Welcome to the Department of Health Care Services Welcome to Medi-Cal Welcome to the Department of Health Care Services

National Drug Codes (NDC) FAQs: Resources and References

  1. Are there any examples or National Drug Code (NDC) billing instructions available for providers?
    A: An article announcing the updated companion guides for electronic transactions will be available on the Medi-Cal website. Manual replacement pages were updated in September 2008.
  2. Please cite the Social Security Act that mandates outpatient hospitals report NDCs.
    A: Section 1927(a)(7) of the Social Security Act mandates the collection of rebates for covered outpatient drugs that are physician-administered (as determined by the Secretary of the US Health and Human Services) and also requires that the information be submitted using NDC. The definition of a covered outpatient drug, section 1927(k) of the Act, includes drugs provided in various settings when separately billed to Medi-Cal. The confusion occurs because 1927(k)(3) states:“The term ‘covered outpatient drug’ does not include any drug, biological product, or insulin provided as part of, or as incident to and in the same setting as, any of the following (and for which payment may be made under this title as part of payment for the following and not as direct reimbursement for the drug):”, then lists both inpatient hospital services and outpatient hospital services settings. The key in the wording is the phrase “and not as direct reimbursement for the drug.” This means these are excluded if the drug is not billed and reimbursed directly, i.e., if the payment for the drug is bundled with other services.

    Additionally, many hospitals have pointed to Section 1927(j)(2) as exempting them as an organized health setting. This view is correct to the extent stated in the statute which reads: “The State plan shall provide that a hospital (providing medical assistance under such plan) that dispenses covered outpatient drugs using drug formulary systems, and bills the plan no more than the hospital’s purchasing costs for covered outpatient drug (as determined under the State plan) shall not be subject to the requirements of this section.” Therefore, in order for a hospital to be exempted it must meet two conditions. It must use a formulary system and bill no more than the hospital’s purchasing costs. Though this exempts the drug utilization from rebates, state and federal auditors would need to match specific drugs to their costs to ensure the hospital is conforming to the purchase cost pass-on provision.
  3. Additional Resources
    A: Providers may refer to future Medi-Cal Updates or contact the Telephone Service Center (TSC) at 1-800-541-5555 for more information.