The pharmaceutical sector will have a major influence on how the integration of RFID technology is spread across other industries, according to research firm Venture Development Corporation (VDC).
In a bulletin published last week, the Massachussets-based firm predicts that the use of Radio Frequency Identification (RFID) technology in the pharma industry will be precedent-setting for item-level tracking generally.
RFID is coming into increasing use in many sectors as an alternative to the two-dimensional bar code.
The advantage of radio frequency is that it does not require direct contact or line-of-sight scanning and therefore can scan a thousand tags in a split second.
However, the biggest obstacle to the spread of RFID is the cost of the infrastructure it requires, making it unattractive for distributors who usually have small profit margins.
Nevertheless, this is set to change as the global demand for smart packaging using new technologies such as RFID is set to grow to $4.8bn (€3.8bn) in 2011 and reach $14.1bn in 2013, according to a recent report by research firm NanoMarkets.
In particular, in the pharma industry, the market for RFID tags is set to increase from $90m (€70m) in 2006 to $2.1bn in 2016 driven by the demand for more convenient and anti-counterfeit solutions in pharma packaging - "smart packaging" - to ensure product quality and usability, and improve supply chain efficiency and security.
According to the VDC research, the pharma industry has the power to lead this revolution as 65 per cent of end users in the consumer packaged goods (CPG), retail and health care industries are waiting to observe the pharmaceutical sector's gradual adoption of RFID before moving forward themselves.
"A domino effect will most likely ensue, since the pharmaceutical value chain is heavily integrated with the CPG, retail and health care supply chains," said the firm.
"These three verticals are primary end-user outlets for pharmaceuticals and are poised to rapidly deploy the technology - having conducted numerous evaluation and pilots over the pas five years."
VDC also believes that the pharma industry could be the largest RFID vertical over the next two to three years.
However, the research suggests that there are several obstacles, including price and performance considerations, on the pathway to the full integration of RFID.
According to the company, one of the downsides is that once RFID infrastructure is in place, it is still not clear what can be done with the data collected, and therefore the understanding of how to use this data could make the difference in terms of competition.
Furthermore, there is another drawback to the integration of the technology, which is the uncertainty over radio frequency energy's potential effect on drugs.
"Until it is determined that there are no effects, or that the effects are negligible or otherwise benign, this remains a large question mark," said VDC.
But RFID providers are already trying to address these issues. Leading vendors, including Systech, Mckesson and Tagsys, recently gathered to share expertise and evaluate the potential of their RFID technologies in a living laboratory, in their quest to produce a market viable solution to supply chain tracking.