Compounded ingredient costs: PBMs take action


In response to rising compounding drug costs, pharmacy benefit managers, such as Express Scripts, have made moves to restrict their coverage for active ingredients used by compounding pharmacies.

In response to rising compounding drug costs, pharmacy benefit managers, such as Express Scripts, have made moves to restrict their coverage for active ingredients used by compounding pharmacies.

The Wall Street Journalreported that Express Scripts will block coverage for about 1,000 active ingredients that are used by compounding pharmacies.

But more important than the issue of cost/waste with compounds is a rapidly growing concern relative to the safety of individuals for whom these products are prescribed, according to FormularyWatch clinical editor David Calabrese, RPh, MHP, vice president and chief pharmacy officer for Catamaran.

“Compounds are not FDA approved and as such they are not subject to the same rigorous standards of quality, potency, purity and stability in the manufacturing process as commercially-produced drugs,” Calabrese said. 

“Additionally, there is typically very little, if any, evidence from sound clinical studies supporting the safety and effectiveness of these products,” he said. “And, as compound use has risen, many organizations are seeing compounding practices that are certainly raising eyebrows for all stakeholders as cause for concern.”

According to Calabrese, these practices include, but are not limited to:

  • Utilizing active ingredients in compounds that have never been FDA evaluated or even tested in a dermatologic route of administration  (eg, anticonvulsants, antidepressants, narcotics)

  • Combining upward of 10 to 15 different active ingredients into a single compounded product

  • Combining different drugs from the same drug class in a compound

  • Production of topical compounds with potency of active ingredients 10- to 20-fold that of a commercially manufactured, FDA-approved alternative

  • Bribes/kickbacks to doctors by compounding pharmacies to prescribe compounded products


“These efforts to better manage compounded medications is not a war against compounding in general,” Calabrese said. “There is still a very valid clinical role for compounded medications in clinical practice. At the same time however, given the high degree of variability in oversight of compounding activity from state to state, as well as these increasing safety and cost issues, payers are demanding that their PBMs play a greater role in assisting them with improved management in this area.”

Ideally, any efforts to manage these products should ultimately be a decision made at the individual payer level, with the PBM offering an array of strategic options that can be custom-designed to meet that payer’s individual needs and objectives, according to Calabrese.

However, Loyd V. Allen, Jr., PhD, RPh of Patients and Physicians for Rx Access, Chesterfield, Mo., believes that compounded drugs are as safe as standard manufactured drugs, and that to imply otherwise is misleading.

"All compounding pharmacies are regulated at the state level, as are non-compounding pharmacies and individual pharmacists," Allen said. "Standards set by the United States Pharmacopeia are integrated into the day-to-day practice of pharmacy compounding and are mandated by law in most states." 

Numerous published and peer-reviewed studies document the benefits of compounded medications, particularly for patients dealing with recurring localized pain from cancer and chemotherapy, diabetes, rheumatoid conditions and many other conditions, according to Allen. "By applying compounded medications to the skin, patients can get pain relief without the adverse side effects or dependency too often associated with extended use of oral narcotics. For many patients, compounded medicines are their last resort," he said.

When PBMs say these compounds are not FDA approved for topical applications, they mean topicals are an 'off-label' usage, according to Allen. "Most of the compounds have been approved for oral uses but compounding them for topical use is considered 'off-label'," Allen said.

There are other off-label prescriptions on the market besides compounded medications and doctors often seek an off-label solution for their patients, according to Allen. He cited a 2006 study (Archives of Internal Medicine) that found 21% of drugs prescribed were off-label. 


"So why is it ok for PBMs to routinely pay for other off-label uses and exclude compounded medications?" Allen asked.

As far as price goes, compounded medicines vary in cost, just like mass-produced medicines, according to Allen.

"We have seen no data to show that mass produced items are more economical than compounded medicines," he said. "It should be noted that PBMs are well aware that physicians and pharmacists do not decide the average wholesale price of the ingredients in prescription medication. To suggest otherwise is disingenuous and misleading. Second, the average wholesale price has little or nothing to do with what Express Scripts and others pay for compounded medications."

Allen called the response of the PBMs "totally ridiculous" and "demonstrates they are intent on substituting their cost-driven judgment for the physician’s judgment," he said. "Ending or dramatically reducing coverage of essentially all compounded medications means the majority of patients will have to pay full-cost for their compounded medications or be forced to use a treatment that is not as effective for them.

"PBMs attempt to mislead when they say manufactured medicines provide the same benefits as compounded preparations for virtually all patients. For many patients, compounded medicines are not just the best option, they are the only option. We must never lose sight of the fact that compounded medicines are prescribed when the physician treating the patient has made the decision that commercially manufactured products are not meeting an individual patient’s unique needs," Allen continued.

"My recommendation has always been that if there is an FDA-approved, manufactured drug product that will do the job, then use it. If not, then compounding pharmacies can fill in the gap and provide the necessary medications for effective therapy the patient’s needs," he said. "Countless lives are improved every single day by physicians and patients using compounded medications. It is hard to imagine modern healthcare without compounded preparations. To remove patient access to an entire class of medication is irresponsible. PBMs should manage this benefit and related costs, rather than cutting it."

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