Every few months a flurry of faxes and flyers are sent to oncology offices across the country with announcements of huge savings on oncology drugs from Canadian pharmacies. And with each new advertising campaign questions arise as to the legitimacy of the pharmacy, the transaction and the almost irresistible pricing.

First, the FDA has clearly stated that virtually all drugs imported to the United States from Canada and any other foreign country would violate U.S. law.

Second, as described in the press release below, billing Medicare for drugs imported from a foreign company has been determined to be a violation of the Federal False Claims Act.

In a press release dated April 24, 2008 the United States Attorney's Office Eastern District of New York announced that a NY oncologist and his wife agreed to settle civil fraud allegations involving importation of oncology drugs from Canada.

The oncologist and his wife agreed to pay $275,000 in damages to the United States to resolve allegations that they violated the federal False Claims Act in connection with claims they submitted to the Medicare program for oncology drugs that were imported from Canada. They also agreed to enter into an integrity agreement with the Department of Health and Human Services.

The settlement was announced by Benton J. Campbell, United States Attorney for the Eastern District of New York, Gary Heuer, Special Agent in Charge, Department of Health and Human Services, Office of Inspector General, New York Regional Office, and Mark J. Mershon, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Division.

The government alleged that for a one year period between October 2004 and October 2005 the defendants purchased oncology drugs that were imported from Canada and then billed and were reimbursed by the Medicare program despite knowing that the drugs were not subject to reimbursement. In settling the case, the defendants have not admitted to engaging in the conduct at issue.

The government began its investigation after another physician filed a "qui tam" (whistleblower) lawsuit in the Eastern District of New York on behalf of the United States. In the lawsuit the physician alleged that doctors throughout the United States were importing oncology drugs from Canada because they could be purchased at a lower price than domestic oncology drugs. He further alleged that patients were generally not informed that they were being administered an imported drug.

In announcing the settlement United States Attorney Campbell stated,
“Health care providers who violate the law will be held accountable. We are committed to vigorously investigating and prosecuting fraud on the Medicare program.”

And HHS OIG Special Agent-in-Charge Heuer said, “Fighting the misrepresentation of pharmaceuticals and services provided by physicians is a priority of this office. This investigation is a further example of our commitment to root out schemes generating inflated profits at the expense of the taxpayers and vulnerable recipients.”

  • Click Here to read the Press Release on the United States Attorney's Office Eastern District of New York Web site.
  • Click Here to read a letter from the FDA regarding importing Canadian drugs.


Medicaid Drug Rebate Program Challenges Practices 

By now most of you are aware of the Medicaid Drug Rebate Program created by the Omnibus Budget Reconciliation Act of 1990 (OBRA'90). This program requires drug manufacturers to have a national rebate agreement with the Secretary of the Department of Health and Human Services (HHS) for states to receive Federal funding for outpatient drugs dispensed to Medicaid patients. The drug rebate program administered by the Centers for Medicare & Medicaid Services’ Center for Medicaid and State Operations (CMSO) was intended to lower the cost of pharmaceuticals reimbursed by state Medicaid agencies.

The drug rebate program was amended by the Veterans Health Care Act of 1992 (VHCA). VHCA requires manufacturers to enter a pricing agreement with HHS for the Section 340B Drug Pricing Program administered by the Health Resources and Services Administration and various other agreements with the Department of Veterans Affairs. A drug manufacturer must sign an agreement with both the HHS and VHCA programs in order to have its drugs covered by Medicaid. CMS maintains a complete list of Rebatable Drugs on their Web site.

Because of the VHCA pricing agreement requirement it is recommended that you verify coverage through your Medicaid carrier prior to administering drugs to Medicaid beneficiaries. Most Medicaid program Web sites contain lists identifying drugs that are reimbursable without prior-authorization and those that require prior-authorization.

Included in the Deficit Reduction Act of 2005 (DRA) was a change in how drug manufacturers calculate the Average Manufacturer Price (AMP) and a requirement that States collect Medicaid rebates for certain physician administered drugs.  In order to apply for and collect the appropriate rebates from manufacturers Medicaid programs must be able to identify the manufacturer and their drugs administered to Medicaid beneficiaries. Therefore, beginning January 01, 2007 States must collect National Drug Codes (NDC) for both single source drugs and the 20 multiple source physician-administered drugs identified as having the highest dollar volume in Medicaid.

