Compounded Medications

Medicare Set-Aside Blog on August 20, 2009
Posted by Louis Jordan

As the new CMS pricing protocols are examined and followed by the Medicare Set-Aside (MSA) industry, several questions have arisen with regard to inclusion of particular drug classes in the prescription drug portion of an MSA allocation.  One recent question specifically addressed whether compounded drugs are a covered Medicare item and whether they should be included in an MSA allocation. In short, compounded drugs may be covered under Medicare Part D, but only the components that would ordinarily be covered under Part D and are not made with bulk chemicals.

CMS released a memo on 12/09/08 indicating that effective 02/01/09, bulk chemical NDCs will no longer be covered under Medicare Part D. Many compounded drugs are created using bulk chemicals, but to have that component covered by Medicare the compounding pharmacy will need to use non-bulk products. Essentially, if a drug comes in both a powder and a tablet form, in order to establish Medicare coverage for a specific compounded drug under Part D, the compounding pharmacy would need to bill by the tablet, not the powder, NDC. Each compounded medication has multiple associated NDCs but only those which meet coverage
criteria would be paid.

It is important to note the distinction between the coverage criteria for compounded medications noted above as opposed to the criteria for commercially available combination prescription products.  Commercially available prescription products are not billed with multiple NDCs like compounded drugs, but rather, are assigned one NDC. Medicare has determined that if these commercially available combination prescription products contain at least one component that is covered under Part D, then the product as a whole will be covered as long as it is used for a medically accepted indication and is not otherwise excluded from coverage under Part D
for another reason. As an example, Fioricet® (Butalbital, APAP, Caffeine) alone is not covered by Medicare Part D since it contains a barbiturate; however, Fioricet® with Codeine is covered as a commercially available combination medication, if prescribed for a medically accepted indication, because Codeine is a component that is covered under Part D.

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