Back in a simpler era—2004, when the first reports came out from Project JumpStart, an effort to evaluate the costs and value of RFID tagging of pharmaceutical packages—Accenture (Chicago) played an active role in fostering a collaboration among manufacturers, wholesalers and retailers in setting up pilots for tracking pharmaceuticals through the supply chain. Back then, as many types of suppliers were gearing up for the Wal-Mart RFID “mandate,” and as RFID vendors rolled out new devices and technology, the outlook could be summarized as: Serialization offers significant value, but its near-term cost and capability is open to question. Now, having been hired by Coalition for Community Pharmacy Action (essentially, NACDS and NCPA) to evaluate track-and-trace technology’s value in preventing anticounterfeiting, the outlook seems to be: Costs too much, and we don’t need it.

The Coalition report, available here, finds that the first-year implementation costs range between $84,000 and $110,000 per pharmacy. For medium to large central distribution facilities for retail chains, there is an additional cost of $2.4-2.8 million at each facility. (Independents, presumably, are covered by the process costs incurred by the wholesaler-distributors serving them.) On a per-pharmacy basis, the store cost averages 0.88% of total annual revenue, a figure Accenture calls “lofty.” The Accenture analysts performed a literature search and found that “press reports involving counterfeit drugs in the U.S. pharmaceutical supply chain are scarce,” and where counterfeits have been found, they were intercepted before reaching consumers.

From these findings the Coalition concludes: “The substantial cost to retail pharmacy to implement a federally mandated track and trace program would be detrimental to the industry and other cost beneficial alternatives to enhance the security of the U.S. drug distribution supply chain should be explored.” NCPA CEO Bruce Roberts, targeting the new federal legislation HR 5839 (Safeguarding America’s Pharmaceuticals Act”), adds that “"First, the problem is caused by Internet drug operators, who are not legitimate healthcare providers that unfortunately are not targeted in the current legislative solutions being bandied about Congress. Second, the cost to fix this problem is an enormous unfunded mandate that would create a tremendous financial strain on community pharmacies.”

Glass half-empty

Now come the qualifiers. The Coalition report carefully sidesteps existing pedigree rules, currently in effect in several states, while noting that the “normal chain of distribution” exemption in most of those rules allow for drugs to be passed without a pedigree. The entire topic of drug diversion (a problem for manufacturers; less so for retailers) was also sidestepped. The cost model Accenture developed seems, at first glance, to be lopsided: the labor cost to perform inventory receipt is carefully calculated, but seems to imply that neither pharmacies nor chain distribution centers currently pay anything to check incoming or outgoing inventory. The report also assumes 100% track-and-trace from Day 1 (skipping over various proposals to phase in tracking programs), and that chain stores are required to recheck pedigrees even when getting deliveries from their own chain’s DC (a topic that varies in its interpretation).

Most damning of all, though, is one sentence in Accenture’s writeup: “Any proposed operational efficiencies or inventory management benefits realized from RFID product in the supply chain have not been considered.” This pretty much throws over the conclusions from the JumpStart program, which highlighted potential efficiencies in managing inventory, preventing stockouts, reducing the cost of recalls and returns, and basically making supply chain practices more efficient. Industry blogger (and Pharmaceutical Commerce Editorial Board member) Adam Fein, in commenting on the study, opines, “I . . . surmise that NACDS and NCPA got their money's worth from Accenture.”

Since about the beginning of this year, NACDS and the Coalition have been signaling a growing discomfort with track-and-trace technology. One thing’s for sure: as HR 5839 wends its way through Congress, and as California revives its in-state pedigree program (which is essentially a track-and-trace system), there’s a big train wreck looming.