Compounding pharmacies have drawn increased scrutiny over the past few years, due to high costs and lack of quality standards. As a result, insurers and PBMs have responded in various ways.
- OptumRx has enhanced the OptumRx Compound Management Strategy for direct business. These enhancements are designed to promote high quality standards and efficient use of compound prescriptions.
- Beginning with January 1, 2017 effective dates, compound medications must be filled at pharmacies credentialed by the Network Compound Credentialing Program (NCCP) to be eligible for coverage. Members may continue to fill covered compound medications at a broad range of credentialed pharmacies.
The great majority of prescription medicines used in the U.S. are developed with oversight from the U.S. Food and Drug Administration (FDA). The FDA reviews new drugs to ensure that they are safe and effective. The FDA also inspects and approves manufacturing processes so the public can be sure of medication quality and consistency.1
A small number of people cannot be treated successfully with commercially-manufactured, FDA-approved medications. They might have difficulty swallowing pills, and so they need a liquid form. Or they might be allergic to a dye or other ingredient in the manufactured form. These patients are treated through pharmacies providing compounding services.2
According to the FDA, pharmacy compounding is where a pharmacist combines, mixes, or alters ingredients in response to a doctor’s prescription to create a medicine tailored to the medical needs of an individual patient.3 Between 1 to 3 percent of the U.S. prescription market is currently filled by compounding.2
Calculating the risk
It would be impossible to apply for FDA approval for drugs compounded on an individual basis, since that process can take years. Simply as a practical matter, compounded drugs are made under far less demanding conditions than those applied to FDA-approved products.4
There are three main concerns with compounding:
- Efficacy: Many active ingredients are FDA-approved for use in one form, say as an injection, or to be taken orally, or as an inhaled powder. But compounders are transforming these ingredients for different routes of administration, often a cream or topical preparation, where they have never been proven to be safe or effective.4
- Safety: The FDA has analyzed commonly available compounded drugs to assess identity, strength, quality and purity. About one-third (33%) failed analytic testing, mostly regarding potency or uniformity of dosage.5
- Some states have found problems with drug potency in compounded drugs, ranging from 0%—no active ingredient present—to almost 400% of the prescribed dosage.5
- Cost: These medications are typically far more expensive than commercial medicines – as much as $10,000 per prescription.6
Compounds vs. FDA Approved Alternatives
Any time we substitute compounded medicines for an FDA-approved product, we are incurring a degree of risk.4 But too often these risks are unnecessary. In many instances, there are safe, effective, lower-cost alternatives to compounded medications. When OptumRx examined the five conditions most commonly treated with compounded drugs in 2013, there were at least 25 FDA-approved drugs that could be used instead:
Sudden growth of compounding
By 2012 there were some 7,500 pharmacies that specialized in compounding, a 200% increase in only four years. (The total number has subsided somewhat from this peak in 2012. In 2015 there were about 6,000 compounding pharmacies submitting claims to OptumRx.)
The concern is that some of these firms are operating in ways that have clearly stretched beyond the boundaries of traditional compounding practice. They operate under the less-rigorous compounding pharmacy standards instead of adhering to FDA manufacturing standards to actually manufacture large quantities of standardized dosage forms.4,5
Rapid cost growth
It wasn’t long before health plans and PBMs began to feel the effects of the sharp rises in pricing and utilization of compounded products. One large PBM saw total compounding spending increase by more than 1,000% from 2011 to 2013.6
Note that the sudden increase in compounding costs did not come about because of a sudden increase in the number of patients who actually need compounded drugs (e.g., pediatric patients with swallowing problems, or people with allergies to the dye found in certain tablets).
According to David Calabrese, Chief Pharmacy Officer of OptumRx, compounders have used many different tactics to evade efforts by PBMs and payers to manage compound expenditures. For example, 'price rolling' is a common trick used by compounders where the pharmacy will submit the same compound claim over and over again, slightly lowering the submitted cost each time, until the claim pays.
