CMS requires all State Medicaid Programs to require National Drug Code (NDC) numbers on “physician-administered” drugs which include those administered in hospital outpatient departments and physician offices. Since Medicaid programs are jointly funded with CMS, this requirement applies to drugs which are covered under Medicare Part B.
The program requires a drug manufacturer to enter into a national rebate agreements with the Secretary of the Department of Health and Human Services (HHS) in exchange for the State Medicaid program providing coverage for most of the manufacturer’s drugs. The manufacturer has to electronically submit product and pricing data to CMS when a new product is marketed.
Manufacturers are required to report all covered outpatient drugs under their labeler code and may not be selective in reporting their NDC numbers. Manufacturers then pay a rebate to the State when payment is made under the state plan.
CMS publishes a database of all NDC numbers reported to them as eligible for rebates. States cannot provide coverage for NDC numbers that are not included in the manufacturer’s agreement and many States use this database to evaluate claims submitted from hospital outpatient departments. If the NDC number is not listed in the database, an “invalid NDC” reason code may be sent back to the provider with a rejection for either the single line, or the entire claim. The database was last updated on August 30, 2021 and contains information pertaining to quarters from 2014 3QU through 2021 2QU. The 2021 2nd Quarter data contains 41,895 entries. The database can be filtered for any fields included in the database.
The database contains prescription and OTC drugs with associated information such as the product name, unit type, units per package size, product name, FDA approval date and a clotting indicator, pediatric indicator, and innovator indicator. It is important to note that although some manufacturer catalogs assign an “NDC number” to other products such as medical devices and dietary supplements, these products are not registered with the FDA as drugs and therefore cannot have an NDC number assigned. These non-drug products should not be reported in a pharmacy revenue code (such as 25x or 63x), nor have an 11-digit number reported on the claim. Since they are not drugs and not included in the CMS Medicaid Rebate Program database, reporting these numbers for medical devices and dietary supplements will often cause claim rejections from State Medicaid Programs.
Note that according to the Social Security Act, vaccines are not considered a covered outpatient drug under Part B. Although State Medicaid programs may provide coverage for vaccines, these NDC numbers are not reported to CMS for inclusion in the Medicaid rebate database.
1. Pharmacy and Pharmacy IT teams should ensure that only drugs (Prescription and OTC) are setup to report NDC number on outpatient claims.
2. Claims rejected with an “invalid NDC” reason code should be researched and rejected State Medicaid claims should be compared to the CMS Medicaid Rebate Program Data file to ensure the NDC administered to the patient is a “rebatable” drug and therefore a covered outpatient drug.
3. If a valid vaccine NDC number is rejected by a State Medicaid Program on a hospital outpatient claim, the State Medicaid program should be contacted to determine the reason for the rejection as a State Medicaid Program may require an NDC number for vaccines, but the NDC numbers are not reported to CMS for verification purposes.