Healthcare’s Y2K: How to prepare for the FDA’s big update

Who would have thought we would see yet another major shift in the healthcare and life sciences industry? But a change is coming via the FDA’s proposal to revise the National Drug Codes (NDCs), replacing an existing 10-digit format (XXXX-XXXX-XX) with the new 12-digit format (XXXXXX-XXXX-XX). This blog will discuss the implications and compliments the lengthier response IBM’s Enterprise Strategy and Life Sciences team at IBM Consulting provided to the US Federal Drug Administration (FDA).

Expanding the number range addresses the rapidly deprecating number range paving the way for decades as billions of new codes will be available. But this is not without significant challenges for anyone utilizing this data. Healthcare executives experienced a similar change before: Remember the move to the International Classification of Diseases (ICD) 10?

NDCs are used across the healthcare system by pharmaceutical manufacturers, distributors, pharmacies, insurers, healthcare providers and more. They are the critical data component of routine transactions like manufacturing, shipping, dispensing and prescribing. For the most part, this data is housed in outdated systems incapable of supporting an immediate shift from a 10-digit to a 12-digit format. Why is this the case? Because for years, the industry resorted to hardcoding (manually embedding data in the source code) the NDCs into the computing systems.

What does this mean for the industry? Think Y2K but for healthcare: racing the clock to update systems and datasets with major uncertainty as to whether these updates are enough to keep the processes functioning as they do today. For this reason, industry executives need to make a game 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 revision will go into effect five years after the publication date and initially require all existing codes to adopt the new format. For most companies, this will create months of manual labor, adjusting hard-coded data across many systems. We heard from our industry partners that they don’t have a complete view of which systems, business processes and transactions involve NDCs. Such an undertaking may be disruptive, time-consuming, costly and error-prone, introducing an abundance of liability.

One-time costs will include substantial updates to software systems as well as employee training to adopt these new systems. Organizations will also need to revise all product visual design and packaging to accommodate the new barcode system. In addition to the cost of implementation, the changes will also disrupt the ongoing activities of the impacted departments. To address this, it will be worth considering how this change could qualify for investment funding being used for other supply chain resilience initiatives already underway.

Additional considerations include an exhaustive planning and implementation cycle that will disrupt major milestones like new products and manufacturing centers, which will rely heavily on NDC data functionality. Couple this with the ongoing push towards Drug Supply Chain Safety Act (DSCSA) compliance, and the entire industry is in for several years of complication and disruption. Furthermore, each organization will have its own transformation timeline, introducing challenges of format interoperability throughout the transition window. For these reasons, it is imperative that companies act today to accommodate the various challenges this update promises to deliver.

Invest in diligence and a modernization plan to help speed time-to-compliance

Regulatory affairs and operations teams can take easy steps to pull together a plan to get to compliance within the 5-year timeframe (or hopefully sooner). Business leaders can expect changes to packaging, labeling, IT systems, transaction systems, scanning hardware and more. With multiple data updates pending, now is the time to implement systems capable of minimizing these challenges. Below are a few steps we believe our industry partners should take:

• Determine the scope of impact including systems, business processes, transactions, labeling and packaging, and external supply, as well as any training and quality compliance standards required.
• Understand the underlying technologies, tech architecture and opportunities to modernize as you upgrade to get to compliance.
• Leverage business area stakeholders to develop a transition plan that identifies interdependencies and initiatives required to reach full compliance.
• Develop a financial plan and implementation timeline based on available resources and future projects expected to be impacted by NDC revisions, like new product launches and manufacturing site openings.
• Develop a remediation program plan for stakeholders that addresses changes, key milestones, risk mitigation initiatives, expected costs and communication plans for industry partners.
• Realize the transition will be staged as some trading partners will adopt the change sooner than others and, even within a single organization, new products will likely launch with the new number range while older products continue utilizing the legacy numbering.

This transition may sound daunting, but with the right strategy and an open mind about using this as an opportunity to modernize technology systems, companies may yield a lot of long-term value.