Switch to National Drug Codes could shake up market

Sunday, January 12, 2003

January 13, 2003

WASHINGTON - Various DMERC publications have informed providers that they must drop HCPCS and use National Drug Codes (NDC) as part of HIPAA beginning April 1, and rumors are flying.

Industry sources say providers are wondering whether there’s more in store for them than just a change in coding.

“A lot of people are telling me that the real reason for the switch to NDC is that there’s going to be a change in payment philosophy,” said Mickey Letson, president of Letco Medical in Decatur, Ala., and chairman of the Respiratory Homecare Providers Association. “We’ve always found that when Medicare makes a change to coding, they make a change to reimbursement.”

Letson said he’s heard the switch to NDC could mean CMS is moving toward reimbursing at average wholesale price (AWP). Right now, Medicare reimburses for albuterol, for instance, with one code and one fee, even though different brands of albuterol have different AWPs. But with NDC, it would reimburse for albuterol with numerous codes and numerous fees, possibly fees similar to the AWPs.

“All the AWPs are close, but even pennies are enough to make providers change from one brand to another based on higher reimbursement,” Letson said.

The result could be drug shortages, as manufacturers with higher AWPs struggle to fill an influx of orders, Letson said.

John Durkee, national sales manager for ABC Plus in Orlando, Fla., said he’s heard the switch to NDC could mean CMS is moving toward reimbursing at AWP or that it’s moving toward a national prescription drug program. He said Medicare is the only insurer to use HCPCS (most other payers already use NDC), and if you’re going to implement a national program, you want standardized coding.

“You’re not going to change the thousands of codes everyone else already uses,” he said. “You’re going to change the 40 or so codes Medicare uses.”

Both Letson and Durkee said regardless of the change in reimbursement, providers are bracing themselves for a cut this year.

Letson said many providers have applied for extensions, giving themselves until Oct. 16 to comply with NDC.