Furthermore, effective January 01, 2008, states that do not collect NDCs on these physician administered drugs will not receive Federal matching payments for the drugs unless the state applies for and receives a hardship waiver. For more information on the Medicaid Drug Rebate Program refer to the March/April 2006 Best Practices Review Newsletter sponsored by Genentech.

The current list (dated December 2006) of the top 20 multiple source physician-administered drugs lists drugs ranked in order of highest cost and volume in the Medicaid program is available on the CMS Deficit Reduction Act Web page under the Physician Administered Drugs tab. The list includes the HCPCS code, short description, HCPCS dosage, NDC and labeler name for each drug. CMS says that the list may be modified from year to year to reflect changes in cost and volume.

Currently CMS only mandates the collection of single source drugs and the top 20 multiple source drugs (as described above), nevertheless several State Medicaid programs are now requiring the NDC be submitted for every physician administered drug.

In order to calculate the actual rebate amount due from each manufacturer States are required to maintain drug utilization data that identifies, by NDC, the number of units of each covered outpatient drug for which the States have reimbursed providers. This drug utilization data must be provided by the State to CMS and the manufacturer.

The ability of the state Medicaid program to appropriately collect rebates is dependent on the accurate reporting of the NDC by providers. This represents a challenge for physician practices and most hospital outpatient departments. Unlike pharmacies that bill with the NDC physicians and hospital outpatient departments bill drugs with the Healthcare Common Procedure Coding System (HCPCS) code.

The HCPCS are more generic than NDCs as they only describe the drug and billing units while the NDC number is a 10-digit, 3-segment unique identifier that identifies the pharmaceutical vendor, product, and trade package size. The HCPCS do not contain the information necessary to identify the manufacturer and determine the amount of rebate owed to the State Medicaid program.  

Therefore, because rebates are calculated and paid based on NDCs, each HCPCS must be converted to the more specific NDC. This becomes more complicated when the billing unit assigned to the HCPCS code differs from the units used for rebate purposes (e.g., grams versus liters) necessitating the conversion of both the HCPCS to NDCs and HCPCS billing units into equivalent NDC billing units. Note: See the example provided under Converting Quantities from HCPCS to NDC.

Another issue that has caused confusion is the fact that while the NDC is a 10-digit number the HIPAA standard is an 11-digit NDC. To conform to the 11-digit NDC some programs will add a leading zero to the NDC. For example, CMS displays the labeler code as 5 digits with leading zeros; the product code as 4 digits with leading zeros; the package size as 2 characters with leading zeros. The FDA does not use a leading zero but instead uses an asterisk as a placeholder. When billing with the NDC it is important to understand the required 5-4-2 format as explained in the article titled, What is an NDC Number?

By far the biggest challenge facing providers is accurately capturing and reporting the NDC. Reporting the NDC for sole-source drugs is relatively simple as there is only one NDC per package size.  However, for multi-source drugs there are as many NDCs as there are manufacturers and package sizes. As an example, the current NDC crosswalk published by Palmetto, GBA in April 2008 lists thirty-five different NDCs for paclitaxel.
While NDC/HCPCS crosswalk information is available by both Palmetto, GBA and the FDA (read the article National Drug Code Resources for more information) providers are warned not to rely solely on NDC information from either of these resources but rather to bill with the NDC listed on the actual drug administered.

Because most practices buy multi-source drugs based on the best available price it is common for them to have several different brands and/or sizes of the drug on hand at any given time. The challenge then is to identify the specific vial from which that dose of drug was administered to the Medicaid patient.

In an effort to simplify the process for reporting NDCs some practices adopted a policy of choosing one NDC to report for each J-code regardless of the NDC assigned to the actual drug administered. This is not only a bad policy it is expressly prohibited and is considered fraudulent billing. While billing with an incorrect NDC doesn’t affect the provider’s reimbursement rate it does provide false information to the State who then relies on that information to collect rebates from the manufacturer.

For some physician practices the administrative work, and the associated cost, necessary to comply with the NDC requirement finally forced them to stop treating Medicaid patients in the office.

In 2007 the American Society of Health-System Pharmacists® (ASHP) conducted a   member survey to estimate the impact of the NDC reporting requirements on hospital outpatient departments. In a letter to CMS the ASHP reports that their survey determined the estimated cost to comply with the rule was $10.80 per claim not the estimated $0.09 as reported in the proposed rule.

