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Rising Cost of Prescription Compounds
The rising cost of compound prescription drugs is becoming an element of focus among health care payers.
According to one national prescription drug benefit manager (PBM), costs of compounded prescriptions have risen over the past two years, with observations of payers experiencing up to a 218% average increase in CY 2013 in year over year drug spend on compounded medications. The average per claim costs rose from $98 to $195. Reasons for this spike appear to be due to:
- Increased cost and AWP price increases of individual ingredients in compounded prescription claims.
- Changes in National Council for Prescription Drug Programs (NCPDP) claims submission standards for compounded prescriptions.
- Increased utilization of medications for indications that have not been fully studied.
In pharmacy compounding, a licensed pharmacist combines, mixes or alters ingredients in response to a prescription to create a medication tailored to the medical needs of an individual patient. Compounded prescriptions (compounds) combine two or more drug ingredients to make products that are otherwise commercially unavailable. These products are tailored to fit individual needs, such as:
- Changing a solid into a liquid.
- Providing medication when there is a shortage of the traditional medicine (as seen recently with drugs that treat flu).
- Offering smaller doses than are provided in traditional medications.
Compounds are medically necessary in some cases. However, there is an increasing prevalence of compounds that are either not medically necessary or prescribed for conditions not approved by the Food and Drug Administration (FDA). Without the appropriate clinical programs or member contract language in place, we have seen health care payers incur costs up to millions per year for compound claims. This trend should concern payers because of not only unnecessary pharmacy costs, but because of safety issues, which include:
- Poor compounding practices that can result in contamination.
- Products that are not regulated by the FDA; therefore there is no testing for appropriate strength. This can potentially cause harm from patients taking either too little or too much of the medication.
There are also several financial concerns. Though most pharmacies have systems that identify compounds by each ingredient, less sophisticated systems may allow compounds to bypass certain checkpoints and cause the following:
- Double-billing - The pharmacy dispenses multiple fills for the same types of drugs.
- Bypassed drug utilization reviews - Disease-to-drug and drug-to-drug interactions are not caught prior to the point of sale.
- Therapeutic duplication - The same drug in different dosage forms reaches a member without being flagged.
The impact of the high-cost compounds can be mitigated by implementing appropriate clinical programs to ensure pharmacy claims meet standards for medical necessity.
- Payers should consider program strategies that implement an exclusion and non-coverage of any claim for a compound that includes bulk drug chemicals/powders. To execute this strategy, this largely rests on a rationale that the rejection of claims containing bulk drug chemicals/powders is not FDA approved and does not allow process for exceptions request or appeals. Therefore, before considering this option, SBG recommends to confirm member benefit contracts that allow a complete exclusion (without review for medical necessity or appeal). Generally, member benefit contract language has language that addresses contract exclusion or non-coverage of prescriptions/claims containing non-FDA approved drug products.
- In cases where contract language cannot currently support contract exclusion of bulk containing compounds, SBG recommends applying prior authorization of top bulk drug chemicals for medical necessity review. This may vary by payer, but some of the top bulk drug chemical compounds of concern that have been observed to drive cost include: diclofenac, flurbiprofen, ketoprofen, gabapentin, ketamine, hyaluronic acid, mometasone, fluticasone, nabumetome, meloxicam.
While intended to address special pharmaceutical needs of individuals, compounds tend to be significantly more expensive than commercial formulations. In many cases, there are Food and Drug Administration-approved alternatives for compounded medications.
Other best practice approaches include:
- Close collaboration with provider networks to ensure they are aware of compounding concerns and have the clinical and evidence-based medicine guidelines needed to choose the optimal therapy.
- Ongoing prospective and retrospective claims review.
- Patient and prescriber education and support.
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