A method and apparatus for drug product tracking (or other pharmaceutical, health care or cosmetics products, and/or the packages or containers they are supplied with) using diffraction grating-based encoded optical identification elements includes an optical substrate having at least one diffraction grating disposed therein. The encoded element may be used to label any desired item, such as drugs or medicines, or other pharmaceutical or health care products or cosmetics. The label may be used for many different purposes, such as for sorting, tracking, identification, verification, authentication, anti-theft/anti-counterfeit, security/anti-terrorism, or for other purposes.