On April 3, Food and Drug Administration Commissioner Scott Gottlieb, and Deputy Commissioner Anna Abram, issued a statement on new 2019 efforts to improve the quality of compounded drugs.

Jean S. Goldstein

Interestingly, in 2018, the FDA also announced a new and expanded compounded research project, for which the FDA struck an agreement between two institutions to conduct research to help the agency on its policies. 

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 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 comprise various ingredients that 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 contain bulk powders and 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.” 

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 compound creams and lotions are most often made from 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 shuddering at the words “medically accepted indication” because we are still reeling from the sticker shock of inclusion of Lyrica in approved WCMSAs within the last year, based upon the Centers for Medicare & Medicaid Services’ use and definition of medically accepted indications and off-label use. This definition can be found in CMS’ WCMSA reference guide, which states:

“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.”

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 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 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 its 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 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 future discussions as related to the effectiveness of compounded medications or any additional regulations regarding same.

Jean S. Goldstein is senior legal counsel for Medval. This post from the Medval blog is republished with permission.