NCPDP Standards for Accurate Billing, Reimbursement and Access

Pharmaceutical CommercePharmaceutical Commerce - January/February 2011

The National Council for Prescription Drug Programs’ (NCPDP) Billing Unit Standard (BUS) brings order to pharmaceutical transactions. Between it, the National Drug Code (NDC) and the Structured Product Label (SPL), all necessary commercial information about a product is known.

Say someone grabs a 6-ounce tube of toothpaste that costs $2.99 but the supermarket scanner rings up the charge at $2.99 per ounce. Such a major inconsistency in pricing is sure to be caught sooner rather than later by the consumer, and the matter can be promptly resolved.

Similar pricing/billing mistakes occur when pharmacies dispense medications without the billing unit standard (BUS) from the National Council for Prescription Drug Programs (NCPDP) or apply a nonconforming NCPDP billing unit for pharmacy transactions. Such errors can create snags during payment/reimbursement adjudication, or cause problems when the books are closed on a billing period. But they can also reverberate across the pharmaceutical supply chain ecosystem, touching manufacturers; wholesale distributors; retail, mail-order and other types of pharmacies; pharmacy benefit managers (PBMs); payers; and consumers.

For years, supply chain stakeholders along with vendors of drug databases and pharmacy information systems collaborated with each other to determine how to bill for a product. The problem with this “handshake agreement” is that these stakeholders may be viewing the same product differently or applying the agreed-upon billing rule inconsistently across other similar product types. Additionally, the arrangement did not offer manufacturers any guidance when products did not neatly fit within its boundaries.

Uniform billing practices

To ensure consistency in how medications are distributed and billed for, in 1993 NCPDP developed the BUS, which represents the quantity of every product as:

  • “Each”—Products that are measured in discrete units and not measured by volume or weight are billed as the number of each dispensed. These include tablets and capsules.
  • “Grams”—Ointments, creams and other items measured by weight are billed by the number of grams.
  • “Milliliters”—Solutions, injectable liquids and drugs measured by volume are billed as the number of milliliters (MLs).

Every manufacturer should utilize the NCPDP billing unit decision tree to identify the appropriate unit of measure for each product. NCPDP strives to contact and educate every manufacturer. However, some companies are so large that the left hand sometimes does not know what the right hand is doing. A few years ago, for example, a well-known pharmaceutical company failed to assign the correct billing unit to a product even though it had an employee represented in the NCPDP Work Group 2 (WG2) responsible for maintaining BUS. While this particular issue was resolved, the point remains that the complexities and size of an organization can create a fragmented process as manufacturers rush to launch new drugs or kits.

Lack of awareness about the BUS is particularly common among start-ups. They may be focused exclusively on developing and commercializing products, unaware of the established protocol for handling billing and payment process flow from pharmacies to payers.

First line of defense

When either situation crops up, the first indication of potential trouble is usually discovered when a pharmaceutical manufacturer is gearing up to ship out a new or repackaged product to pharmacies. Often this happens when a drug company contacts First DataBank, Medi-Span®, Gold Standard Inc. or another drug database vendor to provide details about its medication.

In cases where the manufacturer is questioning the BUS rules given by the drug database vendor, they are instructed to submit an electronic NCPDP QUIC FORM (Quantity Unit Information Communication) to WG2. The QUIC Form is used for clarification and resolution of billing units. WG2’s task group, which meets biweekly via conference calls, includes representation from pharmacy supply chain stakeholders and the major drug compendia. The manufacturer is encouraged to actively participate in the process as the task group discusses the QUIC form and makes a recommendation to WG2. WG2 makes a final determination, using the recommendation of the task group as well as using the guidelines of the BUS.

Pain all around

Despite the diligence of the database vendors, some products hit the market without the appropriate billing unit. Sometimes, these companies list the same product under different billing units or find their billing unit no longer applies because they have reformulated or changed the medication without informing the compendia. All of this results in billing errors, meaning pharmacists will either overcharge or be underpaid by commercial, government and self-insured payors.

