The concern over the cost and safety of compound drugs is growing. According to a report from Towers Watson, 39 percent of employers have already excluded certain compound drugs from their benefits, while another 24 percent expect to do so by 2018. Many pharmacy benefit managers, which work with insurance companies, have done the same.
“Despite not being approved by the Food and Drug Administration (FDA), many compound drugs are in high demand, and costs have skyrocketed in the last few years,” says Veronica Hawkins, Medical Mutual Vice President of Government Accounts. “Unfortunately, it is more difficult than ever for patients, and employers, to know which ones are safe and effective.”
Smart Business spoke with Hawkins about compound drugs, their financial impact and how to help employees avoid high-priced medications that are often unnecessary or dangerous — or both.
What are compound drugs?
To make a compound drug, a licensed pharmacist has to combine, mix or alter the ingredients of a medication. There are a variety of examples on the market today, but the most common are topical pain treatments, such as ointments, creams and powders.
Unfortunately, certain compound drugs are unproven, as well as overpriced. That’s why insurance companies and pharmacy benefit managers have stopped covering many of the ingredients used to make them.
Why is this issue important?
First, the FDA does not verify the quality, safety or effectiveness of any compound drugs. Many have been shown to be clinically unnecessary or even dangerous. Second, many employers have suffered financially from the excessive costs of some compound drugs. A gram of a bulk powder or cream, which hasn’t been proven to be safe or effective, can cost hundreds or even thousands of dollars.
Has the situation gotten worse?
Absolutely. According to Express Scripts, the pharmacy benefit manager for Medical Mutual, the average per patient cost for a compound drug increased from $90 to $1,100 between 2012 and 2014. And it’s gone up since then. As a result, most pharmacy benefit managers have eliminated or reduced coverage for many ingredients used to make compound drugs.
Are all compound drugs dangerous or ineffective?
No, certainly not. There are reputable pharmacies, which compound prescriptions that may be unavailable commercially. For example, employees might need a crushed or liquefied form of a drug if they have difficulty swallowing pills. It’s also common for many pediatric drugs.
However, other pharmacies charge inflated prices for compound drugs that don’t provide additional clinical value over more affordable and FDA-approved alternatives. Those are the ones that are currently creating problems for many employers.
What can organizations do?
One of the best ways organizations can avoid problems with compound drugs is to let their insurance company manage their coverage for them.
Many insurance carriers, including Medical Mutual, allow clients to participate in compound management programs. In these programs, the carrier excludes compound drugs or ingredients that have been determined to be unsafe or unnecessary. The compounds that are found to be reputable stay covered.
In these types of programs, many of the drugs that are excluded are also excessively overpriced. In most cases, organizations will see their compound drug claims dramatically reduced. Of course, employees need to know what’s going on, so the insurance company will notify its members before a claim is denied.
What else is important to keep in mind?
Education is important, too. Employees should know enough to question their doctor when they get a new prescription. They can also ask their doctor to send prior authorization to their insurance carrier to find out if the drug is covered ahead of time.
The most important thing is to keep employees safe from unproven medications that, in many cases, do more harm than good. And that, in turn, will help prevent excessive and unnecessary costs.
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