Another technique is 'prescription splitting', where the pharmacy attempts to avoid maximum dollar edits by submitting multiple claims for the same compound and same patient in smaller quantities within days of one another. Most recently, we've witnessed a new tactic emerge where compounders have begun processing claims for a non-FDA-approved legend drug pain patches and sprays that carry very high price tags and very high margin for the dispensing compound pharmacy. These products can be submitted as 'non-compounds' because each carries a valid NDC number. To address these issues, we've proactively created optional coverage exclusion list for these pain patches/sprays, and utilize our NCCP credentialing program and pre-adjudication checks to block the other schemes.
Rather than continue to react to each new strategy designed to slip suspicious or downright fraudulent compounding drug claims, OptumRx has decided to go a different way. We have decided that a truly comprehensive solution requires two parallel lines of approach:
- First is our new credentialing program (mentioned above). The National Compound Credentialing Program (NCCP) is automatically included (required) for direct-contracted customers.
- Secondly, clients can combine the NCCP with new opt-in components that set clearer limits for compound use while preserving clinically appropriate access. Our proven array of cost containment strategies include benefit design strategies and utilization management protocols that allow clients to tailor their compound management strategy for a more robust offering and to best fit their needs.
Approach 1: Network compound credentialing program
The network compound credentialing program is designed to validate compounding pharmacy providers through a credentialing program and pricing management strategy. The credentialing program sets a broad array of strict, yet fair credentialing criteria developed by OptumRx.
Tight credentialing ensures that the same high-quality standards for compounded products are upheld from pharmacy to pharmacy. Since we implemented the credentialing program we have drastically limited the number of compounding pharmacies that can participate in our network:
Approach 2: Cost containment strategies
- Prior authorization (PA) on high-cost products: Requires prior authorization for targeted active ingredients exceeding the established threshold
- Clinical PA on compounds of high concerns: Requires prior authorization for targeted active ingredients commonly used in compounds regardless of cost
- Select bulk chemical exclusions: Excludes bulk chemicals if they are not recommended by the FDA for compound use, have more affordable FDA-approved alternatives on the market or have questionable clinical value
- Compound kit exclusions: Excludes certain pre-packaged formulations from coverage, driving members to FDA-approved and lower-cost alternatives
- Analytics and reporting: Quarterly plan reviews compare compound trends against benchmarks for effective utilization and cost management
Since the comprehensive compound management program launched, several OptumRx clients have adopted some if not all of the program’s components. In the first year of the program, those who have adopted all of its featured components have witnessed a 91% decrease* in PMPM compound expenditures:
In summary, the OptumRx approach to managing compounding pharmacies has been extremely well-received by clients, providers and the industry as a whole. We believe that this approach represents the most comprehensive management program in the industry –an ideal combination of components to drive appropriateness, quality and cost-efficiency. The opt-in features allow clients to customize their approach while still preserving access for patients and those pharmacies that adhere to high-integrity compounding practices.
Please note: At this time the Clinical Prior Authorization and Credentialing portions of this program do not apply to the UMR book of business. These components may be added to the UMR program in 2017.
* Note: Benchmark results are based on client data and do not represent a guarantee of results.
1. U.S. Food and Drug Administration. FDA Fundamentals. Dec. 03, 2015. Accessed at: http://www.fda.gov/AboutFDA/Transparency/Basics/ucm192695.htm on 01.26.2016
2. International Academy of Compounding Pharmacists (IACP). What is Compounding? Accessed at: http://www.iacprx.org/?page=1 on 01.26.2016.
3. U.S. Food and Drug Administration. Compounding and the FDA: Questions and Answers. Oct. 06, 2015. Accessed at: http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/ucm339764.htm#what on 01.26.2016.
4. Medscape News. Pharmacy Compounding Primer for Physicians: Prescriber Beware. December 19, 2012. Accessed at: http://www.medscape.com/viewarticle/776329_1 on 01.26.2016.
5. Congressional Research Service. Compounded Drugs. June 3, 2013. Accessed at: https://www.fas.org/sgp/crs/misc/R43082.pdf on 01.28.2016.
6. Drug Benefit News. PBMs Ramp Up Efforts to Curb Soaring Cost, Use of Compounded Medications. Volume 15, Number 13 July 11, 2014.