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Compound Drugs

Revised: 01-23-2012

Compound Drugs

A compound drug consists of two or more ingredients. The quantity at the line level should reflect the way the NDC is normally billed.

Example: if the NDC is normally billed per milliliter, the quantity at the line should be the total number of milliliters dispensed for the entire prescription – not the number of containers of normal saline used.

Pharmacies will be paid only for the ingredients which are normally covered by DHS.

Commercially Available Products

If room stable commercially available products are compounded, reimbursement is limited to the rate of the commercially available product (WAC plus 2% or the SMAC plus dispensing fee).

Compounded Products, Preparations, and Oral Drugs

Compounded liquid oral drugs (e.g., solutions, suspensions, emulsions) are covered only for children and for aphagic adult recipients, and only when a commercial liquid version of the drug is not available.

Compounded capsules are covered only if a tablet or capsule commercial version of the drug is not available in the strength prescribed, and if the appropriate strength cannot be achieved using half or quarter tablets.

Compounded Topical Products

Compounded topical products are not covered when a product that contains the same combination of active ingredients in the same strengths is commercially available from a pharmaceutical manufacturer, regardless of the package size that is commercially available.

Example: If the prescription is for 15 grams of an ointment and the commercially available version is available only in 30 gram tubes, MHCP will not cover 15 grams of the compounded product.

Compounded Intravenous (IV) & Total Parenteral Nutritional (TPN) Drugs

Compounded IV and TPN drugs are covered according to FDA guidelines regarding approved indications and preparation.

The basis for determining the amount of payment shall be the lower of the:

  • Usual and customary price charged to the public
  • Actual acquisition cost of the drugs plus a fixed dispensing fee
  • Maximum allowable cost (PDF) plus a fixed dispensing fee
  • Specialty Pharmaceutical Reimbursement rate (PDF), plus a dispensing fee
  • The pharmacy dispensing fee is $3.65 except when dispensing intravenous solutions which must be compounded by the pharmacist the dispensing fee shall be $8 per bag, $14 per bag for cancer chemotherapy products and $30 per bag for total parenteral nutritional products dispensed in one liter quantities, or $44 per bag for total parenteral nutritional products dispensed in quantities greater than one liter.

    If room stable commercially available products are compounded, MHCP reimbursement is limited to the rate of the commercially available products (AWP minus 15% plus $3.65 dispensing fee).

    Indicate the route of administration in the appropriate field of your pharmacy software. Use the SNOMED value that corresponds with the route the compounded prescription is being administered.

    Routes of administration eligible for the enhanced dispensing fee are:

    intravenous central route
    intravenous peripheral route
    intralymphatic route
    intravascular route
    intravenous route
    intra-arterial route
    intraperitoneal route

    Indicate the number of units prepared in the “finished units” field. Finished units are the final number of IV bags, IV cassettes, or TPN bags prepared. The “finished units” value is used to determine the number of dispensing fees that apply to the claim. “Finished units” does not refer to the quantity of solution or drug dispensed.

    Example I: For three 1,000 ml bags of a TPN solution, enter “3” for finished units, not 3,000. This is a very important distinction.

    Example II: For an antibiotic prepared in a separate bag for each dose and given three times daily for five days, enter “15” in the “finished units,” not the total number of milligrams of antiobiotic used, nor the number of milliliters dispensed.

    TPN only: Enter the diagnosis code 994.2 in your software’s diagnosis code field. Diagnosis codes are not required for any other compounded product.

    For chemotherapy claims, the drug NDC is checked against the American Hospital Formulary Service (AHFS) class of drugs 10:00:00, antineoplastic drugs, for assignment of the appropriate dispensing fee. A diagnosis code is not needed.

    Compound Drug Specific Billing Requirements for NCPDP D.0

    Compound Drug Type

    Compound Drug Indicator

    Route of Administration

    Number of Finished Units

    Diagnosis Code





    if applicable





    if applicable

    Sterile intravenous compound


    Appropriate SNOMED code


    if applicable

    Intravenous chemo


    Appropriate SNOMED code





    Appropriate SNOMED code



    Systematized Nomenclature of Medicine Clinical Terms (SNOMED CT) SNOMED CT) terminology which is available from the International Health Terminology Standard Development Organization (

    Compound Billing and Rejected Claim Options

    Bill compounded IV and TPN drugs to DHS using NCPDP D.0 POS software or the MN–ITS Interactive Pharmacy (NCPDP) claim format.

    Bill compound drug claims by reporting each ingredient in the compound.

    MHCP will pay for a compounded claim in full only if each ingredient used meets MHCP billing standards (e.g., the manufacturer must have signed a Medicaid rebate agreement, the NDC must not be expired, and the ingredient must not be otherwise excluded from coverage).

  • • If one or more of the ingredients in a compounded preparation require a diagnosis, enter the appropriate diagnosis code in the diagnosis field of the POS software
  • • If one of the ingredients in a compounded preparation requires prior authorization, please contact the MHCP Prescription Drug PA Review Agent at 1-866-205-2818
  • When the pharmacy submits compounded claims through their POS software the pharmacy will receive information from MHCP about whether or not one or more of the ingredients are not covered and how much MHCP will pay per line item. If the pharmacy chooses to accept the stated amount as payment in full for the compounded drug, the pharmacy must respond by entering “08” in the Submission Clarification Code field of their POS software.

    If the pharmacy decides not to accept MHCP allowed amount as payment in full, the pharmacy cannot charge the recipient. The pharmacist may want to determine why MHCP denied one or more of the NDCs. The pharmacy may check to see if a product exists that can be used in place of the denied ingredient(s) that MHCP will cover. The pharmacy may also consider checking with the prescriber to see if an alternative product can be dispensed. If the allowed amount is accepted, the pharmacy may not bill the recipient for the uncovered portion.

    When billing compounded drugs through POS software or MN–ITS Interactive Pharmacy (NCPDP) enter the SNOMED route of administration code in the route of administration field.

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