Finally, if your practice is treating Medicaid patients and reporting the NDCs verify the documentation required by your Medicaid carrier as some Medicaid carriers have outlined documentation standards requiring that the NDC of the drug administered be documented in the patient’s medical record.

What is an NDC Number?

Drug products are assigned a unique 10-digit, 3-segment National Drug Code (NDC) number that identifies the labeler, product, and trade package size. The NDC will be in one of the following segment configurations: 4-4-2, 5-3-2, or 5-4-1.

  • The first segment, the labeler code, identifies the firm that manufactures, repacks, relabels or distributes the drug under its own name.
  • The second segment, the product code, identifies the specific strength, dosage form, and formulation of the drug.
  • The third segment, the package code, identifies the package size.

The HIPAA standard is an 11-digit NDC with a 5-4-2 configuration. Therefore when submitting an NDC a leading zero is added to the 10-digit NDC. The placement of the zero will depend upon the configuration of the NDC with the zero being added to the appropriate segment to achieve the HIPAA standard 5-4-2 configuration as shown below:

10- Digit NDC # Configuration
Leading Zero Placement for
5-4-2 Configuration
4 - 4 - 2
5 - 4 - 2
5 - 3 - 2
5 - 4 - 2
5 - 4 - 1
5 - 4 - 2


Originally published in Oplinc’s Best Practices Review Volume 2, Issue 2.


Converting Quantities from HCPCS to NDC

The Minnesota Department of Human Services provides a useful table illustrating how to convert HCPCS billing units to NDC units:

Calculating Dosing

Each container of medication has an NDC printed on the box or label. Use the NDC that is closest to the unit of use. For example, use the NDC from the vial rather that the multi-vial box. If you use a multi-vial, report the quantity used from the vial.

Following are some examples of how to convert quantities from HCPCS to NDC:






  • HCPCS code is per 10mg and the product comes as a dry powder injection 500mg
  • NDC units are “each vial”
  • Dose was 100 mg, for example
    HCPCS quantity = 10 and the NDC quantity = 100/500 = 0.2
  • On the CMS-1500, enter: N400002762301 UN0.2



  • HCPCS code is for 10mcg and the product comes as 250mcg/ml
  • NDC units are ml
  • Dose was 750mcg
  • HCPCS quantity = 75 and the NDC quantity = 3
  • On the CMS-1500, enter: N400002897101 ML3



  • HCPCS code is for 10mg and product comes as 100mg powder for injection.
  • NDC units are “each vial”
  • Dose was 200mg
  • HCPCS quantity = 20 (20 x 10mg) = 200mg and the NDC quantity is 2. This is true even if the dry powder was reconstituted to 20ml
  • On the CMS-1500, enter: N457894003001 UN2

Minnesota Department of Human Services http://www.dhs.state.mn.us


National Drug Code Resources

The U.S. Food and Drug Administration (FDA) developed and maintains the National Drug Code (NDC). As reported in this newsletter the NDC is a 10-digit number that uniquely identifies drug products marketed in the United States. The NDC is used to identify the drug’s manufacturer/distributor, dosage, form, and packaging.

Drug establishments are required through the Drug Listing Act of 1972 to provide the FDA with a current list of all drugs manufactured, prepared, propagated, compounded, or processed by it for commercial distribution.  This information is entered in the Drug Registration and Listing System (DRLS) data base.

The FDA extracts some of the information from the DRLS data base and publishes that information in the NDC Directory.

Registered drug establishments must update their drug listing data in June and December of each year, or, at the discretion of the establishment, when a change occurs.  The FDA advises users that if a recent change has not been reported to them the NDC Directory may not be accurate.

In fact, a 2006 Office of Inspector General (OIG) review of the FDA’s NDC Directory, found that the NDC Directory was neither complete nor accurate and the OIG recommended that the FDA improve guidance for industry and streamline the NDC submission and verification processes.

The NDC Directory is organized as follows:

  • Product Trade Name or Catalog Name
  • National Drug Code (unique 11 digit*, 3 segment number). The segments represent the labeler code, the product code and the package code.
  • Dosage Form
  • Routes of Administration
  • Active Ingredients
  • Strength
  • Unit
  • Package Size and Type
  • Major Drug Class
  • FDA approved application number (note that “other” in this field means it may not have been approved).

