The price of compounded medications

Protecting the injured through clinical management and advocacy for reform

This past June, a 5-month old baby died from “multiple drug intoxication of extremely high and lethal levels of pain reliever tramadol, cough suppressant dextromethorphan, and antidepressant amitriptyline”—three ingredients in a prescription cream his mother received for her workers’ compensation injury1. After further investigation, it was discovered that the doctor who prescribed the cream was part of an alleged workers’ compensation kickback scheme bringing to light the question: Are the financial incentives of compounded medications becoming more important than the quality of care and ultimate safety for the injured?

Increasing use and costs
In workers’ compensation, compounded medications are typically prescribed for neuropathic pain when trials of antidepressants and anticonvulsants have failed or when an injured worker is allergic to certain inactive ingredients that can be altered in a compounded product; in other words, as second or third line therapy. Over the last few years however, the use of compounded medications as first line therapy has grown greatly. Research from the California Workers’ Compensation Institute (CWCI) showed a quadruple increase in usage of compounded medications from 2006 to 2009, while the average amount paid per compounded medication prescription increased 68.2% from $460.42 to $774.21 (2011 to 2012)2. Use is similarly growing in the auto-no fault industry.

Typically, first line therapy for muscle pain or inflammation—a common ailment in workers’ compensation and no-fault injuries—is a nonsteroidal anti-inflammatory, such as ibuprofen, and a muscle relaxant, like cyclobenzaprine, for a cost of around $85 for a 30-day supply. Compounded medications that have been prescribed for the same symptoms have ranged anywhere from $2,000 to over $4,000 for a 30-day supply. These creams contain numerous medications, some even within the same therapeutic class, which could lead to drug-drug interactions. As a result, workers’ compensation payers are questioning the therapeutic value of compounded medications out of concern for the safety of the injured parties they serve.

Legislative influence
In 2013, Congress passed the Compounding Quality Act, giving the Food and Drug Administration (FDA) authority to regulate outsourcing facilities that compound sterile medications. Each state retained the ability to establish its own regulations to control the production, distribution, and pricing of compounded medications. In the past year, several states have passed legislation or regulatory action, including the following:

  • Texas addressed the use of “N” drugs in compounded medications via the state’s closed formulary; requiring prior authorization.

  • Oklahoma instituted a rule in its new closed formulary that requires prior authorization for all compounded medications, allowing prescribers and payer medical directors to talk about medical necessity and efficacy prior to approving the use of a compounded medication.

  • Mississippi adopted a rule that requires pre-authorization for compounded creams, imposed a $300 per month price cap and a 120 gram quantity cap per authorization.

  • Hawaii, Indiana, North Carolina and other states have limited reimbursement for ingredients based on the average wholesale price, using the NDC from the original manufacturer of the ingredient.

  • Georgia recently adopted changes to their fee schedule that limit reimbursement for compounds for no more than three FDA-approved active pharmaceutical ingredients.

Clinical oversight and advocacy
There are cases where a compounded medication is the only effective pharmacologic option. Yet, in today’s environment, we are seeing these exceptions becoming the rule, despite lacking medical evidence to support this. As a pharmacy benefit manager, Helios helps payers establish protocols to identify compounded medication use and initiate processes that encourage discussions with prescribers to verify the medical necessity and efficacy of the proposed compounded medication. We rely upon evidence-based medicine and both nationally and regionally approved medical guidelines to drive our clinical policies and recommendations. Additionally, we regularly engage policy makers in discussions about their state’s legislative and regulatory approach to compounded medications and offer recommendations on changes that can help control costs and ensure safety.
These efforts, in collaboration with those of our clients, are lighting the way forward by emphasizing clinical efficacy, medical necessity, and appropriate reimbursement—protecting the injured we serve in the process.