Essential Guidance for Pharmaceutical Companies Adapting to New Serialization Requirements
Introduction: A Pivotal Moment for Pharmaceutical Identification
The pharmaceutical industry stands at a crossroads. Two major regulatory shifts are converging to reshape how drug products are identified, tracked, and verified throughout the distribution network. Understanding these changes and implementing compliant systems is no longer optional—it’s a fundamental requirement for market access.
The Drug Supply Chain Security Act’s enhanced traceability mandates have moved from planning phase to full operational reality. At the same time, the Food and Drug Administration is overhauling the National Drug Code structure, expanding it from its traditional format to accommodate future growth. These parallel transformations create both technical challenges and opportunities for companies willing to invest in robust identification infrastructure.
This article provides practical guidance for pharmaceutical manufacturers navigating this transition, with specific focus on how to properly construct Global Trade Item Numbers that meet both current compliance requirements and prepare for the expanded NDC format coming in the next several years.
The Current State of Supply Chain Traceability Requirements
Enhanced Distribution Security Standards
As of late 2024, the pharmaceutical industry entered a new era of supply chain transparency. The enhanced drug distribution security requirements now mandate that every entity handling prescription pharmaceuticals—from the manufacturing floor to the pharmacy counter—must participate in electronic, package-level tracking systems.
This represents a quantum leap from previous paper-based documentation. Trading partners must now exchange structured electronic data that enables real-time verification of product authenticity and chain of custody. The system relies on standardized data formats, specifically EPCIS (Electronic Product Code Information Services), to ensure that information can flow seamlessly between different organizations and technology platforms.
The Serialization Mandate
At the heart of this new traceability system is the requirement that each individual saleable package must carry a two-dimensional barcode containing four specific data points:
Product Identifier: A 14-digit GTIN that specifies exactly what the product is and at what packaging level (individual unit, case, pallet, etc.)
Unique Serial Number: An alphanumeric code, up to 20 characters, that has never been used before and will never be reused, making each package individually identifiable
Batch Information: The lot or batch number indicating when and where the product was manufactured
Expiration Information: The date beyond which the product should not be used, encoded in a standardized six-digit format
These four elements work together to create a unique digital fingerprint for every package moving through the distribution system. When combined with electronic transaction data, they enable unprecedented visibility into product movement and authenticity verification.
Compliance Timelines and Enforcement
The regulatory timeline has progressed through several phases. Manufacturers were among the first to lose their exemptions, with full compliance required since early 2024. Wholesale distributors followed, with their exemption period ending in August 2025. Smaller dispensing entities received additional time, with extended compliance deadlines running through late 2026 to account for the significant technical and financial investments required.
While enforcement has taken a pragmatic approach—acknowledging that data exchange rates across the industry are still maturing—the expectation is clear: new products and any packaging changes must incorporate compliant serialization from day one. The grace period for remediation has effectively closed.
Understanding the National Drug Code Evolution
Why the Format Is Changing
The National Drug Code has served as the pharmaceutical industry’s primary regulatory identifier for decades. However, the current system is approaching a capacity constraint. The FDA is running low on available labeler codes under the existing variable-length structure, necessitating an expansion to accommodate continued growth in the number of drug products and manufacturers.
The proposed solution is a standardized 12-digit format that eliminates the ambiguity inherent in the current system. Under the legacy approach, NDC segments could vary in length (4-5-6 digits for labeler codes, 3-4 digits for product codes, 1-2 digits for package codes), meaning the same sequence of numbers could represent entirely different products depending on where the segment boundaries fell.
The new standardized format adopts a consistent “6-4-2” structure: six digits for the labeler code, four for the product code, and two for the package code. This removes all ambiguity and provides significantly more capacity for future growth.
Implementation Timeline
The transition to 12-digit NDCs will unfold over approximately five to six years, creating an extended period where both formats coexist in the marketplace. While the FDA has not yet published final implementation deadlines, industry working groups are already developing guidance and best practices to support the transition.
For manufacturers, this means planning must begin now. Waiting until final regulations are published will compress implementation timelines and likely result in vendor capacity constraints and higher costs. Companies that take a proactive approach—assessing their product portfolios, evaluating system capabilities, and developing phased transition plans—will be better positioned to manage the change smoothly.
