Compound Drugs

Revised: August 23, 2022

Overview

A compound drug is not a commercially available final drug that is approved by the U.S. Food and Drug Administration (FDA). A compound drug is the result of a pharmacist combining two or more drugs, or ingredients. Additional information about non-sterile and sterile compound drugs and compounding is available on the US Pharmacopeia website.

Compounded Intravenous (IV) and 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 definition price charged to the public

· Actual Acquisition Cost definition of the drugs plus a fixed dispensing fee

· Minnesota State Maximum Allowable Cost (SMAC) List (PDF) plus a fixed dispensing fee

· Minnesota State Maximum Allowable Cost (SMAC) Specialty Drug List (PDF) plus a dispensing fee

The pharmacy dispensing fee is $10.77 per claim.

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

Compound Billing and Rejected Claim Options

Submit claims for compounded drugs to Minnesota Department of Human Services (DHS) using National Council of Prescription Drug Programs (NCPDP) D.0 Point of Service (POS) software or the interactive pharmacy (NCPDP) claim format in MN–ITS.

Submit claims for compounded drugs by reporting the compound code on the claim and each ingredient in the compound as a separate line of the claim.

Minnesota Health Care Programs (MHCP) will pay for an ingredient if it is a covered drug and meets all MHCP billing standards. For example, the manufacturer must have signed a Medicaid rebate agreement, the National Drug Code (NDC) must not be expired, the ingredient must not be otherwise excluded from coverage, and so forth.

· 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, contact the MHCP prescription drug prior authorization review agent at 866-205-2818.

· Each claim line must be billed using the NDC and NCPDP billing units used in the compounded drug. Each ingredient must be billed as a separate claim line and multiple ingredients or quantities cannot be combined onto a single claim line.

DHS will send information identifying if ingredients are covered or not covered, and how much MHCP will pay per line item when the pharmacy submits compounded claims through their POS software. The entire claim will be denied if any lines are denied. A pharmacy can submit 08 entered in the Submission Clarification Code field to accept payment for the covered lines of a compound claim. A pharmacy cannot charge the member for noncovered lines if they submit a claim with 08 entered in the Submission Clarification Code field.

DHS only covers a selected list of active pharmaceutical ingredients (APIs) and excipients (inactive substances that serve as the vehicle or medium) used in compounded prescriptions. Some APIs and inactive ingredients may require prior authorization. Use the Minnesota Medicaid Fee-For-Service Pharmacy Program Drug Search to review coverage parameters for any NDC.