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Feature Articles : Nov 15, 2007 ( )
BioMarket Trends: Application of RFID Can Save Time and Money
Inventory Control in Manufacturing, Clinical Trials, and Sample Management Tops Use!--h2>
RFID (radio frequency identification) technologies are expected to have a big impact on health care in the very near future. Companies with RFID products are expected to earn over $18 billion in revenue by 2012, and it is estimated that $3 billion of that will originate from sales to the healthcare industry.
Given the high value RFID can offer an industry with highly valued and spread-out assets, it is expected that healthcare will be the best growth area for RFID. Much of this spending, however, will not be of direct interest to pharmaceutical manufacturers—the bulk of projects will be concentrated in areas like nursing homes with wander-free patient tracking systems or in hospitals for inventory and patient management.
Still, a critical application for RFID will be found in the biopharmaceutical industry. It can be conservatively estimated that there will be a $600 million market for RFID applications in pharma/biotech over the next five years, and that one-quarter of major biopharmaceutical companies will implement large-scale RFID projects. Those projects will likely be in three areas: inventory control, clinical trials, and sample management.
The main use of RFID in the biopharma industry will be in inventory control. Drugs change hands at least five times in the pharmaceutical supply chain—at several points in the manufacturing operation, the packaging operation, the distributors, and at retail pharmacies and hospitals. Each transaction carries a risk of counterfeiting, dilution, and diversion, which can lead to fatal ramifications such as improper doses, contamination, and incorrect ingredients. Counterfeiting activities may not be limited to small unorganized bodies; they may extend to companies with sophisticated manufacturing facilities as well.
Passive RFID tags, low-cost tags that do not contain batteries, can be applied to pharmaceutical packaging, enabling manufacturers and distributors to have their eyes and ears constantly on the product. An RFID-equipped manufacturing plant allows continuous viewing of products as they are packaged and sent down the assembly line. In addition, personnel at a distribution center can watch as the product inventory is depleted and order more on a just-in-time basis. Pfizer, GSK, Cephalon, Novartis, Purdue Pharma, and Abbott Labs have all used RFID in their manufacturing operations.
Another promising area for RFID is clinical trials where cost savings are magnified because of the overwhelming expense of trial execution. RFID, by reducing data errors and stock-outs, has the potential to reduce clinical trial duration by approximately 5%; since any time that can be cut off that trial saves almost $700,000 per day, savings can be substantial.
RFID can be used in two distinct areas of clinical trials. The most practical application and easiest to implement is the inventory control operation: tracking batches of materials and formulations, making sure the proper amount of materials is supplied, and ensuring that supplies are stored at the right temperature in a suitable environment.
The second aspect where RFID could play an even greater role is clinical. RFID tags placed on labels could record drugs and placebos given to trial participants and eventually track when drugs are taken. This is important because the time in which a drug is taken can make or break a clinical trial’s success. Currently, the downside to using RFID at the trial-participant level is that each subject needs a reader. As the price of readers moves downward this will become more feasible. (Readers have been reduced from over $1,000 to just about $200; further drops are expected.)
RFID technologies could have a positive impact on sample distribution as well. Distribution of samples has been estimated at $730 million annually for a large manufacturer. Once a sample leaves the sales rep’s hands and goes into a physician’s sample closet, most companies do not have an efficient way to track it. With most physicians’ offices limiting access to physicians and the sample closet, tracking what is in the closet is difficult.
A RFID reader in the sample closet would regularly report the contents of the closet and the type and quantity of tagged samples that have crossed the closet threshold. This data would feed into a database at the biopharma’s headquarters so that the company has knowledge of how rapidly specific samples are used. The savings the industry could gain from implementation of RFID for sample management and distribution are estimated at $12.7 billion.
Return on Investment
The return on investment with RFID is fairly easy to visualize. The system will initially cost anywhere from $10 to $15 million including readers, software, and implementation. Annual cost will likely start at $20–40 million depending on inventory size but will probably drop to $8–20 million annually as tag costs decline.
On the flip side, benefits from inventory control could be in the $20–55 million range each year for a large manufacturer. This relies on reasonable estimates of inventory lost, stolen, or overstocked, and excludes the possibility that RFID implementation could eliminate wide-scale theft, prevent inventory spoilage, or help to avoid a lawsuit or regulatory headache, events which might drive savings far beyond estimates.
There are several major vendors in RFID technologies including well-known names such as Microsoft, Cisco, and Texas Instruments. However, the demand would seem to presage more competition, and further cost reductions are expected as competition in the market increases and as demand makes economies of scale possible.
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