EDI HC 252

NDC and NPI

National Drug Code or NDC:

Each medication listed under Section 510 of the U.S. Federal Food, Drug, and Cosmetic
Act is assigned a unique 11-digit, 3-segment number. This number, known as the
National Drug Code or NDC, identifies the labeler or vendor, product, and trade package
size.

1. The first segment, the labeler code, is assigned by the Food and Drug Administration
or FDA. A labeler is any firm that manufactures, repacks, or distributes a drug product.

2. The second segment, the product code, identifies a specific strength, dosage form,
and formulation for a particular firm.

3. The third segment, the package code identifies package sizes.

Both the product and package codes are assigned by the firm.
The NDC will be in one of the following configurations: 4-4-2, 5-3-2, or 5-4-1.

National Provider Identifier or NPI:

We now understood what an NPI is. But, do you think we need to understand why did the
Health and Human Services or HHS come up with this new concept of “NPI?”

Here is the reason why.

There is no one comprehensive scheme to enumerate health plans; existing enumeration

systems are incomplete and overlapping.  For example, State regulators use the National
Association of Insurance Commissioners’ Company Code; the Internal Revenue Service
and the Department of Labor use a 12-digit identifier consisting of the 9-digit employer
number and a 3-digit plan designation; health care institutions and other health care
providers use their own codes or alphabetic and numeric listings of names and addresses;
and Medicare fiscal intermediaries and carriers use locally devised codes.

A single health plan can have several of these identifiers, each assigned by different
organizations for a specific purpose.  Some health plans are also assigned multiple
identifiers by the same organization because they are known by more than one name.
The lack of a standard identifier for health plans costs the health care industry time and
money.  This is mainly due to the inability to route transactions in a timely way. 

For example, a health care provider may find that its claim has been routed to several
locations before arriving at the correct health plan for payment.  This misrouting of

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transactions results in delayed payments to the beneficiary or provider.  A unique health
plan identifier would simplify and improve the routing of health care transactions and the
administration of health care plan benefits.

In April 1994, HCFA initiated the development of a unique numbering system for health
plans to improve the administration of the Medicare and Medicaid programs.  The
purpose of the initiative was to develop and implement a national model for cost effective
identification of health plans that would facilitate the routing of health care transactions
to the health plan responsible for payment. 

The Medicaid program always pays after any other coverage the patient may have.  Use
of a single, national numbering system for health plans would assist State plans in
assuring that their health care expenditures are limited to amounts not reimbursable under
other plans.

Use of a unique identifier for each health plan would help to reduce inappropriate
expenditure of funds and expensive recovery efforts.  A national unique health plan
identifier would also assist Medicare in transferring claims for Medicare beneficiaries
covered by Medigap policies and in transmitting complementary claims to and from other
health plans.  The health plan identifier would supply the correct electronic address when
Medicare needs to send a crossover claim electronically to another health plan.
Pursuant to the passage of the Health Insurance Portability and Accountability Act of
1996 or HIPAA, and in consultation with the industry, HCFA proposed that NPI be
adopted as the national standard identifier for health plans.

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