samedan logo
home > pmps > summer 2015 > a clearer tomorrow
Pharmaceutical Manufacturing and Packing Sourcer

A Clearer Tomorrow

There is a critical need for major stakeholders within the drug distribution landscape to address supply chain integrity. While horizontal integration is marked by acquisitions across regions for market entry, the procurement of pharmacy chains for market expansion is indicative of the level of vertical integration within the industry.

There is significant pressure on pharmaceutical manufacturers and distributors to intervene and prevent counterfeits from entering the supply chain. According to the FDA, around 10% of medicines consumed – in both developed and developing markets – are counterfeit drugs spawned from the pharma supply chain. The WHO estimates that worldwide sales of counterfeit drugs stand at around $75 billion. Not only does this have serious consequences for patient safety, it also results in losses for pharmaceutical manufacturers. Additional costs incurred are associated with the investigation of drugs and product recalls, not to mention the price of restoring a brand’s tarnished reputation.

To tackle these challenges, there is an urgent need for improved supply chain visibility. An injection of transparency would require a revamp of the orthodox pharma supply chain towards a direct-to-consumer model. In a traditional supply chain, distributors have a major role in dispensing medication; a direct-to-consumer model, on the other hand, stresses the vital role of pharmacies as drug distribution hubs.

In order to bypass the drug distributors and exercise more control over the supply chain, pharma companies will need to collaborate with a third-party logistics provider to enable them to supply its drugs directly to pharmacies. Integrated supply will induce a 30-50% cost reduction, and the importance of technology for supply chain management subsequently becomes more prominent than ever.

RFID Adoption

Increased concerns surrounding counterfeit drugs’ entry into the supply chain and the corresponding tightening of regulations – such as the US Federal Drug Supply Chain Security Act, implemented by the FDA, and the EU Good Manufacturing Practice and Good Distribution Practice – have resulted in pharma companies resorting to radio-frequency identification (RFID) to cope with the issues, with greater emphasis on the part to be played in tracking assets and optimising inventory management. But, despite this, the uptake of RFID in the pharma industry – in comparison to the healthcare market – remains marginal.

The reasoning behind this low-level adoption is attributed to the complexity of a supply chain comprising three major stakeholders: manufacturers (pharma companies and contract manufacturers); distributors (wholesale distributors and third-party suppliers); and dispensers (pharmacies, hospitals and general practitioners/clinics). There is a need for uniform implementation of RFID across this trio to supplement its full utilisation. At the same time, it is pivotal that all groups validate their RFID processes in line with current Good Manufacturing Practice, to ensure total accuracy.

Smart Cabinets

Within the pharma industry, RFID tags and smart cabinets are the two most commonly used applications, due to their ease of deployment and flexibility. RFID smart cabinet systems are used for itemised real-time tracking at both the intermediate and final points of movement for drugs, medical equipment or supplies. However, smart cabinet usage is comparatively lower than RFID tags (by about 20%), the latter still being the preferred method for track and trace.

Nonetheless, these cabinet systems are increasingly being implemented in warehouse management and drug storage in a tamper-proof way to minimise the probability of counterfeits entering the supply chain. Furthermore, they can be installed to manage drugs at a particular temperature to maintain their quality. Over the next five years, the adoption of RFID smart cabinets in the pharma industry is expected to increase as the advantages are realised by its early benefactors.

In Practice

For tamper-proof storage of inventory in warehouses, there is a need for quicker identification and recording of products which must be individualised, irrespective of their huge size. Automation of the process can reduce errors caused by manual intervention to a great extent; RFID smart cabinets are fit for this purpose. Pharma companies want itemised tracking to ensure quality of supply – again, backing the likelihood of increased usage of this technology over the coming years. It is likely that there will also be specific demand for refrigerated/temperature-controlled smart cabinets for drug storage.

