Pharmaceutical product ID: An industry in crisis?


How to code claims



Pharmaceutical product ID:
An industry in crisis?

What does "one" mean to a pharmacist trying to get reimbursed for a particular prescription? Sounds like a simple question, but in the realm of pharmaceutical products, the road to an answer is strewn with potholes, land mines, and washed-out bridges.

In real terms, knowing how to measure and identify what R.Ph.s dispense can make a big difference in reimbursements and/or rebates, so sorting out numbering systems is not the snore-inducing chore it might seem. "This is the most misunderstood area of the drug industry," said Linda Schock of Schock Heywood Consultancy at a recent conference in Baltimore sponsored by the National Council for Prescription Drug Programs (NCPDP). "Each player sees product identification differently, which has led to an identity crisis in our industry."

Schock offered a hypothetical example of a drug the manufacturer sells as one box, containing several packets. A distributor takes the packets out and sells them to R.Ph.s, who reconstitute the drug and dispense subdivided quantities of the liquid to patients. If the amount reported to the Centers for Medicare and Medicaid Services, or CMS (formerly the Health Care Financing Administration), is required to be the "smallest unit by which the drug is normally measured," exactly what is that number?

Merely identifying and counting the quantity of a drug dispensed to the satisfaction of providers, payers, and regulators is a complex, messy, and contradictory task. For instance, NCPDP's reporting standard says the basic unit is one tablet or capsule, while CMS permits counting by bottles. The result could make a hundredfold difference in the rebate claim.

Should oral contraceptives be reported as packages or as individual tablets? Some packages contain 21 tablets; others have 28. Then there's the issue of using metric quantities, which requires a confusing rounding-up procedure before multiplying unit quantities and seems designed to create billing discrepancies. Take the conventional rendering of 1 fl. oz. into the metric system as 30 ml. If the manufacturer reports that amount exactly as 29.57 ml, a 0.43 ml discrepancy arises—small but not insignificant when multiplied over millions of Rxs.

This system should be phased out by next year, when the much simpler metric decimal quantities will come into use, said Tom Bizarro, R.Ph., product manager with First DataBank Inc. in Indianapolis. However, he noted, standards are now voluntary, so just to confuse things more, some pharmacy benefit managers may ask for either metric quantities or metric decimal quantities—or even both—in order to compare and see if the resulting claims are equal.

Another complaint aired at the session addressed the use of nonstandard packaging by manufacturers. Odd package sizes are the result of a number of factors and don't simply crop up at the distribution stage, explained Beth Rader, manager of coverage and reimbursement for Genentech in South San Francisco.

"Formulations and doses reflect their development in the course of clinical trials, efficiencies in manufacturing or utilization, reduction of waste in shipping, or maximization of patient compliance and acceptance," said Rader. Adjusting contents to standardize packaging might require restarting the Food & Drug Administration approval process.

One goal of NCPDP, said Schock, is to make manufacturers responsible for knowing how their products are sold and dispensed. Labeling an inhalant as containing "200 sprays" is meaningless. Ideally, everyone agreed, units should be universally agreed upon and be reported only as "each" for counted products, "grams" for those that are weighed, and "milliliters" for anything poured.

Compounding the issue of quan-tity is finding a consistent way to identify items that flow through the pharmaceutical system. At present, a welter of numbering systems and their affiliated acronyms create yet another arena for confusion. The current leader is the National Drug Code (NDC), a 10-digit number, sub-divided into labeler, product, and package codes. The FDA assigns the labeler code, while the manufacturer decides on the other two. Unfortunately, while the total number of digits is fixed at 10, the arrangement may be 4-4-2, 5-3-2, or 5-4-1. Any changes to product name, dosage form, strength, concentration, or active ingredient require a new NDC code. There are 48,000 active NDCs at present.

A second system is the Healthcare Common Procedure Coding System (HCPCS), developed in 1983 to process Medicare claims electronically, said Vince Powell, operations technical director for the Medicaid Drug Rebate Program of CMS. HCPCS codes consist of a letter and four numbers—most drugs begin with "J"—and are used primarily by hospitals, physicians, and other providers as well as the insurance industry.

Speakers at the conference noted two drawbacks to HCPCS codes. While manufacturers can assign NDC numbers during the New Drug Application process, HCPCS codes are assigned only after the drug is approved and has been on the market for at least six months. While a "miscellaneous" category can catch some drugs just reaching the market, the time lag and lack of a unique designation create other avenues of confusion.

Final rules issued in August 2000 for the Health Insurance Portability & Accountability Act (HIPAA) of 1996 proposed the use of NDC numbers. Pharmacists liked the idea, but doctors and hospitals objected on the grounds that switching their five-digit system to a 10-digit format would increase costs. Now, the Department of Health & Human Services is reevaluating this recommendation.

According to Schock, NCPDP wants to persuade all parties to the identification question—manufacturers, pharmacists, providers, and government—to join together to agree on a single standard. "There are so many pieces to the puzzle—some we control, some we don't," she said.

The organization has already put forward for discussion its own billing unit standard, with quantities based on metric decimal units of each/grams/milliliters, and an 11-digit numbering system based on the current NDC code. The additional digit would put all numbers into a consistent 5-4-2 format.

Adoption of one billing standard would have many benefits, said Mary Ryan, v.p., corporate regulatory affairs for Merck-Medco Managed Care, LLC, particularly as healthcare dollars move from acute hospital stays to pharmaceuticals. "We would improve dispensing accuracy, especially if prescriptions were originally sent electronically by the doctor," she said. "And accuracy would improve in billing, allocation of copayments and reimbursements, data management, and even in flagging exceptions to the rule for later audit and analysis."

Aaron Levin

Based in Baltimore, the author writes frequently on health-related subjects.


Aaron Levin. Pharmaceutical product ID: An industry in crisis?

Drug Topics

Sep. 3, 2001;145:42.

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