manufacturers and provider of clinical nutrition products and medical devices.

In September, Fresenius began adding RFID tags to individual pre-filled syringes of Diprivan (propofol), an anesthetic used in the operating room during surgery. Through a partnership with Intelliguard, the company plans to add RFID tags to 24 products by the end of 2021. The move makes Fresenius “the first pharma company to pre-tag and encode medication identification data onto that RFID tag,” prior to hospital delivery, said Volpe.

The 24 products selected by Fresenius for RFID tagging are all used in the operating room. “The operating room is one of the few places where an anesthesiologist orders, dispenses and administers a product,” said Matt Farley, senior manager, medication technology and analytics, at Fresenius. “Unlike other areas of the hospital, where [that process] would be broken up between a physician, a nurse and a pharmacist, it’s all happening at once. The [stock] replenishment and dispensing model is a little bit different, and it lends itself well to a tracing system.”

One benefit of RFID tags over barcode scanning, explained Volpe, was speed. Barcodes require a “line-of-sight” scan, meaning a scanner must be pointed at a barcode to read it. RFID tags, by comparison, are recognized automatically by radiofrequency readers using “over-the-air” protocols, without the need for individual line-of-sight product scanning. “Anesthesiologists have a unique workflow, every second counts, and barcode scanning takes extra steps. RFID enables the ability to select and immediately put the product to use, without a barcode scan, so they can use the medication much more quickly.”

Fresenius’s pre-tagged products could also prevent mistakes, said Farley. “I know from my background as an informatics pharmacist that any time you open up a scenario where someone has to manually associate information with something” – such as hospitals sticking their own labels on products, or keeping track of supplies on paper – “it causes a potential for error.” The RFID tags used by Fresenius contain “all the information that pharmacists care about,” including NDC number, lot, expiration date and serial number, said Farley.

‘Nominal’ Cost Difference

Different types of RFID tags are available for different use cases, and different price points. The Fresenius RFID tags are RAIN ultra high frequency (UHF) RFID tags. RAIN is a patented term, like Wi-Fi or Bluetooth, referring to the RAIN (RAdio-frequency IdentificatioN) Alliance, a group that certifies passive UHF RFID tags and software protocols. Passive RFID tags are not battery powered and don’t actively transmit, but are instead activated by the RFID reader.

Asked about the extra product costs associated with adding RFID tags, executives at Fresenius said ongoing group purchasing organization (GPO) contracts made it difficult to estimate the extra cost per product for RFID tagging. “It will be a nominal increase, and we feel that the value of what we’re bringing outweighs what [hospitals] are doing today,” said Farley. RFID tags may cost about 5 to 7 cents extra per product. Fresenius will continue to offer the same product portfolio with barcodes, for customers that are not using RFID tracking systems.

“It’s cheaper for the hospital to buy products with the [RFID] smart label already there, because it reduces their labor,” said Intelliguard CEO Krass. “This is important in the context of COVID-19, which has really exposed supply chain issues around medications and labor issues. Hospitals are under a crunch to make sure they have inventory managed well, particularly critical medications and controlled substances, and they don’t have the labor component they used to have.”

Krass said Intelliguard also provides RFID tagging for vendor managed inventory, typically for pharmaceutical specialty distributor clients using RFID tags for consignment. “They are using our [RFID enabled] cabinets for high-valued items, things that tend to be very expensive to inventory. All those products have expiration dates, so they are better managed on a consignment basis. Our technology allows the pharmacist or clinician to badge in, open a cabinet, take out what they want, close the door, and then the inventory and replenishment is fully automated.”

With Fresenius, RFID tags “give them a point of differentiation in a market that’s hard to differentiate,” said Krass. In hospitals with RFID capability, tagged products are tracked at arrival in the pharmacy, when placed in a hospital kit and tray, and when used in an operating room. “We take that data and put it into the electronic health record, so we know which anesthesiologist administered it to which patient, for what case, and all of that data is put into an analytics engine, and made available back to the manufacturer. That's a significant advantage,” said Krass.

Data Standards, DSCSA And Barcodes

Fresenius’s RFID tags follow GS1 global open technology independent standards, a set of standards defined by three pillars:

1. identification, including product and location identification

2. data capture, and the type of barcode used

3. data sharing between trading partners

The pharma industry is moving to “Electronic Product Code Information Services, or EPCIS, which allows you to share event data for things that occur throughout the supply chain,” said Peter Sturtevant, senior director, community engagement, pharmaceuticals, at GS1 US, a nonprofit organization that develops and maintains global standards for business communications. Sturtevant added that the US FDA’s Drug Supply Chain Security Act (DSCSA) catalyzed biopharma adoption of EPCIS for compliance.

The DSCSA requires a two-dimensional (2D) barcode, which is what biopharmaceutical companies are now using, but it also allows for the use of “other technologies” to track product movement. A recent pilot program conducted by the FDA, Sandoz and Kit Check, which tested the use of products affixed with 2D barcodes and RFID tags, found that the combined tags reduced identification errors and made it easier to match shipping boxes with a master data log, among other benefits. (Also see "RFID Tags Found To Improve Drug Supply Chain Tracking In Recent DSCSA Pilot" - Pink Sheet, 7 Aug, 2020.) Fresenius is not using RFID tags to track products through its own supply chain, prior to hospital delivery, said Jeanne Sirovatka, director, continuous improvement and serialization, at Fresenius. “As growth happens with the use of RFID tags, you could track it through the supply chain. But the growth has to reach that critical inflection point [across the supply chain] to make that a common occurrence.”

RFID in the context of GS1 global standards “includes a globally unique identification that matches the same on-pack data you see in terms of the batch lots, expiration dates, serial numbers, and you can go through the elements and match the products with the information,” said Jonathan Gregory, director, industry engagement, at GS1 US. “It's another form of authentication and a way of seeing where the product has been over its lifecycle.”

RFID tags were more likely to compliment the use of barcodes, not replace them, said Gregory. Line-of-sight scanning has its place, for example, if someone wants to identify, scan and account for one single object at a time. “If someone is looking at an object and wants to scan it , great, go ahead and do that, now you've identified that secure item,” said Gregory. “But if someone wants to read all of the items, all of the vials in a package, all of the items in the refrigerator, that can happen very quickly with a semi-automated process. You could have two employees walk around a store and quickly scan 100,000 items, with a 99.94% read rate, for example, or you could use the RFID reader to act kind of like a Geiger counter, to look for an expired product, or a close to expiring product, by searching electronically over the air using a reader device with a radio signal.”

Whether more hospitals, pharmacies and parts of the drug supply chain adopt RFID tracking systems, or how fast they adopt that infrastructure, is an open question. “That’s part of the chicken and the egg conversation, and why it’s not necessarily the norm yet,” said Gregory. “With new technology, you always have these tipping points.” One tipping point could be when biopharma companies decide to RFID tag all of their products, which could lead to greater adoption of RFID infrastructure in hospitals. With consumer retail products like apparel, where RFID usage is widely used, the market is more segmented, and one brand doesn’t sell to every single retailer. “But in Fresenius’s case, they sell to a large number of hospitals, so that is a different business dynamic,” noted Gregory.