A Healthesystems publication

Spring 2013

National Drug Codes (NDC) Depletion Dilemma on the Horizon

All stakeholders need to prepare for a wide-reaching and imminent change.

The pharmaceutical industry is headed towards a shortage of National Drug Codes (NDCs) – and everyone from payers to prescribers and patients will be impacted. It is important to recognize and understand this depletion issue now, so steps can be put in place today to alleviate the challenge this will cause in the future.

A Look Behind the Code

The National Drug Code is a unique ten-digit, three-segment numeric identifier assigned to each medication listed under Section 510 of the U.S. Federal Food, Drug, and Cosmetic Act. The segments within each number identify the labeler or vendor, the product (within the scope of the labeler), and the trade package (of the product).

While the labeler code is assigned by the FDA, both the product and package segments are assigned by the labeler.1 In the past labelers were able to re-assign old product codes that were no longer being used to new products; but according to new FDA validation procedures, once an NDC code has been assigned to one product (defined by key properties including active ingredients, strength, and dosage form) it can no longer be reassigned to a different product.

It was recently reported that the FDA is quickly running out of NDCs for assignment to new medications/products. This issue was reported to be related to the FDA’s requirement to have new NDCs assigned when manufacturers or companies are repackaging medications. This may be directly related to the increase in repackaging seen in the workers’ compensation market.

The three segments that make up each NDC code are arranged into one of the following sets of digit strings: 4-4-2, 5-3-2, or 5-4-1, with all of these strings totaling ten digits.1

The Centers for Medicare and Medicaid Services (CMS) had created an 11-digit NDC derivative based on the FDA 10-digit string, which pads the labeler, product, or package code segments of the NDC with leading zeroes wherever they are needed to result in a fixed length 5-4-2 configuration (but always written without dashes).1 This format was adopted by data standards selected pursuant to HIPAA regulation, thus other government agencies’ lists and databases (such as the UMLS) may contain the 11-digit derivative of the original NDC.

Far-reaching Impact

An NDC number assigned to a medication is an integral component to many pharmacy processes, including dispensing, claims adjudication, formulary management, billing, and many others. These unique codes are also used in patient profiles and even make their way to hospital bedsides as verification of patient identity with prescribed medications. A change to the structure of this important coding system will have a far reaching impact as all parties will need to make programmatic changes to allow for a new coding system.

Contributing Factors

A practice which may be contributing to the forthcoming depletion of NDCs is that of repackaging drugs. This is the practice in which repackaging companies purchase large quantities of prescription drugs from manufacturers and then repackage them into smaller quantities and resell them. As part of the repackaging process, drugs are assigned a new NDC. Assigning a distinct, new NDC allows the repackaging company to increase the average wholesale price (AWP) of the repack drug compared to the original drug price.

Drug repackaging activity has been rising over the last several years and as such has become one of the contributors to the depletion of available NDC’s.

Next Steps and Solutions

The FDA has recommended a potential solution of increasing the first segment to a six digit labeler code. The National Council of Prescription Drug Programs (NCPDP), the organization that provides national coding standards for the insurance industry, is concerned about the potential impacts to the industry. NCPDP has established an NDC Depletion Task Group to evaluate the impacts and to assist in educating the FDA Office of Compliance about issues surrounding potential solutions and advise the FDA about other options that may be available to minimize the impact of a new coding system.

It is important for all stakeholders to be actively engaged in the solution to this far-reaching dilemma. Preparing for a change to the coding structure now will alleviate problems with exchanging the prescription data in the future. Payers, PBMs and other stakeholders should begin to evaluate their systems’ capabilities for receiving, and the resulting impact of, a longer NDC value.

FDA publishes the listed NDC numbers and the information submitted as part of the listing information in the NDC Directory which is updated daily.

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SOURCES

1 -FDA. National Drug Code Directory. 4/8/2013 Update. http://www.fda.gov/Drugs/InformationOnDrugs/UCM142438.htmen.wikipedia.org/wiki/National_Drug_Code#cite_note-SPL_Validation_Procedures-3
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