Errors involving high-volume prescriptions and medication kits are even more of a nightmare for pharmacists and payors because they require so much time and manual intervention to correct them. Both sides have to investigate, readjudicate and adjust payment for every affected claim.

Billing errors covering kits, which can be more complex to resolve, often are caused by dispenser confusion over whether to bill a product labeled as a kit as Each, Grams or MLs. For example, a box may contain 30 prefilled one ML syringes along with other supplies to facilitate the products’ administration. Should the pharmacist bill for one box (one each), 30 syringes (30 eaches) or 30 ML? In this particular case, it should be listed as 30 ML.

What if a kit contains one drug measured in grams and another in ML? Should it be billed as one each or as a combination of grams and MLs? In most examples of the combination of two different billing units in one box, the product is listed as a KIT (one each).

Billing unit errors can have serious consequences when state Medicaid agencies are involved, as underpayment or overpayment of rebates could generate a fraud investigation by the state or by the Centers for Medicare and Medicaid Services (CMS). Consumers who pay out of pocket have equivalent concerns, especially if the inaccuracy affects Medicare Part D “doughnut hole” coverage.

Discrepancies can be highly disruptive and take weeks to resolve. For example, compendia may agree to give their clients two weeks to a couple months’ notice when it discovers or learns from a payer or PBM that a product’s BUS has been listed differently. This enables pharmacies, insurers and PBMs sufficient time to back up existing data in case they are audited later.

Tomorrow’s billing units

Although billing units for pharmaceutical products have been standardized for the past 18 years, it’s not uncommon for a product to be introduced into the market that challenges the BUS rules, forcing WG2 to urgently address the matter. NCPDP anticipates that volume will increase after 2015 when manufacturers of brand name drugs bring new innovator products that they have been developing for years to market. Many large manufacturers are acquiring biotech companies with promising pipelines. NCPDP is working with the U.S. Food and Drug Administration (FDA) to minimize problems when these new products hit the market, to support compliance with the NCPDP BUS.

When a company develops a drug it obtains a National Drug Code (NDC) from the FDA. The 10-digit number identifies the manufacturer, the product and the package size. Once the company acquires an NDC, it must create and electronically submit a Structured Product Label (SPL) to the FDA. SPL documents the content of labeling and additional machine-readable information. The former includes text, tables and figures; the latter includes product and generic names, ingredients, ingredient strengths, dosage forms, routes of administration, appearance, DEA schedule, package quantity and type.

Between the NDC number and SPL, all information about a product is known except its billing unit. NCPDP has recommended that the FDA include the billing unit as an index file within their SPL. This action would establish uniformity in drug distribution and billing and create a more efficient and effective process for all stakeholders — from the manufacturer to the payer, saving both time and money. PC


John Klimek, RPh, is senior vice president of industry information technology, The National Council for Prescription Drug Programs.


NCPDP, founded in 1977, is a not-for-profit, ANSI-accredited, Standards Development Organization (SDO), with over 1,500 members representing virtually every sector of the pharmacy services industry. Through a consensus-building process, the organization’s diverse membership creates and promotes standards for electronic healthcare transactions. Work Groups have joint meetings quarterly (the next one is in Las Vegas on Feb. 9) and the organization has an annual conference , to be held this year in Phoenix on May 16-19.

The organization also sells database and information products, including HCIdea, a database of over 1.6 million prescribers, and dataQ, a pharmacy database updated weekly—both trusted sources of business data.


In addition to WG 2 Product Identification, NCPDP has over a dozen other Work Groups, subdivided into task groups, tending to standards and practices in pharmacy and healthcare activities. Of particular interest to pharma manufacturers are Work Groups overseeing manufacturer rebates (WG7); government programs (WG9); professional pharmacy services (WG10), e-prescribing (WG11), and pedigree and traceability (WG17). Industry representatives needn’t be NCPDP members to participate in task group meetings or conference calls. More information is available at

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