The Technical Challenge: GTIN Capacity Constraints
How GTINs Are Structured
To understand the challenge posed by 12-digit NDCs, it’s essential to understand how GTINs are constructed. A GTIN-14 consists of exactly 14 numeric digits arranged in a specific structure:
The first digit is the Indicator Digit, which signals what packaging level the barcode represents (individual unit, case, pallet, etc.). The next 12 digits combine the manufacturer’s GS1 Company Prefix with an item reference number. The final digit is a check digit calculated using a specific algorithm to detect scanning or data entry errors.
This 14-digit structure is fixed and cannot be expanded. It’s a global standard used across all industries, not just pharmaceuticals, which means changes to accommodate one sector’s needs would have ripple effects across the entire supply chain.
The Mathematical Incompatibility
Under the traditional approach used with 10-digit NDCs, manufacturers could construct GTINs by inserting the complete NDC directly into the GTIN structure, using “03” as a prefix to indicate pharmaceutical products. This created a convenient one-to-one mapping where the GTIN essentially “contained” the NDC.
When you attempt this same approach with a 12-digit NDC, the mathematics simply don’t work. You need one digit for the Indicator, two digits for the “03” prefix, 12 digits for the NDC, and one digit for the check digit—that’s 16 positions. But a GTIN-14 has only 14 positions available. The shortfall isn’t trivial; it represents a fundamental structural incompatibility.
The New Approach: Association Rather Than Embedding
The solution requires a conceptual shift. Instead of trying to embed the NDC within the GTIN structure, manufacturers must create GTINs using their GS1 Company Prefix and item reference numbers, then maintain the association between each GTIN and its corresponding NDC through external data systems.
In this model, the GTIN functions purely as a supply chain identifier—a unique code that trading partners use to identify and track products. The NDC continues to function as the regulatory identifier—the code used for FDA registration, healthcare reimbursement, and prescription processing. The two codes are linked through master data management systems rather than through numeric embedding.
This approach actually offers advantages beyond solving the capacity problem. It provides greater flexibility in GTIN assignment, simplifies packaging hierarchy management, and aligns pharmaceutical practices with how other industries manage product identification.
Packaging Hierarchy and the Indicator Digit
The Purpose of Packaging Level Identification
One of the most important concepts in proper GTIN assignment is understanding how to differentiate between different packaging configurations of the same product. A bottle of medication, a case containing 24 of those bottles, and a pallet containing 40 cases are all the same drug product—but they’re very different things from a supply chain perspective.
This is where the Indicator Digit comes in. As the first digit of every GTIN-14, it serves one specific purpose: signaling what packaging level the barcode represents. It doesn’t change the fundamental product identity; it simply tells trading partners what they’re handling.
Indicator Digit Values and Their Meanings
The value “0” is reserved for the individual saleable unit—the specific package that will be dispensed to a patient or sold to a consumer. This is the only packaging level that requires FDA registration of an NDC.
Values “1” through “8” are available for various groupings and aggregations. GS1 standards intentionally don’t prescribe which specific value should be used for which type of grouping, giving manufacturers flexibility to define their own hierarchy. However, consistency is critical—once you assign a particular Indicator Digit to a specific packaging type for a product, that assignment should remain stable.
The value “9” is reserved for variable-measure trade items, which aren’t typically used in pharmaceutical applications.
Building a Consistent Hierarchy
Most pharmaceutical companies adopt a straightforward three-level hierarchy:
Level 0 – Individual Unit: The primary package (bottle, blister pack, vial, tube) that contains the drug product in its dispensable form. This is what pharmacies stock on their shelves and what patients receive.
Level 1 or 2 – Case or Shipper: A homogeneous grouping of individual units, typically in a corrugated shipping container. This is the level most commonly handled by wholesale distributors and the standard unit for warehouse operations.
Level 2 or 3 – Pallet: A homogeneous collection of cases, typically shrink-wrapped on a pallet for bulk transportation and storage. This level is primarily used for manufacturer-to-distributor shipments.
