Business Group Blog

ISSUE: Compounds – THEY'RE BACK!

Compounding pharmacies lost a big stream of revenue in the last few years when large employers, working closely with their PBMs, implemented caps and exclusions on compounded medications to better manage costs. While these control measures addressed a significant portion of unnecessary compounding, there are new creative compounding billing practices that are slipping through the cracks:

  • Pharmaceutical companies are now manufacturing kits, which involve:
    • “Mix-at-home” compounds with easy instructions for the patient or
    • Combining multiple products into a single product kit. The individual products in these kits are generally available as generics and/or over-the-counter. There are a growing number of these kits for dermatological (skin) conditions. 
    ***For many PBMS, these products are not addressed by their compounding management programs.
  • Billing by ingredient. While certain compounds are excluded by plan design, in some cases, ingredients have been allowed to process individually. Frequent offenders are largely seen in creams used for diabetic neuropathy pain.

According to the National Business Group on Health’s® Large Employer's 2017 Health Plan Design Survey, 83% of employers have worked with their health plans and/or PBMs to place restrictions on how compounded medications are prescribed as a response to huge spikes in compounded medication costs. Thus far, employers have tackled compounded medication costs by:

  • Implementing a prior-authorization on compounded drug claims over a certain amount (Caps commonly set at $200 or greater),
  • placing compounds on a higher specialty tier, 
  • excluding certain bulk chemicals or
  • excluding compounds entirely.

Review your claims data to see if compounds and/or kits (especially dermatologicals) are being covered and closely monitor dispenses associated with known compounding pharmacies. Push your PBM to explicitly characterize what they will not cover and be sure to incorporate this language in the upcoming benefit cycle.

More tips and solutions can be found in this members-only Rx Alert – a series recently launched by the Business Group to provide members with real-time, actionable insights based on information received through our National Committee on Pharmacy Benefits and Specialty Medicine and our relationships with PBMs, consultants and employer members that can help you identify the next issue impacting the quality and cost of your pharmacy program.

The National Committee on Pharmacy Benefits and Specialty Medicine focuses on ways employers can optimize these, and other strategies for specialty medication management. Members — please visit our Specialty Pharmacy Management Series for an in-depth look at a variety of specialty topics of interest to employers.