*The NDC directory uses asterisks as placeholders in the NDC

Users can search the NDC Directory by:

  • Proprietary Name
  • NDC Number
  • Active Ingredient
  • Firm Name
  • Application Number 

For example, choosing the Search by Proprietary Name option and typing in “Taxol” brought up the following information:



Appl No


Firm Name




300MG/50 ML

























300MG/50 ML





30MG/5 ML


Clicking on the abbreviated NDC number for the fourth item listed brought up the additional information (shown below) including the complete NDC, the package size, package type, the dosage form and whether the drug is prescription or over the counter.



Complete NDC








16.7 ML




A second source of NDC/HCPCS crosswalk information is available through Palmetto GBA. Palmetto updates their NDC Crosswalk regularly and publishes the information in both PDF and Excel formats.

Still, providers should not rely solely on this information for billing purposes and should remain aware of the possibility of errors contained in the NDC Crosswalk.

When using the Palmetto NDC Crosswalk to find the NDCs associated with a particular HCPCS code sort the Excel spreadsheet by HCPCS, if a particular NDC is listed more than once for that HCPCS identify the correct NDC row based on the Relationship Start Date and Relationship End Date, the billed HCPCS code, and if applicable, the HCPCS code modifier. The Relationship End Date should be 99/99/9999 to be a valid NDC for the billed HCPCS code.

For example, when searching for NDCs associated with paclitaxel (J9265) thirty-five distinct NDCs were found. As shown in the table below one NDC number 68817-0134-50 was listed with the HCPCS code J9265, the HCPCS Description of paclitaxel, 30mg but the NDC Label was listed as Abraxane 100mg. This is not the correct HCPCS code or NDC for Abraxane but you might miss that if you didn’t pay attention to each field and in particular the Relationship End Date. As described above to be a valid NDC the Relationship End Date should be 99/99/9999. Therefore the first row shown below is not a valid NDC for HCPCS J9265 (paclitaxel) but it a valid NDC for HCPCS J9264 (Abraxane) as shown in the row below it.

















30 MG

Abrazane 100 MG







INJECTION, Paclitaxel
Protein-Bound Particles
1 MG

Abraxane 100 MG

Excerpted from Palmetto, GBA NDC Crosswalk

Notify Patients of Expected Medicare Denials

The Advance Beneficiary Notice of Noncoverage (ABN) is a notice given to Medicare beneficiaries to inform them that Medicare is not likely to provide coverage in a specific case. ABNs are not required in emergency or urgent care situations.

The ABN gives the Medicare beneficiary the opportunity to accept or refuse the items or services.

Once all blanks are completed and the form is signed, a copy is given to the beneficiary or representative and the original is retained by the provider.

On March 3, 2008 CMS released a revised Advance Beneficiary Notice (ABN) of Noncoverage (CMS-R-131). Providers may now use the revised ABN for all situations where Medicare payment is expected to be denied. The revised ABN replaces the following existing forms:

  • ABN-G (Form CMS-R-131G), General ABN
  • ABN-L (Form CMS-R-131L), Laboratory ABN and
  • NEMB (Form CMS-20007) Notice of Exclusion from Medicare Benefits.

There is a 6-month transition period (ending September 1, 2008) during which time providers may use either the existing ABNs or the new revised ABN. However, providers and suppliers must begin using the revised ABN (CMS-R-131) no later than September 1, 2008.

Revised manual instructions in Chapter 30 of the Claims Processing Manual (Pub.100-04) will be published within the next few weeks and a Medicare Learning Network (MLN) Matters article will also be released at that time.  The Revised ABN CMS-R-131 Form and Instructions are available on the CMS Web site.

Identified by CMS as some of the key features the revised ABN:

  • Has a new official title, the “Advance Beneficiary Notice of Noncoverage (ABN)”, in order to more clearly convey the purpose of the notice;
  • Replaces both the existing ABN-G and ABN-L;
  • May also be used for voluntary notifications, in place of the Notice of Exclusion from Medicare Benefits (NEMB);
  • Has a mandatory field for cost estimates of the items/services at issue; and
  • Includes a new beneficiary option, under which an individual may choose to receive an item/service, and pay for it out-of-pocket, rather than have a claim submitted to Medicare.

The ABN is approved by the Executive Office of Management and Budget (OMB) and cannot be altered except as outlined in the form instructions. A Spanish language ABN is also available on the CMS Web site.