Some manufacturers define additional levels for bundles, display units, or other configurations, using the remaining Indicator Digit values as needed.
The Critical Principle: One Product, Multiple GTINs
Here’s a fundamental rule that many companies initially find counterintuitive: a single drug product with a single NDC should have multiple different GTINs—one for each packaging level in your hierarchy.
Consider a 30-count bottle of a medication with NDC 12345-6789-01. This product would have:
- One GTIN for the individual bottle (Indicator 0)
- A different GTIN for a case of 24 bottles (Indicator 1)
- Another different GTIN for a pallet of 40 cases (Indicator 2)
All three GTINs represent the same underlying drug product, but they identify different packaging configurations. The core numeric sequence (derived from your GS1 Company Prefix and item reference) remains the same across all levels—only the Indicator Digit and the check digit change.
This structure enables any trading partner scanning a barcode to immediately understand both what product they have and what packaging configuration they’re handling, which is essential for accurate inventory management and order fulfillment.
Practical GTIN Construction Methods
Prerequisites: Company Prefix and NDC Registration
Before constructing any GTINs, you must have two foundational elements in place:
First, you need a GS1 Company Prefix licensed from GS1 US (or the appropriate GS1 Member Organization for your country). This prefix serves as the root identifier for all your GTINs. The prefix length varies—typically between 7 and 10 digits—and determines how many unique item reference numbers you can create.
Second, you must have registered NDCs with the FDA for each saleable package configuration. The NDC identifies the specific drug product, strength, dosage form, and package size. Only saleable units require NDC registration; groupings like cases and pallets do not.
Method 1: Transitional Approach for 10-Digit NDCs
For products still using the traditional 10-digit NDC format during the transition period, you can continue using the established embedding method:
Start with your 10-digit NDC, for example: 12345-6789-01
Remove the hyphens: 12345678901
Construct the GTIN by adding Indicator 0 at the beginning and the prefix “03”: 0-03-1234567890-1
Calculate the check digit using the GS1 algorithm (detailed below): let’s say the result is 5
Your final GTIN-14 is: 00312345678901****5
This method provides continuity with existing practices and maintains the convenient property that the NDC can be directly read from the GTIN.
Method 2: New Approach for 12-Digit NDCs
For products using the new 12-digit NDC format, you must use your GS1 Company Prefix and create an associated item reference:
Start with your 12-digit NDC, for example: 123456-7890-12
Identify your GS1 Company Prefix, for example: 0301234 (7 digits)
Calculate available space: 14 total digits – 1 (Indicator) – 7 (Prefix) – 1 (Check) = 5 digits for item reference
Assign an item reference number: 56789 (you define this number sequentially or according to your internal system)
Construct the GTIN: 0-0301234-56789
Calculate the check digit: let’s say the result is 3
Your final GTIN-14 is: 00301234567893
Critical step: Create a master data record that explicitly links GTIN 00301234567893 to NDC 123456-7890-12. This association must be maintained in your systems and shared with trading partners.
Creating GTINs for Higher Packaging Levels
Once you’ve constructed the GTIN for your saleable unit (Indicator 0), creating GTINs for cases, pallets, and other groupings is straightforward:
Keep the same 12 digits (everything except the Indicator and check digit)
Change the Indicator Digit to the appropriate value for that packaging level
Recalculate the check digit (it will be different because the Indicator changed)
Example hierarchy:
- Saleable unit: 0 0312345678901 5 (Indicator 0)
- Case of 24 units: 1 0312345678901 2 (Indicator 1, new check digit)
- Pallet of 40 cases: 2 0312345678901 9 (Indicator 2, new check digit)
Notice how the middle 12 digits remain constant—this is what creates the logical connection between packaging levels.
Check Digit Calculation: The GS1 Algorithm
Why Check Digits Matter
The check digit serves as a built-in error detection mechanism. When a barcode is scanned or a GTIN is manually entered, the receiving system can instantly verify that the number is valid by recalculating the check digit and comparing it to the one provided. If they don’t match, the system knows there’s been a scanning error or data entry mistake.
This simple validation catches a significant percentage of common errors—transposed digits, missing digits, incorrect digits—before they can cause problems in inventory systems or transaction processing.
