NDC rule squeezes hospital outpatient pharmacies

"If you don't have universal bar code scanning, and most hospitals do not, collecting and reporting NDC numbers is pretty much a manual system," said Randy Kuiper, clinical pharmacy manager at Benefits Healthcare in Great Falls, Mont., the largest hospital in the state.

"And if you are not 100% accurate in your reporting, there are potentially dire consequences. We figure this requirement will cost at least $80,000 for our one hospital alone. That represents time and resources that are not going to be available for patient care. CMS did not do a very good job of considering how this change would impact providers and patients," Kuiper said.

A 2004 report by the Office of Inspector General found that only four states were able to collect appropriate manufacturer rebates on physician-administered drugs. The problem, according to Medicaid Rebates for Physician Administered Drugs, was that Medicaid claims did not include the NDC numbers used to claim rebates.

CMS' solution was to require NDC numbers for single-source and 20 multi-source drugs on Medicaid claims. ASHP, Safety Net Hospitals for Pharmaceutical Access, and several state Medicaid agencies have been urging CMS to reconsider the rule for more than a year.

"We are concerned about the overall impact these proposed changes would have on our pharmacy providers," wrote Carol Steckel, commissioner of the Alabama Medicaid Agency in a February 2007 letter to CMS.

In Montana, the state Medicaid agency itself requested that CMS delay implementation of the NDC rule, Kuiper said. "Our state Medicaid agency was no more ready to deal with multi-source NDC numbers than we were," he explained. "CMS gave us a 90-day reprieve, but that just delays the impact."

CMS spokeswoman Mary Kahn reported at the end of January that 31 states had been granted delays of three to six months. The agency did not know how many other requests for delay might be in process.

ASHP sees two problems with the NDC requirement, said federal legislative director Joseph Hill. One is the scope of CMS' rule, the other is the cost of compliance.

DRA includes a specific requirement that state Medicaid agencies collect NDC numbers in order to secure manufacturer rebates on "physician-administered" drugs. Hill said CMS overstepped its authority by interpreting that DRA requirement to mean all drugs administered in hospital outpatient settings.

"These are all items that are coming straight from hospital pharmacy stock for use in oncology, gastroenterology, and other hospital outpatient areas," said Scott Meyers, executive VP of the Illinois Council of Health-System Pharmacists. "A lot of these procedures are being shifted back to the hospital because physicians don't want to or can't afford to handle them in the office."

Based on a 2007 member survey, ASHP estimates that tracking and recording NDC numbers will cost hospitals $10.80 per Medicaid claim submitted, Hill said.

"On the brand side, recording the NDC number is not a problem because there is only one NDC out there for each dosage form," he said. "It's a different situation when it comes to generics."

Tracking NDC numbers in community pharmacy is automatic, Kuiper said. That's because retail pharmacy inventory is ordered, tracked, and reimbursed by NDC.

Hospital pharmacy inventory is based on formulation, not NDC, he noted. If a specific formulation is unavailable through standard contract sources, buyers look elsewhere.

"You almost always have multiple NDC numbers for the same product in stock throughout the hospital," Kuiper said. "The only way to track them and report them on claims is with bar code scanning. A lot of hospitals, including ours, don't have that."

ASHP is now trying to convince Congress to roll back or delay the NDC requirement. Health committee members in both houses are aware of the issue, Hill said, but prospects for action in this election year are dim.