FDA Takes Interest in Compounding Medications; Does this Mean Compounded Medications Will be Included in WCMSAs in the Future?

FDA, MSAs, Rx/Pharmacy on April 10, 2019
Posted by Jean S. Goldstein, JD

Last week the Food and Drug Administration’s (FDA) Commissioner, Scott Gottlieb, M.D. and Deputy Commissioner, Anna Abram issued a statement on new 2019 efforts to improve the quality of compounded drugs.  The statement can be found here.  Interestingly in 2018, the FDA also announced a new and expanded compounded research project, for which the FDA announced an agreement between two research institutions to conduct research to help the agency on their policies regarding compounded drugs.  Of additional interest, is the fact that one of the driving focuses of the 2018 research project is the effectiveness of multi-ingredient compounded topical pain creams, which are typically classified as non-Medicare covered prescription drugs and therefore, not included in Workers’ Compensation Medicare-Set Aside (WCMSAs) Allocations.  Over the last several years, compounded drugs (including topical ointments and creams) have come under intense scrutiny due to cases involving Medicare fraud, in addition to concerns regarding safety, since compounded drugs are not regulated. 

Compounded medications are comprised of various ingredients, which are typically prepared by a pharmacist for an individual patient, as opposed to being mass produced by a pharmaceutical manufacturer combined to create a medication.  Most often these medications are comprised of bulk powders, and if comprised of bulk powder ingredients are typically considered a non-Medicare covered expense and therefore excluded from WCMSA prescription drug allocations.  However, there may be some generic drug coverage depending on the specific ingredients of the compounded medication.   Per the 2018 Medicare Prescription Drug Benefit Manual, in order for a compounded prescription drug to be Medicare covered it must contain

“…at least one ingredient that independently meets the definition of a Part D drug, and that do[es] not contain any ingredients covered under Part B as prescribed and dispensed or administered… 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.” (Emphasis added.)  

Essentially, this means that a compounded drug may be covered by Medicare depending upon the components of the medication, and the setting in which the medication is administered, particularly if the medication contains at least one FDA approved ingredient.  Therefore, compounded creams and lotions will almost always be excluded from WCMSA prescription drug allocations because most often compound creams and lotions are comprised of bulk powders. 

Furthermore, and perhaps of most significance to the Medicare Set-Aside arena, is that in order for a compounded drug to be Medicare covered it must be prescribed for a “medically-accepted indication.” The Medicare Part D manual defines a medically-accepted indication as,

“…any use of a covered Part D drug which is approved under the Federal Food, Drug, and Cosmetic Act, or the use of which is supported by one or more citations included or approved for inclusion in any of the compendia described in section 1927(g)(1)(B)(i) of the Act. The recognized compendia are:
I. American Hospital Formulary Service Drug Information, and
II. DRUGDEX® Information System.”

Some of our readers may be shuttering at the words “medically-accepted indication” because we are still reeling from the sticker shock of inclusion of Lyrica in CMS approved WCMSAs within the last year, based upon the Centers for Medicare & Medicaid Services’ (CMS) use and definition of medically accepted indications and off-label use, as discussed here on our blog.  This definition can be found in CMS’ WCMSA reference guide, which states that, in order,

“For a drug to be covered under the Part D Benefit, and thus included in a WCMSA, it must be used for a medically accepted indication. A medically accepted indication is any use for a covered outpatient drug which is approved by the FDA, or a use which is supported by one or more citations included or approved for inclusion in the recognized compendia.” (Emphasis added.)

The latest statement issued by the FDA is noteworthy because we are seeing this increased focus on compounded medications.  Which begs the question as to whether we may begin seeing some sort of an impact on workers’ compensation claims, and further whether this will occur based upon use of these medications for medically accepted indications.  As we have seen in the WCMSA space, with inclusion of Lyrica, the definition of what constitutes a medically-accepted indication will continue to be broadened, and perhaps the FDA’s recent focus on compounded medications is a telltale warning sign that we are going to experience more sticker shock if compounded medications become more acceptable or widely used.  Moreover, topical agents are coming into the limelight as alternative first-line treatments to avoid and minimize the prescribing of opioids.  With that in mind, if the FDA is shifting their focus and research to compounded medications, is it possible we will see these medications included in WCMSAs?  In theory, compounded medications could come into play in WCMSAs in the future, if more formal regulations are implemented by the FDA, and if the results of the FDA’s current studies truly document the effectiveness of these medications. It may be a long road ahead before we see these medications coming into play, but the FDA’s initiative may be paving the way for more regulated, safer, and medically-acceptable use.  We will be monitoring any future discussions as related to the effectiveness of compounded medications or any additional regulations regarding same.