The Calculation Process
The GS1 check digit algorithm uses a modulo 10 calculation with alternating weights. Here’s the step-by-step process:
Step 1: Write out the first 13 digits of your GTIN (everything except the check digit position)
Step 2: Starting from the right and moving left, assign alternating weights of 3 and 1 to each digit
Step 3: Multiply each digit by its assigned weight
Step 4: Add all the products together to get a sum
Step 5: Divide the sum by 10 and note the remainder
Step 6: Subtract the remainder from 10 to get your check digit (if the remainder is 0, the check digit is 0)
Worked Example
Let’s calculate the check digit for: 0 0 3 1 2 3 4 5 6 7 8 9 0 1
Assign weights from right to left:
Position: 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Digit: 0 0 3 1 2 3 4 5 6 7 8 9 0 1
Weight: 3 1 3 1 3 1 3 1 3 1 3 1 3 1Multiply each digit by its weight:
0×3=0, 0×1=0, 3×3=9, 1×1=1, 2×3=6, 3×1=3, 4×3=12
5×1=5, 6×3=18, 7×1=7, 8×3=24, 9×1=9, 0×3=0, 1×1=1Sum the products: 0+0+9+1+6+3+12+5+18+7+24+9+0+1 = 95
Calculate the check digit: 95 ÷ 10 = 9 remainder 5
10 – 5 = 5
Final GTIN: 003123456789015
Practical Tools
While understanding the algorithm is important, you don’t need to calculate check digits manually. GS1 provides a free online calculator, and most ERP systems, serialization platforms, and label design software include automated check digit calculation. The key is to validate that your systems are using the correct GS1 algorithm and that you verify check digits before printing barcodes.
Implementing Serialization and Data Exchange
Beyond GTIN Assignment: The Complete Picture
Properly constructing GTINs is essential, but it’s only one component of DSCSA compliance. You must also implement systems to:
Generate unique serial numbers for each individual package, ensuring that no serial number is ever reused across your entire product portfolio
Print compliant 2D barcodes that encode all four required data elements (GTIN, Serial, Lot, Expiry) in GS1 DataMatrix format with sufficient quality for reliable scanning
Capture and store serialization data at the time of packaging, creating a digital record of every package produced
Exchange transaction data electronically with trading partners using EPCIS format whenever ownership of product changes hands
Respond to verification requests from trading partners who need to validate the authenticity and chain of custody of products they receive
Barcode Specifications
The two-dimensional barcode on each saleable unit must meet specific technical requirements:
Symbology: GS1 DataMatrix (ISO/IEC 16022 standard)
Data content: All four required elements encoded using GS1 Application Identifiers:
- (01) for GTIN
- (21) for Serial Number
- (10) for Lot Number
- (17) for Expiration Date in YYMMDD format
Size: Minimum 6mm × 6mm, though larger is often better for scanning reliability
Quality: Minimum grade of “B” (3.0 on a 4.0 scale) per ISO/IEC 15415 standards
Placement: On the primary package in a location that can be scanned without opening outer packaging when possible
Human-readable interpretation should accompany the barcode, showing each data element with its Application Identifier for manual verification when needed.
Master Data Management
As the industry transitions to 12-digit NDCs and association-based GTIN assignment, master data management becomes increasingly critical. Your systems must maintain authoritative records linking each GTIN to its corresponding NDC, and this information must be shared with trading partners.
Several industry initiatives facilitate master data exchange:
HDA Origin: The Healthcare Distribution Alliance’s master data service, widely used by distributors and dispensers
GS1 Data Hub: GS1’s cloud-based platform for sharing product information with trading partners
Direct data exchange: Some large trading partners establish direct connections for master data sharing
Participating in these services ensures that your trading partners can correctly associate your GTINs with NDCs for reimbursement, prescription processing, and regulatory compliance.
Common Implementation Mistakes and How to Avoid Them
Mistake 1: Misusing NDC Package Codes for Groupings
Some manufacturers attempt to use different NDC Package Code values to represent cases, pallets, or other groupings. For example, they might register NDC 12345-6789-01 for the individual bottle, then register 12345-6789-02 for a case of bottles.
