Blue Cross Blue Shield of Texas Position on Compounding

What are we experiencing?

PrimeTherapeutics, Inc. (Prime), a separate company providing pharmacy benefit manager (PBM) services for Blue Cross and Blue Shield of Texas (BCBSTX), has identified the billing practices of non-traditional compounding pharmacies as one of the most common reasons network pharmacies are placed on Corrective Action Plans (CAPs) or other related actions. As a result of ongoing claims auditing activities, Prime has been able to identify a number of pharmacies with questionable compounding practices. Examples of inappropriate practices include: submitting pharmacy claims with incorrect or invalid NDCs according to the compounding log, claims for compounds which contain medications that are not covered by Medicare Part D based on their intended route of Administration, marketing of compounded drugs utilizing a non FDA-approved aerosolizing device, and compounding copies or near copies of FDA approved commercially available drugs. In two instances, further research following an on-site pharmacy audit, Prime discovered that both pharmacies had received warning letters from the FDA detailing a number of issues such as the misbranding of drugs, unsubstantiated efficacy claims, and marketing of unapproved medical devices. Another pharmacy was discovered to be dispensing an excessive quantity (i.e. 540 – 5ml bottles) of antimicrobial ophthalmic drops to be diluted with saline and administered intranasally three times daily for the treatment of recurrent upper respiratory infections. The total cost of one 30 day prescription of this unproven therapy was $10,000!

What do the CMS regulations say?

Chapter 6 of the Medicare Prescription Drug Benefit Manual provides the following guidance on the coverage of ‘Extemporaneous Compounds’:

• Compounded prescription drug products can contain: (1) all Part D drug product components; (2) some Part D drug product components; or (3) no Part D drug product components.
• Only costs associated with those components that satisfy the definition of a Part D drug are allowable costs under Part D because the compounded products as a whole do not satisfy the definition of a Part D drug. As a consequence, claims for compounded prescriptions can consist only of National Drug Codes (NDC) for FDA approved prescription drug products. Traditional compounding powders are typically not FDA-approved drug products.
• The labor costs associated with mixing a compounded product that contains at least one Part D drug component can be included in the dispensing fee.

What are we asking providers to do?

Providers should discuss with their patients in detail whether the use of compounded medications in lieu of FDA-approved and clinically tested products is indeed the best option for their specific medical needs. Patients or practitioners who encounter problems (e.g. adverse drug events, etc.) with compounded products are asked to file a MedWatch report with the FDA at: (Telephone)800.332.1088, (Fax) 800.FDA.0178, (Mail) MedWatch, 5600 Fishers Lane, Rockville, MD 20852-9787, or online at www.fda.gov/medwatch.