Merger Creates $65M E-Pharmacy with RFID

Innovative players look to stand out in the RFID pharmaceutical market, where analysts are projecting RFID growth that is much more rapid than in retail.

With the RFID pharmaceutical market heating up fast, four players merged Wednesday to form NEXT GENeSYS Corp., a new public company with a projected market capitalization of $65 million.

Earlier this week, Swedish-based RFID smart packaging startup Cypak announced new R&D funding. Meanwhile, analyst groups released research pointing to stronger growth for RFID in pharmaceuticals than in some other sectors.

Geared toward delivering prescription drugs directly to uninsured minority members, NEXT GENeSYS is an entity that comprises medical and hospitality RFID specialist FutureCom Global; Wi-Fi PDA maker CareDecision Corp.; mail-order pharmacist CareGeneration Inc.; and KCWG Pharmaceutical Solutions, a $100 million-plus wholesale prescription-drug provider.

"We cant really say much about this yet, but therell be extensive use of RFID and other wireless technologies," a spokeswoman for the company said, adding that more details will be provided over the coming week.

By bringing together cross-disciplinary expertise, the merged entity aims to avoid failures made by other companies in earlier attempts to fulfill mail-order prescriptions, the spokeswoman said.

/zimages/5/28571.gifAre Wal-Mart and the feds pushing an immature technology? Click here to read more.

Meanwhile, Swedish-based Cypak received new R&D funding to help support its emerging paper-based smart packaging technology, which has already been deployed in test mode for pharmaceutical and transportation/logistics applications.

Last January, Cypak announced a deal giving exclusive North American distribution rights to MeadWestvaco, a major player in the international health care packaging industry.

Stina Ehrensvard, Cypak co-founder and marketing director, told in an interview that the companys smart packaging provides a number of advantages over RFID smart labels.

Cypaks technology features a built-in chip containing 15 kilobytes of memory, along with circuitry embedded throughout the packaging.

The integrated computer can be programmed to alert humans when a package has been opened, to track patients compliance with pill-taking regimens and to send out reminders that its medicine time.

The RFID (radio frequency identification) technology has already been tested at the Swedish and German post offices, as well as on a limited basis by major pharmaceutical firms, Ehrensvard said.

The post offices have been looking at a delivery-pouch form factor that is designed to safeguard jewelry, cash and other small valuables, in addition to a "tape" form factor. The German post office, known as the Bundespost, owns DHL, a large international package delivery firm. The latest round of funding brings MSEK 30 from IT Provider, a venture capital firm, and the Swedish Industrial Development Fund.

Ehrensvard acknowledged that Cypaks smart packaging is much more costly than competing smart labels. In the pharmaceutical sector, for example, the company foresees use of the smart packages with special populations such as the elderly.

On the strictly retail supply chain side, IHL Consulting Group released a report this week stating that the top 20 drug stores will spend $1.8 billion on IT in 2004—and that, of this, a "significant portion" will go into RFID technology for increasing the accuracy and authenticity of pharmaceuticals.

In an interview with, IHL founder and president Greg Buzek noted that unlike makers of some consumer goods, pharmaceutical firms usually dont have to deal with issues such as getting RFID to operate in the presence of metals and liquids.

Also this week, a report by The META Group Inc. said RFID will increase rapidly in the pharmaceutical industry over the next 18 months, even though pharmaceutical applications will be limited to "track and trace" until the EPCglobal standards group completes authentication specs that will afford greater security.

Bruce Hudson, program director with METAs Enterprise Application Strategies service, said the business case is stronger right now for voluntary RFID adoption in pharmaceuticals, as opposed to consumer goods.

/zimages/5/28571.gifClick here to read about more retailers mulling RFID mandates.

Pharmaceuticals are priced higher, meaning a much better ROI (return on investment) for RFID in prescription medicines than among over-the-counter HBA (health and beauty aid) products, Hudson told Pharmaceutical companies also can make use of RFID in targeted recalls and in fighting against counterfeiting, he said.

In addition, he suggested, drug companies can wield a bit of extra clout in helping to shape retailers RFID mandates. "If Wal-Mart doesnt carry a specific medicine that I really need, then maybe Ill just go elsewhere," he said.

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