Creating Your Non-Covered Outpatient Drug (NCOD) List

Hospitals subject to the GPO Prohibition can define drugs as NCODs and purchase them strictly at GPO. However, the steps involved in creating a NCOD drug list are not always clear. Below you will find a simplified approach that will guide you through the process.
 
First, consider whether the manufacturer has entered into a Pharmaceutical Pricing Agreement (PPA) or if the product is classified by the FDA as a device or a vaccine. If the manufacturer has NOT entered into a PPA (i.e., does not offer a 340B price) or the product is either device or a vaccine, then the drug is clearly a NCOD and can be purchased at GPO. These categories of products should be defined as NCODs in policy/procedure and prevented from accumulating and being purchased at 340B.
 
Drugs that are part of/incident to another service and payment is not made as direct reimbursement of the drug (“bundled drugs”) might be interpreted by a covered entity as NCODs under section 1927(k) of the Social Security Act and can be purchased at GPO (see Apexus FAQ 1355). This is based on the statutory limiting “covered outpatient drug” definition under section 1927(k), which might be interpreted by the covered entity as exempting bundled drugs.
 
Therefore, when there is a PPA in place and the product is NOT a vaccine or device, the next step is to determine whether the drug is directly reimbursed. If a drug NOT directly reimbursed and therefore commonly bundled, it can also be considered for inclusion on the covered entity’s defined NCOD list. This evaluation should include a review of several billing claims to determine if the drug appears on claims and whether the NDC is included. When the drug is NOT found on claims or appears as a line item without an NDC, the drug could be considered for inclusion on the NCOD list as this would be considered commonly bundled. If the drug appears on claims along with its NDC, work with your billing department to determine if payors are directly reimbursing. Those products that are directly reimbursed would be difficult to defend as commonly bundled.
 
Work closely with your billing department to align charging practices and NCOD determinations. Furthermore, clearly define NCODs in policy/procedure and provide a defensible position based on the covered outpatient drug and limiting definition of section 1927(k) of the Social Security Act. When operationalizing, be certain to consistently apply the NCODs definition across all registered sites, including clean sites and ensure auditable records are maintained. Don’t forget to adjust your third-party administrator settings to prevent them from accumulating and being purchased at 340B. If your health system has a consolidated service center (CSC), ensure that they have mechanism to track, manage, and purchase the drugs on each covered entity’s NCOD list correctly.