HHS-OIG: CMS-FDA Drug Registration and Listing Systems In Need of Update

The Centers for Medicare and Medicaid (CMS) is America’s largest healthcare payer, covering the costs for hospital and physician services, treatments, drugs and devices for approximately 45 million Americans. In fact, Medicaid payments for prescription drugs totaled approximately $24 billion in 2008.

To qualify for Federal payment under Medicaid, the Food and Drug Administration (FDA) generally must first approve the safety and effectiveness of the drug, with certain exceptions. As a result, it is necessary for FDA to collect and maintain drug product and approval information so that CMS will only cover or make payments for FDA approved products.

To keep track of drug products and approval, FDA created the Drug Registration and Listing System (DRLS). As part of the DRLS, FDA maintains a publicly accessible database of currently listed drugs called the National Drug Code (NDC) Directory. FDA has additional databases containing approval information for biological products such as vaccines and blood (among others), used in the prevention, treatment, or cure of a disease or condition. Another is Drugs@FDA, which is a publicly available FDA database that provides each drug’s approval history, including approved labels, and indicates whether it was approved under a new drug application or an abbreviated new drug application; it does not list any of this information by the NDC.

The NDC Directory contains the name, the NDC (i.e., a numeric drug identifier), and the approved application number for each listed drug. The DRLS also includes nonpublic files of pending and discontinued NDCs.

However, according to a recent report from the Department of Health and Humans Services (HHS) Office of the Inspector General (OIG), the FDA has acknowledged that the databases in DRLS may be inaccurate and incomplete. Specifically, the report revealed that while 62% of drugs paid for by Medicaid in 2008 had an approved application number in the NDC Directory—totaling $17.8 billion—the remaining 38% either did not have an approved application number listed or were not in the NDC Directory at all.

As a result, the report highlighted the fact that the NDC Directory cannot reliably be used to verify the approval and listing status of drugs paid for under Medicaid.

REPORT

In 2008, the Office of Inspector General (OIG) received a congressional request to examine the FDA approval status of drugs paid for by Medicaid. To address this request, OIG used 2008 Medicaid utilization data for prescription drugs, approval and listing data from FDA, and a targeted manual review. OIG found that:

–       12% (3,158) of NDCs paid for by Medicaid in 2008 were listed in the NDC Directory but did not include an approved application number (i.e., the approved application number was “other,” was blank, or could not be determined).

–       More than three-quarters of these NDCs (2,426) had an approved application number listed as “other” in the NDC Directory and were not included in the other FDA databases.

–       Medicaid payments for drugs associated with these 2,426 NDCs totaled $803 million in 2008.

–       Each of the remaining 732 NDCs had (1) an application number of “other” but was included in 1 of FDA’s other databases, (2) an approval status that was blank, or (3) an approval status that could not be determined.

In addition, 26% (7,040) of the 27,143 NDCs associated with drugs paid for by Medicaid in 2008 were not listed in the NDC Directory. More than half (3,893) of these NDCs were listed in the pending, discontinued, or biological files. The remaining 3,147 NDCs were not listed in any of these files. Therefore, OIG concluded that FDA would be unable to determine the approval status based on the NDCs alone. Medicaid payments for these 3,147 NDCs in 2008 totaled $1.1 billion.

RECOMMENDATION

After explaining its findings, OIG noted that previous reports also found problems with the accuracy and completeness of the NDC Directory and recommended changes to improve the database. Accordingly, FDA recommended that to improve the completeness and accuracy of the NDC Directory, FDA should:

–       Conduct frequent reviews of its NDC Directory to ensure its completeness and accuracy; and

–       Work with the CMS and Congress to seek a legislative or regulatory change that compels manufacturers to list all approved products with FDA before the products become eligible for Medicaid payment.

OIG noted that “by making payment under Medicaid contingent upon listing, manufacturers would have an increased incentive to ensure that FDA had the most complete and timely information on the products in the NDC Directory.”

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL RESPONSE

In response to OIG’s report, “FDA generally agreed with OIG’s recommendation to improve the completeness and accuracy of the NDC Directory.” FDA stated that:

–       It recognizes that data quality has suffered in the past

–       Agrees that the accuracy and completeness of data in the NDC Directory are imperfect;

–       It remains committed to robust quality improvements; and

–       It has already begun implementing several initiatives for evaluating and enhancing the quality of drug-listing data.

Additionally, FDA has agreed that it should work with CMS to examine changes that could further strengthen CMS’s ability to ensure that drugs are listed with FDA prior to reimbursement.

However, FDA did point out that OIG’s manual review was limited because it examined only a small sample of NDCs. As a result, FDA asserted that most “inaccuracies did not result in improper Medicaid payments, and that the NDC Directory is now more complete and accurate.”

CONCLUSION

The inability of FDA to keep track of drugs approved is problematic for a number of reasons and reflects the weaknesses and obstacles the agency is currently facing. Millions of Americans depend on the drugs that FDA approves and which CMS covers. If patients are denied coverage for drugs or treatments because FDA has not included an approved product in its database, Americans could go without treatment or suffer in pain needlessly.

Both CMS and FDA should work with industry to help find solutions to this problem given that industry is also equally aware of what products are FDDA approved and covered by CMS. This kind of collaboration would ensure that the government is paying for approved drugs and that Americans are not hindered in receiving adequate care.