RFID is helping to manage counterfeits to a large extent, particularly by using packaging tags for track and trace, as well as to create a drug’s ePedigree. The FDA is encouraging a combined RFID-ePedigree approach to eliminate falsified medicines, as the technology can state a drug’s origin and movement throughout the supply chain – making it difficult to manipulate.

Pfizer, GlaxoSmithKline, Purdue Pharma and Johnson & Johnson have all taken steps to use RFID to make their supply chains anti-counterfeit. Pharma companies are also implementing a combination of smart cabinets and tags for improved supply chain visibility. With vendors showing its utility – achieving a return-on-investment within just a year or two of implementation – it is easy to see why businesses are beginning to take note of RFID smart cabinets as a means to fight counterfeit drugs.

Opportunities for Growth

RFID in the pharma industry is moving away from experimental projects and to large-scale commercial deployments. Though adoption rates have been relatively slow in contrast to their employment by other sectors, significant investments are being undertaken in this area. Cloud-based and software as a service-enabled RFID cabinet solutions with integrated analytics present an attractive opportunity that will become sought-after in the coming years. For instance, a sales representative logging into the cloud server to which an RFID smart cabinet is integrated will be able to do an inventory count and process orders for replenishment of drugs within a close to zero lead time.

The rising influence of mobile, near field communications and the Internet of Things on RFID smart cabinet solutions offer great market potential. The concept of hardware for smart cabinets will evolve going forward; it is likely to become more of a space (such as a room) that is integrated to the cloud, as opposed to a shelf-like structure. Drugs entering or leaving the RFID-enabled cloud system will be tracked, and the data analysed using smart interfaces accessed through mobile or web-based applications.

A direct knock-on effect of these technological advances on the market is that outright purchases of smart cabinets will significantly reduce, while virtual management – where RFID smart vendors integrate with pharmaceutical manufacturers – will emerge as the preferred business model.

Long-Term Promise

Positive outcomes from implementation of RFID smart cabinets have been demonstrated by several pharma vendors. Nevertheless, long-term adoption and large-scale deployments will be dependent on sustainable business models and require complete commitment from pharma companies, as well as cabinet manufacturers.


Kanavos P, Schurer W and Vogler S, The pharmaceutical distribution chain in the European Union: Structure and impact on pharmaceutical prices, 2011

Read full article from PDF >>

Rate this article You must be a member of the site to make a vote.  
Average rating:

There are no comments in regards to this article.

Shruthi Parakkal studied Electrical and Electronics Engineering at the University of Calicut. Following this, she attended the Amrita School of Business, gaining a Master's in Business Management. During her time at multinational firms Beroe Inc and Tata Consultancy Services, she worked on several consulting projects for pharma corporations in the area of active pharmaceutical ingredient sourcing. Shruthi is currently Senior Research Analyst for Frost & Sullivan and handles numerous aspects related to connected health. In this role, she provides industry insight on digital/information technology impacting the pharmaceutical, life sciences and healthcare sectors.
Shruthi Parakkal
Print this page
Send to a friend
Privacy statement
News and Press Releases

SICK Launches its IntegrationSpace Digital Services Platform

SICK has established a new web-based platform, SICK IntegrationSpace, to be the home for its growing data-based digital software and services portfolio. Seen as a key strategic development for the company, its aim is to align the operating efficiency goals of its customers in automated factory, process and logistics with enterprise-wide business improvement systems.
More info >>

White Papers

High-tech Packaging for High-tech Medicine

West Pharmaceutical Services, Inc.

As more biologics and biosimilars come on to the global pharmaceutical market, they can and will present unique packaging and containment challenges. For materials that are sensitive to glass or that may require larger-dose volumes or custom configurations, cyclic olefin polymers may offer a solution. These novel materials for drug container closure systems can provide a needed alternative to traditional glass containment systems for advanced therapeutics.
More info >>




©2000-2011 Samedan Ltd.
Add to favourites

Print this page

Send to a friend
Privacy statement