In today’s healthcare landscape, precision matters more than ever. And nowhere is that more true than in pharmacy-related billing. The National Drug Code (NDC) might seem like a random string of numbers, but it plays a central role in ensuring accurate drug identification, payer compliance, and timely reimbursement.
Yet many billing errors stem from NDC code issues—and the stakes are high. Denied claims, compliance penalties, and even legal risks can follow. This guide offers an expert-level breakdown of what NDC codes are, why they matter, and how to use them properly in billing systems.
The National Drug Code (NDC) is a universal product identifier for drugs in the United States, mandated by the FDA. Its purpose is to uniquely identify:
The manufacturer or labeler
The specific drug product (strength, form, formulation)
The packaging format
NDC codes support standardized drug tracking, which is essential for reimbursement, public health monitoring, fraud prevention, and medication safety.
Format of an NDC Code
NDCs are composed of 3 segments in a 10- or 11-digit configuration:
mathematicaCopyEditLabeler - Product - Package
Segment
Description
Example
Labeler (4-5 digits)
Manufacturer or distributor
12345
Product (3-4 digits)
Strength, dosage, formulation
6789
Package (1-2 digits)
Package size and type
01
To comply with billing requirements, most systems convert this to an 11-digit format (with leading zeros if necessary): 01234567890 → formatted as 5-4-2
Where Are NDC Codes Used in Medical Billing?
NDC codes are required in multiple billing scenarios, especially when drugs are administered in-office (J-code drugs) or billed to federal programs like Medicare, Medicaid, TRICARE, or the VA.
📌 Medicare Rule: Since 2007, CMS requires NDC codes on claims for all physician-administered drugs.
How to Find an NDC Code for a Drug
On the Medication Label
Look for a sequence like: NDC 59762-2330-01 Note: This might be printed with or without dashes.
NDC Code Lookup Tools
FDA NDC Directory – Free, official database: FDA.gov/NDC
DailyMed (NIH) – Lists drugs by NDC, packaging, and clinical data
RxNorm API – Ideal for developers and EHR integration
Subscription Databases: Medi-Span, First Databank (FDB), Gold Standard
NDC Code vs HCPCS Code: What’s the Difference?
Feature
NDC Code
HCPCS Code
Format
10- or 11-digit numeric code
Alphanumeric (e.g., J3490, Q2050)
Assigned By
FDA
CMS (Medicare)
Purpose
Identifies the exact drug
Describes reimbursable product or service
Usage
Required for drug detail
Required for claim processing
🧠 Tip for Billers: Use both NDC and HCPCS when billing drugs under Medicare Part B. The NDC adds specificity; the HCPCS links it to reimbursement.
Common NDC Coding Errors—and How to Fix Them
1. Wrong Format (Not 11-Digits)
Fix: Use leading zero padding (e.g., 1234-5678-01 → 01234567801)
2. Expired or Inactive NDC Codes
Drugs frequently change packaging or get reclassified
Fix: Always use updated drug databases
3. Mismatch Between Drug and HCPCS
Some billers mistakenly pair oral NDCs with injectable J-codes
Fix: Double-check dosage route, unit, and NDC-to-J code crosswalk
4. Incorrect Units of Measure
NDCs require units in ML, GR, UN, or F2 (dosage-specific)
Fix: Know the correct billing unit multiplier for each drug
How to Update & Validate NDC Codes in Billing Software
Billing software should:
Allow manual or auto-entry of 11-digit NDCs
Include real-time validation tools
Offer crosswalks between NDC ↔ HCPCS ↔ CPT
Best Practices:
Monthly updates from Medi-Span or FDA sources
Flag NDC mismatches before claim submission
Use built-in claim scrubbers
How to Handle Special Scenarios
Compounded Drugs or Unlisted NDCs
Use closest applicable NDC + proper documentation
Add notes or submit via manual claim correction
Missing or Damaged NDC Labels
Reference your practice’s internal inventory logs
Use the Lot number + contact manufacturer if needed
Off-label Drug Use
Medicare may deny without strong clinical justification
Use supporting documentation and possibly prior authorization
Comparing NDC Code Lookup & Validation Tools
Tool
Best For
Features
Pricing
FDA NDC Directory
Free government source
Labeler and packaging details
Free
DailyMed
Drug label info + NDCs
Routes, strengths, warnings
Free
Medi-Span
High-volume claim scrubbing
Drug crosswalks, audit tools
Paid (enterprise)
First Databank
Hospitals and large health systems
EHR integrations, formulary updates
Paid (custom quote)
Regulatory Requirements: What Billers Must Know
CMS Rule 150: Medicare requires 11-digit NDC format, with HCPCS, and correct units of measure
Medicaid NDC Reporting Rule: All states require NDCs for physician-administered drugs under rebate programs
HIPAA Compliance: NDC data is part of standard X12 claim formats (837P/837I)
Failure to comply = claim rejection, delayed payment, audit flags
Real-World Example
A dermatology practice submitted 20 claims for a J-code biologic injection using the NDC from the starter kit packaging. All were denied. Upon investigation, the NDC was not FDA-approved for billing—it was for promotional use only. They refiled using the office-use NDC and recovered $9,800 in reimbursements.
For example, an NDC code might appear as 12345-6789-01:
12345 is the labeler
6789 identifies the product
01 denotes the package size
In CMS1500 form, the NDC code is available in the shaded portion of the line item field 24A-24G as shown in below image,
In the UB04 form, the NDC code is available in field 43 as shown in the below image,
As you can see in both images, when an NDC code is billed on a claim form, it should have a format that includes the NDC Qualifier, NDC code, NDC unit of measure & number of NDC units.
1) NDC Qualifier: “N4” Qualifier needs to bill with the NDC code.
2) NDC Code: Uniques 11 digits number assigned to each drug code.
3) NDC unit of Measure: There are 4 units to measure drugs,
UN (Unit) – Powder-filled vials for injection (needs to be reconstituted), pellet, kit, patch, tablet, and device.
ML (Millilitre) – Liquid, solution, or suspension.
GR (Gram) – Ointments, creams, inhalers, or bulk powder in a jar.
F2 (International Unit) – Products described as IU/vial, or micrograms.
4) NDC Units: These define the quantity of the drugs.
Actionable Takeaways
🔢 Always convert to 11-digit NDC format
📤 Pair with correct HCPCS code and billing unit
🗂️ Maintain up-to-date drug data libraries
🧹 Use claim scrubbing tools for pre-submission checks
📚 Document off-label or compounded drug use thoroughly
