America has a drug problem. The Food and Drug Administration thinks technology can be used to fight it.

Besides being expensive and often abused, drugs in America are stolen at an alarming rate. The FDA has suggested — and the pharmaceutical companies seem eager to comply — that radio frequency identification (RFID) technologies could put a major crimp into drug theft by layering information onto pallets, cases and bottles of drugs to track their movement around the world.

RFID has been around since just after World War II but has only really picked up steam in the past 18 months as the technology improved and tags got smaller. Manufacturers embed information on RFID tags that are attached to pallets and containers shipped worldwide. At various points wireless devices read and write information on the tags to ensure there hasn't been any tampering of the drug containers — counterfeiting also is a big problem — or theft.

An RFID reader scans an area up to 20 feet, making it fast and easy to move products in and out of shipping-and-receiving departments.

“With RFID, you pass a tag within a field consisting of portal readers or doorway readers … and don't have to worry about aligning the tag up,” said Dan Mullen, president of Aim Global, a trade association representing the automatic data collection marketplace. “The other opportunity is to have not only dynamic information but also some more detailed information (attached to the tag).”

The FDA would like to see RFID labels on pill bottles by 2007. This is driving drug companies, RFID vendors and even chipmakers to invest big bucks in new technology, both hardware and software.

“The pharmaceutical companies seem very dedicated to working with RFID,” said Sarah Shah, an RFID analyst for ABI Research. “I've heard that they're an educated consumer. When they go to their integrators or consultants they know what hardware they want to use.”

Implementing RFID isn't all that difficult to do, according to Shah.

“They have to purchase labeling machines so they can integrate their RFID tag into the label that goes on the bottles and then all the bottles will be tagged,” she said. “[Then they] have to … buy the appropriate software and have it integrated into their current system.”

The need for “appropriate software” is driving a standardization effort for the Electronic Product Code (EPC) that is integral to RFID tags. Spearheaded by a combination of manufacturers, retailers and vendors, a new generation of EPC specs should be widely available in mid-2005.

“They're looking at this as a big technological leap forward in terms of the way the protocol is written that results in a smaller, faster, cheaper, more compact architecture,” said Sue Hutchinson, director of product management for EPCglobal U.S., a joint venture between European Assistance Network International and the Uniform Code Council, which is spearheading the effort. EPCglobal evolved from the Auto ID Center at the Massachusetts Institute of Technology (MIT), which did much of the work on earlier EPC versions.

However, intellectual property claims by RFID vendor Intermec could delay the availability of the specs, according to Erik Michielsen, RFID research director at ABI Research.

Next-generation EPC specs will be compatible with earlier versions of the technology and will operate in the 800 MHz to 960 MHz band. The spectrum range provides wiggle room to overcome frequency interference issues and comply with areas of the world where the UHF band is dedicated to other uses.

“Probably most important is that it's built to meet end-user requirements; it's built for the needs of general merchandise and fast-moving consumer goods, but also the health care and pharmaceutical communities that have come to join us in EPCglobal,” Hutchinson said. “The standard is designed for real-world applications.”

Purdue Pharma is using the technology on bottles of OxyContin, a Schedule II narcotic prescribed for severe pain and in big demand on the black market. Schedule II includes drugs that have a high potential for abuse with the possibility of causing psychic or physical dependence, but have some approved medical use. The company will include other narcotics as the specifications become settled, said Chuck Nardi, executive director of supply chain/corporate systems.

Purdue Pharma will assume multi-million dollar costs for moving to next-generation EPC hardware, software and RFID tags, readers and antennas.

“We're not passing on any of that cost for any of our end customers or to the patients,” he said. “We see this as an important initiative toward patient safety.”

The vendor also is doing it for less altruistic reasons. For starters, inventory theft costs a lot of money. More important, while the FDA is encouraging it, mega retailers such Wal-Mart and another government agency that purchases millions of units — the Department of Defense — both demand RFID-encoded shipments.

“That's the big push for the pharmaceutical companies,” Nardi said. “The consumer product suppliers have a mandate around case- and pallet-level tagging for the Schedule II narcotic suppliers.”

The new EPC specs let drug makers put those tags on the bottles, and “that's the lowest level of the item,” said Nardi. “We have specific tag sizes, 1-inch-by-1-inch and 915 MHz. Based on tag availability and where the technology goes, I'm sure we'll be looking toward widespread adoption in the future.”

The cost of the tag largely will determine where it will be used, said Alan Melling, senior director of EPC solutions for Symbol Technologies, an RFID vendor.

“For some things it makes sense. A bottle of pharmaceuticals, you can easily justify that cost,” he said.

A bottle of pills could have a street value of $80,000, said John Burke, vice president of the National Association of Drug Diversion Investigators (NADDI).

“You're talking about pallets of these,” said Burke. “You're not talking about small money at all.”

Burke is champing at the bit for widespread RFID adoption. “This is the start of a huge aid for investigators of theft once it's fully in place.”

Tagging could severely hinder thieves from peddling pills on the black market, he added.

“Let's say you get a large shipment stolen, and they come to the scrupulous private pharmacist and offer to sell them for half of what he's buying them for wholesale,” he said. “You'd be able to go into that pharmacy with the RFID and immediately identify those bottles from the shipment that was stolen. I can't tell you how valuable that would be in the right situation.”

All this activity is equally valuable to the technology players. Sharply increased demand leads vendors to demand new chips, 1and that leads to new business opportunities for the chipmakers.

“Smaller packaging, smaller silicon die size (are) going to have an impact on the cost of the chips themselves,” said Bill Allen, director of marketing communications for chipmaker Texas Instruments. “In addition to that, we've been working on different form factors for the delivery of the silicon. A lot of companies want a strap that contains a chip with two leads (so) we'll be delivering straps as well as finished inlays.”

It is, Allen conceded, a “hectic” time as the demand for next-gen RFID technology hits a crescendo. But, he emphasized, “it hasn't just happened in the past year or past few months; the groundwork and foundation was begun in '99 for the EPC, but TI and Philips have been involved in the RFID business for 25 years.”

Tagging also helps national security, said Burke.

“We're somewhat susceptible to someone who has devious means to put something into pills,” Burke said. “It sounds far-fetched, but I don't think anything's far-fetched anymore when it comes to homeland security.”

While tracking drugs with tiny tags might seem somewhat futuristic, it isn't.

“Some remarkable things have happened with the technology over the course of the last few years,” said Hutchinson. “There has been some groundbreaking research by the Auto-ID center at MIT that allowed us to get down to some very small, very passive RFID tags, and that helped bring the economics of the market to the point where we really could look at this for uses in the supply chain. That was a big leap forward.”