Sometimes, you can't wait for industry titans to lead the way with the latest technology. Take H.D. Smith Wholesale Drug Co., the seventh largest pharmaceuticals distributor in the U.S., which earlier this year made the leap into radio frequency identification (RFID) technology. Employees at one of the Springfield, Ill.–based company's five warehouses began to attach one-inch-square tags embedded with electromagnetic microchips carrying an elec- tronic product code (EPC) to all the prescription narcotics it distributes. Using RFID technology, the EPC chips make it possible to identify and track every single package separately.

Admittedly, all this comes at a cost to H.D. Smith, but the company says it's worth it for the customer service benefits it will bring. In fact, the company is planning to expand RFID tagging to its four other warehouses. "People don't understand. They're looking at [RFID] as something they have to do and not something 'I want to do,'" says Robert Kashmer, vice president of information technology at H.D. Smith. "We chose to be out ahead of everybody."

And for now, the company is–although the U.S. Food and Drug Administration is beginning to put pressure on the pharmaceutical industry, which loses millions each year from theft, diversion of drugs and counterfeiting, to follow suit. In November, the FDA created a compliance guide policy and a work group to ease RFID adoption by 2007.