By the Numbers: DOD Purchasing Goes for Universal Standard

Medical Device & Diagnostic Industry Magazine | MDDI Article Index

Originally published February 1996

An Interview with LCDR Mitchell Cooper, USN

Universal Product Number Coordinator, Department of Defense, Portsmouth, VA

Effective July 1996, the Department of Defense (DOD) will require that all medical and surgical supplies it purchases be marked with a universal product number (UPN). The push for a universal number came from the need to identify medical products without extensive catalog research and without risk of ordering or receiving the wrong product.

In the past, DOD, which operates 132 army, navy, and air force medical treatment facilities, has encountered severe delays because of inconsistent product numbering. The logic behind the new UPN requirement is that it provides a common language for the medical product industry to simplify distribution processes.

The Health Industry Business Communications Council (HIBCC; Phoenix, AZ) defines the UPN as "a number that uniquely identifies a nonpharmaceutical healthcare product. It consists of either the HIBC­LIC (Health Industry Bar Code­Labeler Identification Code) or the UCC­EAN (Uniform Code Council­International Article Numbering) Primary Data Structures. Included are the manufacturer's identifier, product identification number, unit of measure/package level, and link character." Such a uniform number--and its accompanying bar code--enables customers to identify recurring needs, thereby making communication with distributors and manufacturers more accurate and eliminating cross-referencing.

LCDR Mitchell Cooper has served as DOD's UPN coordinator since November 1994 and has been a key player in the department's efforts to streamline commercial practices for the past 10 years. A staff medical logistician at the Naval Medical Center in Portsmouth, VA, Cooper has also been active in communicating DOD's plans to private sector health-care organizations and associations. In this interview with MD&DI, Cooper discusses the effects of DOD's UPN requirement on manufacturers and distributors, which he views as essential business partners in the task of streamlining the delivery of medical supplies worldwide.

How does a universal product number benefit medical device manufacturers?

Primarily, manufacturers will be able to guarantee that their product is truly identified as only their product. Right now, when a manufacturer puts a number on a package,

sometimes it is a part number, sometimes it is a catalog number, and sometimes it is a reorder number. None of those numbers work when you're ordering from a distributor. For example: if I search for a product based on its part number, the automated system will find all occurrences of that number--which may represent five completely unrelated products. One could be an aircraft, one could be a sponge, one could be a surgical instrument, and the other two could be pencils and paper, but they all have the same four-position identifier. To distinguish which of these products I really need, I have to rely on a purchasing agent. If the system finds five medical products that have the same number and only slightly different descriptions, that could present a real problem.

How does the universal product number help address these issues?

The universal product number gives each manufacturer and each product a unique identity code, so that when we key in its order number to our distributor, we get only that manufacturer's product, and there's no need for cross-referencing. It is similar to the national drug code, which is a unique number assigned to a particular pharmaceutical item. The national drug code consists of a manufacturer's identification (assigned by FDA), its product number, and its package indicator. If I provide a distributor with a particular national drug code, the distributor can cross-reference it to the order number if it wants to, but the invoice will reference the national drug code. The whole supply chain operates off that number. Similarly, the UPN is a unique number that identifies a nonpharmaceutical health-care item. They are both unique identifiers of products.

How does the UPN ensure a product's uniqueness?

The UPN has a unique identifier for each nonpharmaceutical health-care product. It can be in either the HIBCC's primary data structure or the UCC­EAN primary data structure. Both data structures contain four components that ensure uniqueness: a seven-position (UCC) or four-position (HIBCC) manufacturer's identifier; the manufacturer's product identifier; a package or unit-of-measure indicator; and a check or link digit. The UCC number is 14 positions, numeric, and fixed length. The HIBCC number is variable length and alphanumeric.

How does a manufacturer determine which system to adopt?

Using the UCC creates a dilemma for device manufacturers that use alphanumeric catalog numbers. We've afforded them the opportunity to use the HIBCC standard because that system can accommodate a 13-position variable length in an alphanumeric number. Either standard allows for unique product identification.

What are some other advantages to providers and users of medical products?

I can answer that by explaining our setup here at the Naval Medical Center. This is a 450-bed teaching hospital, and we have an automated central processing and distribution system. For me to identify products currently being used and match those up to my central processing and distribution identification number--and ultimately to my prime vendor number--I have to go through a multistep process. I have to cross-reference the manufacturer's part number to the central processing and distribution number, and then the system has to cross-reference that to the prime vendor numbers.

