What Is the True Impact of the FDA Proposed NDC Format Expansion?
A storm cloud has been brewing on the horizon for pharma industry as the FDA looks to solve the impending critical issue of the Labeler code numbers running out. While DSCSA is moving into the forefront of focus and budgets as the 2023 requirements take center stage, a potentially broader impact issue is taking shape. With their recent Proposed Rule on Revising the National Drug Code Format, the FDA has outlined the potential path to resolve the risk of running out of labeler codes. While many in the industry had hoped this would be the opportunity to follow other industries and move away from a rules based structured NDC number format with fragmented segments, the FDA is proposing to instead add additional digits to NDC segments to move the multiple standard NDC 10 format to a single standard NDC 12-digit format. While there are some challenges with this approach, it is clear the FDA put a lot of thought into the options and took time to outline the feedback that led to this proposed approach. We will attempt to outline the proposed approach along with what we see as the positives and challenges it presents. We would like to caution that our thoughts are mostly supply chain impact and that NDC number has a wide impact to pharmaceutical industry which requires deeper analysis by those who work in areas outside of supply chain such as regulator, commercial, packaging, dispensing and reimbursement/payments.
Components of the NDC Number:
The current NDC number is made up of 3 segments separated by hyphens that may vary in length but should total to 10-digit (not including the two hyphens). These segments include:
· Labeler Code: Number assigned by the FDA to each labeler to represent the company who will be performing the manufacturing, repackaging, relabeling or private label distribution and will ultimately own the NDC numbers officially listed under the code. Typically, a 5-digit number but 4-digit version exists for some companies who were approved prior to theconversion to 5-digit.
· Product Code: 3- or 4-digit number proposed by the labeler to represent the drug with active ingredient.
· Package Code: 1- or 2-digit number proposed by the labeler to represent the package size and type of the drug and differentiates between different quantitative and qualitative attributes of the product packaging.
The new approach proposed includes:
1. New NDC Format for 3 Segments: Move away from the current digit length formats which include: 4-4-2; 5-3-2; 5-4-1 to a new universal 6-4-2. This will make the labeler code always 6-digit, product code always 4-digit and the package code always 2-digit in length.
2. Proposed Conversion: . Outline of how each existing format can be padded with leading zeros to convert to the 6-4-2 format along with some mention on effects on non-FDA NDC formats such as those utilized by HIPAA related systems, payments and processes.
3. Effective Date: A date proposed to be 5 years after rule is finalized on which the FDA would begin assigning the new 6-digit labeler code. It is expected that stakeholders will have systems in place to handle the new related 12-digit NDC code with hyphens by this time and continue to accommodate any existing 10-digit formats.
4. Transition Period: A period of 3 years after the effective date for which existing 10-digit NDC formats will continue to be handled as existing inventory in the supply chain is distributed and dispensed. There is a mention that indicates manufacturers should self-convert their existing format during the first year.
5. Linear or Non-Linear Barcode Formats: A recognition that the new format may require a new data carrier since the industry has outlined that a 12-digit NDC would no longer fit in a standard GS1 linear UPC barcode. This makes the current approach of converting to a GS1 GTIN(global trade identification number) that includes the NDC number embedded in it no longer possible. FDA is proposing to update the prescribed standards mentioned 21 CFR 201.25(c) to include non-linear barcodes along with seeking feedback on any other data carrier methods to consider including.
6. Legal Authority: Proposing to amend related establishment registration regulations to include the new standardized format for 12-digit NDC to be listed under such establishments.
7. Cost and Benefits: Outlines the areas that the FDA believes will be included in the benefits and costs associated to the full implementation of the proposed rule for the entire industry. While the list and costs outline are a good starting point, we feel they require significant work from the industry to truly analyze.
Positives in the Approach:
- We estimate it allows the FDA to expand their potential number volume of labeler codes from around 90k to around 900k. This is assuming leading zero is taken by those self-converting previously from 4 to 5 and now from 5 to 6 following mentioned format.
- The document details that the FDA went through a significant process that included public hearings, reviewing of comments, analysis of parallel regulations and comparison of several proposed approaches to arrive at the selected option.
- The approach should reduce existing confusion in the various options of formats that include 3 different formats of “official” NDCs as well as another 11-digit standard that was developed to eliminate duplication and other challenges in dispensing and payment processes.
- Avoids the need to manage historically numerical format in a new alpha numeric format that many noted could increase errors on the critical patient care side where processes can often be more manual due to technical and financial challenges.
Challenges in the Approach:
· Higher Cost for Industry. While all the options that were brought forward by industry and mentioned in the proposed rule have significant potential costs impacts, the option selected will have higher costs for many sectors. These are impacts related to the need to manage the new NDC format in fully separate means from the GS1 GTIN required to standardize barcodes and related data exchanges when compared to following a GS1 GTIN standardize number as other industries and countries have implemented. Furthermore, updates to the systems that key off of NDC will have to be considered to handle the expanded format.
· Higher System Change Management. The extension of NDC from 10- to 12-digit as well as the need to likely add GTIN with NDC to all barcodes and systems integrations not already including both fields will require all stakeholders to develop projects to update impacted areas. NDC is widely utilized in every area from drug approval, packaging, distribution, dispensing and most payment system and processes.
· Time Challenge. While most drugs have shorter than 3 years shelf life, a significant portion has longer than the proposed transition period. The proposal seems to assume that all conversions of existing products will happen in year one or somewhere within the 3-year transition period. Otherwise, it does not take into consideration that new formats may happen sooner for distributors and dispensers if any packaging entity converts in the parallel packaging changes that the FDA mentions packagers go through. Our experience is that manufacturers do not change approved packaging formats unless there is a market or regulatory need to do so and can often go many years without a change to the packaging. We expect most will need to plan a special event to convert to the new format due to the wide impact internally and with trading partners needing cross company change management to handle the related data changes. This is complicated by the FDA mentioning that the planned 5-year plus 3-year approach may change if labeler codes exhaust faster than currentlyexpected.
It is critical for the industry to fully understand the impacts of this proposed change. While cost in some areas may be less, this change impact is significantly wider than those caused by DSCSA due to the areas impacted from regulatory establishment of product through distribution/dispensing and into payment impacts.
When we look back at the change analysis that most companies had to go through back in the years leading up to the Y2K event, we feel this is a more comparable event for pharmaceutical companies since the NDC number is so central to most systems and processes and systems are frequently set with field format limits to help ensure accuracy. Companies will have to manage standing up a new 12-digit format while simultaneously utilizing and then sunsetting existing 10-digit formats.
We encourage stakeholders from manufacturers, repackagers, 3PLs, distributors and pharmacy to review this proposed rule and raise awareness for feedback from any areas in your organization that may utilize NDC number in systems or processes. The deadline for submitting comments to the proposed rule topic to the FDA is November 22, 2022. While the 8 years outlined in the proposed rule may seem like a ways off, those who have been around DSCSA for now longer than that period, can tell you it is aggressive for the amount of collaboration, analysis and change management that will be required.
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