Does Medicare Cover Compounded Medications?

Compounded medications offer tailored solutions for individual patient needs, but their coverage under Medicare can be complex. Medicare, the federal health insurance program, provides prescription drug coverage through its Part D plans. Understanding how these specialized medications fit within Medicare’s framework is important for beneficiaries.

Defining Compounded Medications and Medicare Part D’s Role

Compounded medications are prescription drugs custom-made by a pharmacist or physician to meet specific patient needs. This involves combining, mixing, or altering ingredients to create a medication not commercially available. For instance, a compounded drug may be prescribed if a patient has an allergy to a dye or inactive ingredient in a standard medication, requires a specific dosage not available commercially, or needs the medication in a different form, such as a liquid instead of a pill.

Medicare Part D provides outpatient prescription drug coverage. Private insurance companies approved by Medicare offer these plans. Each Part D plan maintains a formulary, a list of covered drugs approved by the Centers for Medicare & Medicaid Services (CMS). While Part D plans cover a wide range of prescription drugs, compounded medications have distinct coverage rules due to their customized nature.

Specifics of Part D Coverage

Compounded medications present a challenge for Medicare Part D coverage because they are not approved by the Food and Drug Administration (FDA) as a single drug entity. This lack of FDA approval means compounded drugs typically do not have a National Drug Code (NDC), a standard identifier for commercially available drugs.

Despite not being FDA-approved as a finished product, a compounded medication may be covered by a Part D plan under specific conditions. All active and inactive ingredients used in the compounding must be FDA-approved and listed on the plan’s formulary. Importantly, only the costs associated with Part D-eligible components are allowable for coverage, and the medication cannot contain any ingredients covered under Medicare Part B. Bulk powders, for example, are generally not considered FDA-approved drug products and are therefore not covered under Part D.

The compounded medication must be prescribed for a medically accepted indication, meaning there is a genuine medical need for the custom formulation. Coverage is typically considered when there isn’t an FDA-approved, commercially available alternative that meets the patient’s specific needs. Compounded medications should not be for convenience or a combination of readily available drugs that could be taken separately. Even when these criteria are met, coverage is not guaranteed and is often determined on a case-by-case basis by the individual Part D plan. Many compounded medications do not meet these strict requirements and are therefore not covered.

Navigating Coverage and Costs

Beneficiaries needing a compounded medication should proactively gather information to understand potential coverage and costs. Communicate with the prescribing physician to ensure the medical necessity for the compounded medication is clearly documented. This documentation can explain why a standard, commercially available drug is not suitable, such as specific allergies or dosage requirements.

Engaging with the pharmacist who will prepare the compounded medication is also advisable. The pharmacist can provide details about the specific ingredients, their FDA approval status, and whether the pharmacy has experience billing such prescriptions to Medicare Part D. They can help determine if the components of the compounded drug meet the criteria for potential Part D coverage.

Before filling the prescription, it is important to contact the specific Medicare Part D plan directly. Inquire about coverage for the particular compounded medication, providing details like its ingredients and the documented reason for its use. This communication helps confirm if the medication, or at least its Part D-eligible components, will be covered and what the expected out-of-pocket costs might be.

If a claim for a compounded medication is denied, beneficiaries have the right to appeal the decision. The appeal process typically begins with filing an appeal directly with the Part D plan within 60 days of denial. If the plan denies the appeal, further levels of appeal are available, including an Independent Review Entity (IRE) and potentially the Office of Medicare Hearings and Appeals (OMHA). Each appeal level has specific timeframes for submission and decision.

Beneficiaries should keep meticulous records of all communications and documents related to their claim and appeal. Financial responsibilities for non-covered compounded medications can include deductibles, co-payments, co-insurance, or paying 100% of the cost. In such cases, asking the pharmacy for a cash price or exploring alternative treatments with a healthcare provider may be options to consider.