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