Ndc Codes

Written by Norene Anderson
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NDC codes originated as a method of standardizing the identification of drugs for Medicare reimbursement. The NDC (National Drug Code) identification system has been accepted as a universal standard for pharmaceuticals used by humans. The Federal Food, Drug, and Cosmetic Act was amended with the Drug Listing Act of 1972 to require information necessary to enforce the standards of the Federal Food and Drug Administration (FDA).

The DRLS (Drug Registration and Listing System) has all drugs listed by a National Drug Code (NDC) to identify the product, vendor, and size of package. The NDC codes are a 10-digit, 3-segment number that is unique to each drug. The segments can be 5-3-2, 4-4-2, or 5-4-1. The first segment is assigned by the FDA as a labeler code. This identifies the firm responsible for manufacturing, repacking, or distributing the drug product.

Explaining NDC Codes

The second segment identifies the product code for strength, dosage, and formulation. The third segment is the package code. This identifies the size of the package. The firm assigns the package and product codes. An example of the 4-4-2 segment is 0335-0117-02.

NDC codes are often used by other government agencies for the sake of consistency in identification of drugs. Agencies such as HCFA (Health Care Financing Administration) utilize an 11-digit number using the NDC 10-digit number with a zero as the first digit. The example in the previous paragraph would become 00335-0117-02. This maintains consistency across the various boundaries of different agencies.

For Accurate Reimbursement

The reimbursement program under Medicare has initiated a massive coordination of healthcare identifiers that carries over into the scope of insurance providers. The NDC codes are used to identify the product cost payment limits. If the NDC code is not correct, it will result in a false claim and misrepresentation carries a stiff penalty.

NDC codes are updated on a quarterly basis. The updated product numbers are available immediately through electronic media. This offers the physician the opportunity to use the latest approved drugs as soon as they come on the market. There is no need to wait for the next edition of the NDC directory to be published. There are more than 170,000 drugs listed with NDC codes.

NDC Codes Meet HIPAA Requirements

NDC codes are HIPAA compliant and are used on many types of insurance forms. The coded system is one of the efficient methods of billing a specific medication without listing it by name and amount. The insurance providers are programmed to interpret the data based on a payment schedule per the identifier.

Medicaid utilizes the National Drug Code identifiers in payment consideration to providers. With Medicaid being so valuable to individuals on limited income, it is a widely used program. For that reason, the cost must be controlled to limit the burden on the state and federal governments. An accurate NDC code is crucial for keeping the costs within the appropriate limits.


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