Compound Drugs 101

Compound drugs are getting a lot of attention lately. The aim of this blog post is to identify what compound drugs are, why they’re such a big deal and what your organization can do to control your pharmacy benefits costs.

What are Compound Drugs?

A compound drug is created when a licensed pharmacist combines, mixes or alters ingredients for a prescription. Compound drugs may cost tens of thousands of dollars for a single dose.

These drugs are valuable when:

• Therapy needs to be tailored.
• An allergy requires a medication to be compounded.
• A patient cannot consume the FDA-approved medication form and requires the medication in a different dosage (such as a liquid or suppository).
• There is a market shortage of the commercially available product.

Some Compounding Pharmacies Use Questionable Practices

Compounds represent about 1 percent of claims and about 1 percent of total drug costs.  This is up from prior years and growing.

While compound drugs are often necessary and life-saving, National CooperativeRx/WisconsinRx has identified potential concerns:

• There has been a rapid growth in the number of pharmacies offering compounding services. Since 2009, there have been 2,500 new compounding pharmacies for a total of 7,500 pharmacies specialize in compounding services.
• There are established compounding pharmacies that follow ethical practices; however, some compounding pharmacies are using questionable practices. These questionable activities include cold-calling consumers and offering to waive plan participant cost shares.
• Some compounding pharmacies are taking advantage of changing Health Information Portability and Accountability Act (HIPAA) provisions in questionable ways. HIPAA requires reimbursement of each ingredient in compounded claims as of Jan. 1, 2012.  In some cases, compounding pharmacies that engage in questionable practices have taken advantage of this and are billing for unique blends of ingredients at high costs.
• Compound drugs have no FDA approved indications, which may raise safety risks and possible effectiveness concerns.

How Can Your Plan Control Compound Drug Costs?

You can implement a compound drug strategy. National CooperativeRx was among the first to offer such a strategy, which we introduced in 2014.

Effective strategies include:

• Requiring a prior authorization on all compound drugs over $500.
• Implementing a one-fill limit per 25 days to prevent split billing.
• Eliminating coverage of select product formulations.

As a small and agile pharmacy benefits cooperative, National CooperativeRx was able to move quickly to help its members use these strategies to avoid a combined $5 million in costs. When the results were compared to employers who use larger pharmacy benefit managers (PBMs), National CooperativeRx found that our members fared better at controlling overall drug trend.

Our members can also take advantage of the prior authorization services offered by CVS/caremark, the PBM vendor used by National CooperativeRx. We help support and implement this strategy among our members.

Implementing Your Compound Drugs Strategy

Compound drugs are important and can be life-saving. But some pharmacies are applying questionable practices and using compounds to create unnecessary drugs for their own monetary gain.

To ensure that your participants get the right medications to maintain their health, work with your PBM provider to implement a compound drug strategy.