Visante 
We are hearing from more health-systems that they are receiving an increasing number of charges rejected for an “invalid NDC number”. How can this be?
Let’s walk through some history and then look at the most common reasons for the denial.
History: State Medicaid programs began requiring National Drug Code (NDC) numbers on outpatient claims in 2006 based upon a federal mandate from the Deficit Reduction Act of 2005. CMS provided instructions to the States with full implementation by 2008. The purpose was so that State Medicaid programs could include physician-administered drugs from physician offices and hospital outpatient departments in the volume reported to manufacturers for rebates. Some States issued specific instructions on billing including which revenue codes are included (e.g. 636 vs. 250), which products were included (e.g. excluding vaccines and radiopharmaceuticals), and how to convert a 10-digit NDC to 11-digits. Most hospital IT systems required updating in order to accommodate the specific requirements.
In addition, to State Medicaid Programs, Medicare Advantage programs for dual eligible (Medicare primary, Medicaid secondary) also began requiring NDC numbers to adjudicate claims. By 2016, some payers were requiring NDC numbers for all lines of business (i.e. commercial, Medicare Managed Care) with varying instructions.
Invalid NDC numbers: So, how can an 11-digit number be rejected by a payer as “invalid”? Here are the top reasons:
1. It’s not a drug. Only a “drug” (either prescription or OTC) can have an NDC number according to the FDA. The FDA website includes this statement: Assignment of NDC number to non-drug products is prohibited. So—those products labeled as medical devices (e.g. Healon, Gelfoam) are not drugs and should not be billed under revenue code 25x or 636 as these revenue codes are used for drugs and biologicals only. Your Compliance department may instruct that they can be billed under a supply revenue code like 270 or 272.
2. An oral vitamin is usually not a drug, it is a dietary supplement. Other items may also be considered dietary supplements like Coenzyme-Q. See #1. Based upon facility decision these may be billed as a supply or not billed at all.
3. It’s a drug, but it is “unfinished” or “excluded”. The FDA has created two additional files which list drugs that are not “final” drugs or “excluded” because the manufacturer has failed to comply with statutory requirements to update their on-line drug submissions. NDC numbers in these files are considered to be “unapproved drugs” and therefore not covered by Medicare or other payers. These should not be billed to any payer unless there are specific coverage terms within the payer contract for unapproved drugs. (Note: Drugs authorized under an Emergency Use Authorization (EUA) are still “unapproved”, but CMS provides special billing instructions and condition codes for these products).
4. It’s a drug, but it isn’t listed in the FDA NDC Directory. Payers are using two files to evaluate NDC numbers on claims: the FDA NDC Directory, and the CMS ASP HCPCS-NDC crosswalk.
a. The CMS ASP HCPCS-NDC crosswalk is published quarterly. Due to the time lag, new drugs may not appear in the NDC crosswalk for multiple quarters from the time first marketed.
b. The FDA NDC Directory is updated daily but also contains a limitation: some manufacturers only report a “carton” NDC and not both a “carton” and “vial” NDC when they are different. This may lead to inappropriate rejections. Payers also have provided conflicting instructions on how to address this limitation. For example Cigna instructs to use the NDC from the “vial administered to the patient”. However, Blue Cross/Blue Shield of Illinois instructs that the “NDC on the box (outer packaging) is recommended.” And United Healthcare recognizes the limitation on manufacturer reporting and advises: “There are exceptions when drug manufacturers don’t provide pricing at the individual vial level. Generally, only NDC numbers with available pricing are considered valid. In these instances, you should bill using the NDC information from the outside packaging and include the correct units administered. When missing vial level NDC’s are identified we add these exceptions to our validation tables so your claims will process accurately.”
Note: A letter from CMS to State Technical Contacts on Manufacturer Reporting and Rebate Payment of Inner/Outer NDCs indicates: “If each of these individual NDCs meet the definition of a covered outpatient drug, then both the inner and the outer NDCs are to be reported to the MDRP” (July 7, 2017). This letter may be used in contacting manufacturers to request that they report both outer and inner carton NDC numbers to both the MDRP (Medicaid Drug Rebate Program) and to the FDA for inclusion in the NDC Directory.
5. State Medicaid Programs only cover NDCs that are listed in the CMS Medicaid Rebate File (or some States publish their own files, e.g. Texas). For Medicaid OP, an invalid NDC may indicate that it is not covered by the State Medicaid program.
6. The zero is in the wrong place. Some EHRs have both a 10-digit and 11-digit version of the NDC numbers, or some third-party vendors perform the conversion as only the 11-digit can be used for billing. But on new drugs that aren’t yet in the databases, the conversion may need to be manual. When looking at a 10-digit, hyphenated NDC number remember “5-4-2”. The first segment is always 5 characters, the second segment is 4 characters and the third segment is always 2 characters. Whichever segment is “short”, you put the zero in the lead position for that segment to make 11 digits.
SHOUT-OUTS
1. An NDC scanned with Barcode Medication Administration (BCMA) is preferred to report on outpatient claims as it is likely to be “valid” and some payers require that the NDC be “from the package administered to the patient”. Pharmacy and Nursing should evaluate all outpatient areas and determine if BCMA has not been implemented when it may be feasible to do so. IT specialists to verify that the scanned NDC number is transmitted to the claim.
2. When a BCMA scanned NDC is not available for billing, the selected NDC number should be verified in the FDA NDC Directory as “valid” and a cross-check with the CMS ASP NDC-HCPCS quarterly file done to ensure that the NDC is being reported with the correct HCPCS code. Since payers are using these two files to evaluate claims, this will ensure that the information transmitted is available in the payer validation files. (Note: some payers have their own published files such as Texas Medicaid that may also provide a useful double-check).
3. IT System Specialists and Chargemaster Managers should ensure that products that are not drugs, (e.g. medical devices, dietary supplements, comfort items) should not be billed under revenue codes 25x and 636 which are reserved for drugs and biologicals. Based upon facility decisions, these may be billed under a supply revenue code (e.g. 270, 272) or deemed as a “non-billable” supply and not billed.
a. Some third-party databases often have items labeled with “NDC number” when they are not drugs and are actually a UPC number or other 11-digit designation. These numbers are not actual NDC numbers and should not be reported as such for billing purposes.
We recommend that Pharmacy and Chargemaster Managers partner to proactively review pharmacy chargemasters and verify that only “drugs” are listed in pharmacy revenue codes and that all NDCs used for billing are BCMA-scanned NDC numbers or are listed in the current FDA NDC Directory (and not “unfinished” or “excluded”). NDC numbers rejected by the payers as “invalid” should be researched and systems updated if needed, or rejections appealed when the NDC is for a drug and has been verified as correct.