This approach creates multiple problems. It requires unnecessary FDA registrations for packaging configurations that aren’t saleable units. It creates confusion about which NDC should be used for reimbursement and prescription processing. And it violates GS1 GTIN allocation rules, which specify that groupings should be identified through Indicator Digits, not separate product codes.
The correct approach: Use NDC Package Codes only for different saleable unit sizes (30-count bottle, 60-count bottle, 90-count bottle). Use GTIN Indicator Digits to identify groupings. Only the saleable unit NDC gets registered with FDA.
Mistake 2: GTIN Reuse Across Packaging Levels
Some companies print the same GTIN on both individual units and the cases that contain them. This creates scanning ambiguity—when a distributor scans a case, their system can’t determine whether they scanned one unit or a case of 24 units.
This leads to inventory discrepancies, order fulfillment errors, and shipment disputes. It also violates GS1 standards, which require unique GTINs for each distinct packaging configuration.
The correct approach: Always use different Indicator Digits for different packaging levels. The saleable unit gets Indicator 0. Cases get Indicator 1 (or whichever value you’ve designated for cases). Pallets get a different value. Each level has its own unique GTIN.
Mistake 3: Neglecting GTIN-NDC Association for 12-Digit NDCs
Some companies assume that because 12-digit NDCs can’t be embedded in GTINs, the association between the two is no longer important. They create GTINs without establishing clear linkage to NDCs in their systems.
This breaks down at multiple points. Pharmacies can’t determine which NDC to use for prescription claims. Healthcare providers can’t match products to their formularies. Regulatory reporting becomes impossible. The entire supply chain loses the ability to connect supply chain identifiers with regulatory and clinical identifiers.
The correct approach: Treat GTIN-NDC association as a critical compliance requirement. Implement robust master data systems that maintain these linkages. Share this information with trading partners through industry-standard services. Test the data exchange to ensure trading partners can successfully receive and use the associations.
Mistake 4: Poor Barcode Quality
Low-quality barcodes are one of the most common operational failures in serialization implementation. Barcodes that are too small, have insufficient contrast, are printed with poor resolution, or are damaged during packaging cannot be reliably scanned.
When barcodes can’t be scanned, trading partners must either manually enter data (defeating the purpose of serialization) or reject shipments. Either outcome is costly and disruptive.
The correct approach: Invest in barcode verification equipment for every packaging line. Establish quality control processes that check barcode grade on a regular basis. Target minimum grade B (3.0/4.0) for all production. Train operators to recognize and reject poor-quality labels. Maintain and calibrate printing equipment regularly.
Mistake 5: Inadequate Testing Before Full Production
Some companies implement serialization systems and begin full-scale production without adequate testing of data exchange with trading partners. They discover problems only after thousands of packages have been produced and shipped.
The correct approach: Conduct pilot programs with select products and key trading partners before full rollout. Test the complete end-to-end process: barcode printing, data capture, EPCIS file generation, data transmission, and trading partner receipt and validation. Identify and resolve issues while volumes are low and corrections are manageable.
Preparing for the 12-Digit NDC Transition
A Phased Implementation Strategy
While final regulatory timelines haven’t been published, industry consensus suggests the 12-digit NDC transition will span approximately five to six years, beginning in the 2025-2026 timeframe. Companies should adopt a phased approach:
Phase 1 – Assessment (2025-2026)
Conduct a comprehensive audit of your current NDC portfolio. Identify which products will require new NDC assignments under the 12-digit format. Assess the impact on packaging artwork, labeling systems, and serialization infrastructure. Evaluate your master data management capabilities and identify gaps. Engage with GS1 US to understand GTIN allocation strategies for the new format.
Phase 2 – Infrastructure Development (2026-2027)
Upgrade ERP systems, serialization platforms, and master data systems to accommodate 12-digit NDCs and association-based GTIN assignment. Establish or enhance master data exchange capabilities with trading partners. Redesign packaging artwork templates to accommodate longer NDC displays. Develop internal procedures and training materials for the new GTIN assignment methodology.
