Medical Device & Diagnostic Industry Magazine | MDDI Article Index

Originally published August 1996

Bar Coding

Just a short 18 months ago, the Department of Defense (DOD) announced that by July 1 its suppliers would have to provide universal product numbers (UPNs) on all health-care products. At press time, Lieutenant Commander Mitchell Cooper, DOD's UPN coordinator, predicted that 98% of its suppliers, which include device companies and distributors, would be in compliance. The success of DOD's compliance campaign has sparked a minor revolution in the health-care industry, with 9 major buying groups following DOD's lead in February and another 10 joining in March, according to the Healthcare EDI Coalition.

By mid-June, more than 77% of DOD's suppliers had already complied. Cooper says that because DOD has well over 1000 suppliers and uses 135,000 products, its requirement for the UPN encoded in a bar code has affected a large portion of the device industry. The few companies not in compliance will be granted a six-month waiver if they have already selected their standard, purchased the license to bar code, and have the needed equipment in place. If they have not met these conditions, they will be dropped from DOD's prime vendor program.

Although the device industry had supported the idea of a unique identification system in general, many companies had resisted the move because they would have had to invest hundreds of thousands of dollars to convert from one data structure -- either UCC/EAN (Uniform Code Council­International Article Numbering) or HIBC-LIC (Health Industry Bar Code­Labeler Identification Code)--to another. A break in the logjam came when UCC/EAN and the European Health Industry Business Communications Council agreed last fall to accept either the UCC/EAN or HIBC-LIC data structures as an open standard. According to Bob Hankin, president of the U.S. Health Industry Business Communications Council (HIBCC), the two European groups and their U.S. counterparts have drafted an agreement of cooperation that they expect to sign in the coming weeks.

A recent informal survey of MD&DI Readers Board members showed that of the companies responding, 25% were already using bar codes. A further 66% of the respondents said they would use bar codes in the coming year. Those manufacturers already placing bar codes on their products use the HIBCC standard.

Cooper says DOD doesn't need to know which data structure its suppliers are using. "Suppliers are using both. The structure they choose doesn't affect DOD or any other buyer because the scanners differentiate between whether the bar code is the UCC's numeric symbology or HIBCC's alphanumeric data structure," he says. Hankin says that for the past 10 years the industry has used autodiscriminating scanners that can read many symbologies.

Because both codes will be recognized internationally, manufacturers and distributors don't have to incur any conversion costs. Cooper says manufacturers became enthusiastic about complying once it became clear that there would be an open standard that would not require them to change systems.

Walt Mosher, president of Precision Dynamics Corp. (San Fernando, CA), predicts that most manufacturers and distributors will see substantial cost savings. One of DOD's distributors predicts substantial savings due to decreased product returns. It now gets 8000 returns monthly because a wrong unit or wrong amount was sent. This costs the company about $70 per unit in administrative costs such as restocking. "Eliminating those returns will result in a $6.6-million savings for one distributor on one part of its business," Cooper says.

The 10 newest buyers to require a UPN as a significant consideration in awarding medical supply contracts are Aurora Healthcare (Milwaukee), Catholic Healthcare West (San Francisco), Catholic Materials Management Alliance (St. Louis), Child Health Corp. of America (Shawnee Mission, KS), Health Partners of Southern Arizona (Tucson, AZ), Health Services Corp. of America (Bridgeton, MO), NJHA Group Purchasing (Princeton, NJ), Samaritan Health System (Phoenix), SSM Diversified Health Services (St. Louis), and West Jersey Health System (Camden, NJ).

Mosher points out that hospitals have claimed they don't use bar codes to order products because the manufacturers haven't put the codes on their packaging. He predicts that even more hospitals and purchasing groups will begin to use them now that so many manufacturers and distributors have begun to label their products with a bar code.--Sherrie Steward