If you have 1000 hospitals and 1000 suppliers--and each supplier may be identified differently at each hospital--the sheer number of possibilities creates a tremendous need for extensive cross-referencing. A universal product number would be the sole number throughout the entire supply chain. Right now, that's just not possible.

What are the obstacles to instituting the UPN system?

One might think that manufacturers would be fighting this tooth and nail, but they're not. For a time, manufacturers were not clear about which system they would prefer. They did not know whether it was better to adopt the HIBCC standard or the UCC standard. They were not seeing the demand from the point of view of the customer such as a small hospital like ours. They were only hearing the demand from distributors who were absorbing all the requirements. Distributors must meet hospital requirements to bar code, and distributors usually only mark exterior packaging.

When I began talking to manufacturers, in January 1995, the major complaint was that our UPN designation required that manufacturers use only the HIBCC standard. But the alphanumeric HIBCC standard is not well accepted--except in North America and a specific region of Europe--and many manufacturers commented that the UCC was more user-friendly internationally. They attributed this to the fact that it is a fixed-length, all-numeric scheme, which allows any system worldwide to recognize it.

How have the provider and distributor communities responded to the UPN initiative?

It's been extremely well received. The distributors are ecstatic because a UPN removes a major part of their overhead. Distributors currently must cross-reference their product numbers with each hospital's numbers. We also have more and more provider groups coming on board.

Provider organizations continue to seek further information, and we are soliciting their support in making the UPN system mandatory. Most hospitals are members of group purchasing organizations (GPOs) that negotiate with manufacturers to obtain discount pricing for their members. These GPOs can really help to move the UPN project along, but they have to have the endorsement and support of their member hospitals in order to make the requirements enforceable.

What challenges remain?

The biggest challenge is that a lot of automated systems will have to be changed. Manufacturers, distributors, and consumers will have to change coding, reading, and imprinting systems. The minimum part-number configuration for the UPN ranges from 8 to 20 positions. Most manufacturers' and distributors' systems currently in place will not accommodate more than a 15-position number. We are working diligently to make software developers aware of this. Hospitals also need to be brought up to speed on bar coding. Healthcare EDI Coalition (HEDIC; Little Rock, AR) has formed a UPN-users group and we are working with that group to develop a cost/benefit analysis model for them.

How has the trend toward managed health-care delivery affected the establishment of this system?

In most cases managed-care hospitals are reimbursed on a flat, per-patient rate. If a managed-care hospital could identify its costs by procedure, then it would have a reason to seek lower-priced products that would meet its needs. That's almost impossible under the current system, but the existence of universal product numbers will improve hospitals' capabilities to more clearly identify and monitor their needs. A package bar code that is specific down to the user- inventory level can be scanned into an automated system, and thereby related to a particular patient, diagnosis, and procedure. This facilitates scanning at the point of use, which would tie in to matching the product used to the patient and ultimately to a diagnostic code.

How can manufacturers increase the support they need from their customers and distributors?

The biggest message I can convey to manufacturers is to come on board with the new Efficient Health Care Consumer Response (EHCR) initiative. EHCR is a concept in which the industry forms a coalition consisting of representatives from all sectors to embrace the latest technologies to take costs out of the supply chain. One of the key factors in this concept is product identification through bar coding.

EHCR is more of a philosophy than a technology. If manufacturers embrace the EHCR initiative and fully support the reengineering of the supply chain, everyone benefits, including the manufacturer. The real beneficiary is the end consumer of health care. This can literally purge millions of dollars in excess cost out of the health-care system.

What do you see happening to make the UPN work?

Most of the major software developers are going to need to modify their software to maintain a competitive advantage in the marketplace. Anyone who wants to keep an internal numbering system will have to add a method for cross-referencing those numbers to the UPN. All those who manufacture, distribute, or consume health-care supplies, including those who process payments or reimbursements for claims, will have to modify their numbering systems.

How are suppliers doing on meeting DOD's July 1996 deadline for implementation of the UPN system?

We are now in the process of compiling the results of a study that evaluated the progress of each of our distribution and pricing agreement holders. It looks like 80% or more are at some stage of the implementation process. We're waiting for responses from the remaining 20%.

Distributors are reengineering their systems. I've been in contact with each of the major distributors involved in DOD's prime vendor program, and all are progressing well. I think we're going to see continued improvement in adopting bar codes. In the past year, we went from 40% to about 52% compliant.

So you see the July deadline as achievable?

For the most part, yes. Some companies may struggle at first, but I think they will follow suit very quickly to avoid being at a competitive disadvantage. If a company's products are not marked and easily identifiable, that will become an impediment to the company's participation in the supply chain.