CMS reminds providers that the ABN must be verbally reviewed with the beneficiary or his/her representative before it is signed. The ABN must also be delivered to the beneficiary far enough in advance of the service that the beneficiary has time to consider his/her options and to make an informed choice about receiving the services.

Questions regarding the new ABN can be emailed to CMS at:


Published by Rise Marie Cleland. Sponsored by Genentech and hsi

Reporting NDCs on Crossover Claims for Dual Eligible Beneficiaries

If you aren’t currently including NDC information on physician administered drug claims for your dual eligible Medicare/Medicaid patients you should be aware that CMS has clarified the requirement for NDC information on these claims.

Crossover claims that are sent to the Medicaid contractor through the electronic Coordination of Benefits (COB) process should have the NDC included on the original claim to Medicare on  the 837 Electronic Transaction.

CMS Transmittal 1401 Change Request 5835 summarizes the changes to Publication 100-04 Medicare Claims Processing Manual that include where and how to report the NDC number and corresponding quantity on the CMS-1500 paper claim for Medicare-Medicaid crossover claims. CR 5835 applies to CMS-1500 paper claims only and the requirements only apply when the Medicare provider is submitting claims for physician administered drugs to Medicare for dual-eligible Medicare/Medicaid beneficiaries.

CR 5838 has an Effective Date of April 7, 2008 and Implementation Date of April 7, 2008.

MLN Matters Number: MM5835 includes the following information regarding how to report the required information:

Key Points
When required to submit NDC drug number and quantity information for Medicaid rebates on the CMS-1500 paper claim be aware of the following:

Submit the NDC code in the red shaded portion of the detail line item in positions 01 through position 13.
The NDC is to be preceded with the qualifier N4 and followed immediately by the 11digit NDC code (e.g. N499999999999).
Report the NDC quantity in positions 17 through 24 of the same red shaded portion. The quantity is to be preceded by the appropriate qualifier: UN (units), F2 (international units), GR (gram) or ML (milliliter). There are six positions available for quantity. If the quantity is less than six positions, the entry should be left justified with spaces filling the remaining positions.

For additional information regarding this requirement, refer to the IOM, Pub 100-4; Chapter 26.

As State Medicaid programs make the changes necessary to accept the NDC information on these claims they have been informing providers that CMS-1500 crossover claims submitted without the required information for rebatable drugs will be denied. The list of rebatable drugs and their corresponding NDCs can be found on most State Medicaid Web sites.






Risë Marie Cleland

Oplinc, Inc.
315 W. Mill Plain Blvd.,
Suite 204
Vancouver, WA 98660
360.695.1608 office
360.695.6937 fax

Comments and suggestions for future issues are welcome, please forward correspondence to Risë Marie Cleland by email at: Rise@Oplinc.com

Volume 3 Issue 8
Volume 3 Issue 7
Volume 3 Issue 6
Volume 3 Issue 5
Volume 3 Issue 4
Volume 3 Issue 3
Volume 3 Issue 2
Volume 3 Issue 1
Volume 2 Issue 7
Volume 2 Issue 6
Resource Guide Issue 5
Volume 2 Issue 4
Volume 2 Issue 3
Volume 2 Issue 2
Volume 2 Issue 1

Risë Marie Cleland is the founder and President of Oplinc, Inc., a national organization of oncology professionals. Through Oplinc, Inc. Ms. Cleland publishes the weekly Oplinc Fax Tracts focusing on the timely dissemination of information pertaining to billing, reimbursement and practice management in the oncology office and Oplinc’s Best Practices Review, which provides a more in-depth look at the issues and challenges facing oncology practices. Ms. Cleland also works as a consultant and advisor for physician practices, pharmaceutical companies and distributors.

Please note that this newsletter is presented for informational purposes only. It is not intended to provide coding, billing or legal advice. Regulations and policies concerning Medicare reimbursement are a rapidly changing area of the law. While we have made every effort to be current as of the issue date, the information may not be as current or comprehensive when you review it. Please consult with your legal counsel for any specific reimbursement information. For Medicare regulations visit: www.cms.hhs.gov.


CPT® is a Trademark of the American Medical Association Current Procedural Terminology (CPT) is copyright 2007 American Medical Association. All Rights Reserved. No fee schedules, basic units, relative values, or related listings are included in CPT. The AMA assumes no liability for the data contained herein.

Remove me from this distribution list | Sign up to receive this newsletter