Who would have thought that we would see another major change in the healthcare and life sciences industry? However, change is coming in the form of the FDA’s proposal to revise the National Drug Codes (NDCs), replacing the existing 10-digit format (XXXX-XXXX-XX) with a fresh 12-digit format (XXXXXX-XXXX-XX). This blog will discuss the implications and complement a longer response from the IBM Corporate Strategy and Life Sciences team at IBM Consulting delivered to the US Federal Drug Administration (FDA).
Number range expansion solves the problem of rapidly phasing out number ranges, paving the way for decades as billions of fresh codes become available. However, this is not without significant challenges for anyone using this data. Healthcare executives have experienced a similar shift before: Remember to turn to the International Classification of Diseases (ICD) 10?
NDCs are used throughout the healthcare system by pharmaceutical manufacturers, distributors, pharmacies, insurers, healthcare providers and more. They are a critical data element in routine transactions such as manufacturing, shipping, dispensing and prescribing medicines. For the most part, this data is stored in dated systems that cannot handle the immediate transition from 10-digit to 12-digit format. Why is this happening? Because for years, the industry has resorted to hardcoding (manually embedding data into the source code) NDCs into computer systems.
What does this mean for the industry? Think of the year 2000, but in the context of healthcare: racing against time to update systems and data sets with great uncertainty as to whether these updates will be enough to keep processes working as they do today. For this reason, industry executives must develop an action plan now to mitigate the costs and risks associated with the FDA mandate. Below is what we discussed with the FDA and our industry partners.
Act today to save time tomorrow
The change will come into effect and will initially require all existing codes to adopt the fresh format. For most companies, this will mean months of manual work adjusting hard-coded data across multiple systems. We have heard from our industry partners that they do not have a complete picture of which systems, business processes and transactions NDCs cover. Such an endeavor can be disruptive, time-consuming, costly and error-prone, creating significant liability.
One-off costs will include significant updates to software systems and employee training to implement fresh systems. Organizations will also need to review all visual and product packaging designs to align with the fresh barcode system. In addition to the implementation costs, the changes will also disrupt the current operations of the affected departments. To address this issue, it is worth considering how this change could qualify for capital funding for other supply chain resilience initiatives already underway.
Additional considerations include an exhausting planning and implementation cycle that will disrupt key milestones such as fresh products and manufacturing centers that will rely heavily on NDC data functionality. Add to this the ongoing push to comply with the Drug Supply Chain Security Act (DSCSA), and the entire industry is facing several years of complications and disruption. Moreover, each organization will have its own transformation timeline, which brings with it challenges related to format interoperability throughout the transition period. For these reasons, companies need to take action today to address the various challenges this update brings.
Invest in diligence and a modernization plan to reduce the time to compliance
Regulatory and operations teams can take straightforward steps to develop a compliance plan within 5 years (or hopefully sooner). Business leaders can expect changes to packaging, labels, IT systems, transaction systems, scanning equipment and more. With many pending data updates, now is the time to implement systems that can minimize these challenges. Below are some steps we think our industry partners should take:
- Determine the scope of impact, including systems, business processes, transactions, labeling and packaging, and external deliveries, as well as any required training and quality compliance standards.
- Learn about core technologies, technical architecture, and modernization opportunities as you update for compliance.
- Leverage business area stakeholders to develop a transition plan that identifies the interdependencies and initiatives required to achieve full compliance.
- Develop a financial plan and implementation timeline based on available resources and future projects likely to be impacted by NDC changes, such as fresh product launches and opening of manufacturing facilities.
- Develop a stakeholder corrective action program plan that includes changes, key milestones, risk mitigation initiatives, expected costs, and communication plans for industry partners.
- Be aware that the transition will be phased as some trading partners will adopt the change sooner than others, and even within a single organization, fresh products will likely be launched with a fresh number range, while older products will continue to apply the older numbering.
This transition may seem daunting, but with the right strategy and an open mind when it comes to using this opportunity as an opportunity to modernize technology systems, it can bring a lot of long-term value to companies.
IBM’s life sciences team stands ready to provide FDA and industry partners with expertise in strategy, business processes and technology modernization. Learn more