An ambitious project by GlaxoSmithKline (GSK) to beat drug counterfeiters by putting a microchip in every packet of pills has been fraught with problems and may be scrapped, The Times has learnt.

The pharmaceutical giant said three years ago that it was investigating the use of radio frequency identification (RFID) tags for products deemed to be susceptible to counterfeiting.

In March last year GSK launched a United States-wide pilot programme and began to attach RFID tags to every American bottle of Trizivir, an HIV medicine. Trizivir is one of GSK’s top-selling products, with sales of £268 million in 2006, 53 per cent of which were in America.

However, the programme, which uses technology developed by IBM, has been riddled with technical hitches. They include RFID tags breaking as they are attached to products, a failure of tracking technology to read them during transit and a widespread failure by wholesalers and retailers further down the supply chain to embrace the technology.

As well as GSK, two of America’s biggest pharmaceutical retailers – one of which is believed to be Wal-Mart – and two other big drug companies involved in the scheme are also struggling with prohibitive costs, both for the RFID tags themselves and for the technology required to read them.

As a result, Glaxo is considering abandoning the project and opting for technology that is cheaper and less prone to technical faults.

A spokesman said: “We don’t necessarily understand the benefits. The question is whether it is a valid technology . . . Is it a technology that could be applied to a significant part of the business?”

One pharmaceutical industry executive said: “Lots of people have looked at RFID and realised that the cost is just prohibitive.

“The unit costs are just so high as to not be economic, plus there are all sorts of teething problems with implementation. It requires such a huge investment – not just by the company installing it but all the suppliers, retailers and wholesalers, too.”

GSK is expected to make a final decision on whether to scrap the project or to apply it more broadly later this year. One alternative is barcodes, which are cheaper and easier to use.

GSK has been working closely on RFID technology with the US Food and Drug Administration, which is keen to encourage the technology to help to defeat drug counterfeiting.

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