Phase 3 – Pilot Implementation (2027-2028)
Begin transitioning select new products to 12-digit NDC format. Test end-to-end processes with key trading partners. Validate that master data associations are correctly transmitted and received. Refine procedures based on pilot learnings. Maintain parallel support for both 10-digit and 12-digit formats during this phase.
Phase 4 – Scaled Rollout (2028-2029)
Expand 12-digit NDC adoption to broader product portfolio. Gradually convert existing products during normal packaging redesign cycles rather than forcing immediate changes. Continue supporting both formats as the industry transitions. Monitor FDA guidance and adjust timeline as regulatory requirements are finalized.
Phase 5 – Completion (2029-2030)
Complete conversion of all products to 12-digit NDC format. Retire legacy systems and processes. Ensure all trading partners have updated their systems to handle 12-digit associations. Conduct final validation of master data accuracy across your entire product portfolio.
The Cost of Delay
Companies that wait until the FDA publishes final rules with mandated deadlines will face significant challenges. Vendor capacity will be constrained as the entire industry rushes to implement simultaneously. Costs will be higher due to compressed timelines and limited negotiating leverage. The risk of compliance failures and market disruptions will increase.
Early movers, by contrast, can spread costs over a longer period, negotiate better terms with vendors, and learn from pilot programs before full-scale implementation. They’ll also be better positioned to influence industry standards and best practices as they emerge.
Conclusion: Building for the Future
The convergence of enhanced traceability requirements and the NDC format transition represents a fundamental transformation in how pharmaceutical products are identified and tracked. While the technical challenges are real—particularly the shift from embedding NDCs in GTINs to associating them through master data systems—they also present an opportunity to build more robust, flexible, and future-proof identification infrastructure.
Success requires more than just technical implementation. It demands cross-functional coordination between regulatory affairs, supply chain operations, IT, quality assurance, and commercial teams. It requires investment in systems, processes, and people. And it requires sustained engagement with industry working groups, standards organizations, and trading partners.
The companies that approach this transition strategically—starting early, planning comprehensively, and implementing incrementally—will not only achieve compliance but will also build competitive advantages through superior supply chain visibility, reduced operational friction, and enhanced ability to respond to future regulatory changes.
The ultimate beneficiary of these efforts is the patient. Every properly constructed GTIN, every accurately printed barcode, and every successfully transmitted EPCIS file contributes to a pharmaceutical supply chain that is more transparent, more secure, and more trustworthy. That’s a goal worth the investment.
Key Resources for Further Information
Regulatory Guidance
The FDA’s Drug Supply Chain Security Act webpage provides official guidance, compliance timelines, and answers to frequently asked questions about serialization and traceability requirements.
The FDA National Drug Code Directory is the authoritative source for NDC registration requirements and the official database of registered drug products.
Standards and Technical Specifications
GS1 US Healthcare provides comprehensive resources on GTIN assignment, barcode specifications, and EPCIS implementation for pharmaceutical applications.
The GS1 General Specifications document is the authoritative reference for GTIN structure, check digit calculation, and barcode symbology requirements.
Industry Collaboration
The Healthcare Distribution Alliance offers resources, working groups, and the Origin master data service to facilitate information exchange between manufacturers, distributors, and dispensers.
Industry associations including PhRMA and the Generic Pharmaceutical Association provide forums for sharing best practices and coordinating industry responses to regulatory changes.
Technical Tools
GS1 US provides free online tools including a check digit calculator, barcode verification guidance, and GTIN allocation decision trees.
Multiple vendors offer serialization platforms, master data management systems, and EPCIS data exchange solutions designed specifically for pharmaceutical applications.
Get DSCSA Compliant:
Whether you’re a traditional pharmacy or a med spa preparing for new regulations, the time to act is now. The November 2026 deadline is approaching, and compliance takes time to implement properly.
Need help getting DSCSA compliant? Contact TrackTraceRX for affordable solutions designed for independent pharmacies and small healthcare businesses.
About the Author: Christian is a pharmaceutical compliance specialist focused on helping independent pharmacies and healthcare businesses navigate DSCSA requirements. For more information about DSCSA compliance solutions, visit www.tracktracerx.com or call 1-321-418-7147.
