The Crackdown on Pharmacy Compounding

If you’re a retail pharmacist or pharmacy technician, you’ve likely experienced issues with getting compounded prescription drug claims paid.

Although compounding has a long-standing tradition in clinical practice, insurers and pharmacy benefit managers (PBMs) have recently instituted policies to decrease claims for compounded medications, citing questions about their safety, efficacy, high costs, and lack of FDA approval. In fact, the PBM Express Scripts announced in June 2014 that 1000 ingredients used in compounding would no longer qualify for reimbursement beginning July 1, 2014.¹

For the past few years, compounded medications have been among employers’ most expensive drug categories. According to Express Scripts, “compounded drugs” ranked as the third most expensive drug class in 2014 after “diabetes” and “high cholesterol.”¹

Under a 2012 requirement of the Health Insurance Portability and Accountability Act (HIPAA), all components of compounded drugs must be specified and billed using average wholesale price at the ingredient level. Previously, compounded prescription claims were billed under the highest-priced ingredient.

Since this change, bulk manufacturers and compounding pharmacies have substantially raised average wholesale price prices for the components of many compounded drugs, creating “unsustainable cost increases,” according to Express Scripts.¹

A recent retrospective claims analysis examined trends in the use of compounded medication between 2012 and 2013. Compound users represented 1.4% of eligible members in 2013.²

In 2012, the average cost was $308.49 for compounded prescriptions and $148.75 for non-compounded prescriptions. In 2013, the average cost of compounded prescriptions increased by 130.3%, to $710.36, while non-compounded prescriptions increased by 7.7%, to $160.20.²

Gabapentin, ketamine, cyclobenzaprine, baclofen, lidocaine, flurbiprofen, and fluticasone were consistently among the most expensive compound ingredients for patients aged 10 years or older in 2013. The most expensive ingredients for patients younger than 10 years in 2013 were used for influenza (oseltamivir), gastric acid suppression (omeprazole, lansoprazole) and skin conditions (zinc oxide, hydrocortisone).²

In addition to concerns about cost, there has been greater scrutiny of compounded drugs by citizens, regulators, and insurers ever since the 2013 tragedy of contaminated steroid injections from the New England Compounding Center. This event caused serious infections and other injuries in at least 751 patients and also resulted in at least 64 patient deaths.

References

1. Express Scripts. 2014 drug trend report. http://lab.express-scripts.com/drug-trend-report. Published 2014. Accessed February 2016.

2. McPherson T, Fontane P, Iyengar R, Henderson R. Utilization and costs of compounded medications for commercially insured patients, 2012-2013. J Manag Care Spec Pharm. 2016 Feb;22(2):172-181.