No, most insurance plans don’t cover compounded medications because they are not FDA-approved and lack standardized billing codes. Insurance companies typically require FDA approval and specific billing systems to process claims, which compounded drugs don’t have. However, some plans do provide partial coverage under certain conditions.
This article will explain the main reasons insurance companies avoid covering compounded medications, what you can do to get coverage, and smart ways to save money on these custom medicines.
What Are Compounded Medications?
Compounded medications are crafted by specially trained pharmacists who alter, mix, or combine ingredients to create a medication that’s tailored to a patient’s exact requirements. Think of them as custom-made medicines for people who can’t use regular, store-bought pills.
Common Reasons People Need Compounded Medications
- Allergies to dyes or fillers in regular medications
- Different dosage strengths not available in commercial drugs
- Special forms like liquids for people who can’t swallow pills
- Combination medications that mix several drugs into one
- Discontinued medications that are no longer made
VillageRx offers comprehensive compounding services to create personalized medications when standard options don’t work for you.
The 5 Main Reasons Insurance Won’t Cover Compounded Medications
1. No FDA Approval
The biggest reason insurance companies say “no” to compounded medications is simple: compounded drugs are not FDA-approved, which means the agency does not verify their safety, effectiveness or quality before they are marketed.
Insurance companies like to play it safe. They want proof that medications work and are safe before they pay for them. Since compounded medications skip the expensive FDA approval process, insurance companies see them as too risky.
2. Missing Billing Codes Create Headaches
For drugs administered in outpatient physician office settings, claims lack information to identify compounded drugs because there are no specific billing codes for most of these drugs. This creates a big problem for insurance companies.
Regular medications have special codes called NDC numbers that tell insurance companies exactly what drug they’re paying for. Compounded medications don’t have these codes, making it nearly impossible for insurance systems to process claims automatically.
3. The “One Bad Ingredient” Rule
Here’s where things get really tricky. If your compounded medicine contains five ingredients and one is not covered under your insurance company, they will reject the entire medication for drug coverage.
This all-or-nothing approach means even if four out of five ingredients in your compounded medication are covered, the whole prescription gets denied because of that one uncovered ingredient.
4. Higher Costs Scare Insurance Companies
The average cost in 2013 was $710.36 for compounded prescriptions, while noncompounded prescriptions cost $160.20. That’s more than four times higher!
Costs over the last five years have risen dramatically for compounded medications. Some suppliers have forced up the cost of bulk powders in the quest for increased profits. Insurance companies don’t want to pay these high prices when cheaper alternatives might exist.
5. Pharmacy Network Requirements
Even when insurance companies do cover compounded medications, they often require you to use specific pharmacies. Some require that the compounding pharmacy be in-network. Others will require that you pay more for out-of-network providers.
The situation gets even more confusing because a pharmacy may be in-network for regular prescriptions and out-of-network for compound drugs.
How Much Do Compounded Medications Really Cost?
The truth about compounded medication costs might surprise you. According to a study published in the Journal of Managed Care & Specialty Pharmacy, let’s break down the real numbers:
Average Costs by Year
YearCompounded MedsRegular MedsDifference2012$308.49$148.75107% higher2013$710.36$160.20343% higher
In 2013, the average cost of compounded prescriptions increased by 130.3% to $710.36, while noncompounded prescriptions increased by 7.7% to $160.20.
Why Costs Keep Rising
Several factors drive up compounded medication prices:
- Supplier markups on raw materials
- Labor-intensive preparation by skilled pharmacists
- Quality testing requirements
- Lower volume production compared to mass-produced drugs
- Specialized equipment and facility costs
If you need specialized medications like pain management compounding or hormone therapy solutions, these costs can add up quickly.
Which Insurance Plans Sometimes Cover Compounded Medications?
Not all insurance plans treat compounded medications the same way. Here’s what different types of coverage typically offer:
Medicare Coverage Rules
Medicare Part D may cover compounded medications, but Medicare only pays for compounded medications containing at least one ingredient that is a Part D-covered drug.
Key Medicare requirements:
- Must contain at least one Part D-covered ingredient
- Cannot contain ingredients covered under Medicare Part B
- Self-administered compounds are not covered
Medicaid Varies by State
New York Medicaid members may be eligible for Medicaid compounded prescription benefits and do not need approval from their doctor or healthcare provider before receiving these medications. However, coverage rules change dramatically from state to state.
Private Insurance Plans
Most private insurance companies follow these patterns:
- Some plans cover medically necessary compounds when no commercial alternative exists
- Others don’t cover compounds at all
- Many require higher copayments or coinsurance
- Most need prior authorization
TRICARE Has Clear Rules
TRICARE covers compound drugs if they are safe, effective, and medically necessary. TRICARE actually has some of the clearest policies for compound coverage among major insurers.
Smart Strategies to Get Insurance Coverage
Even though getting insurance to cover compounded medications is tough, you’re not completely out of luck. Here are proven strategies that work:
Work with Your Doctor for Prior Authorization
If a patient needs a compounded medication long-term, the prescribing physician can call the patient’s insurance carrier for pre-approval. This is probably the most efficient way for patients to ensure that their medication will be covered by their insurance carrier.
Your doctor needs to explain why:
- Standard medications won’t work for you
- The compounded medication is medically necessary
- No commercial alternatives are available
Get Help from Your Compounding Pharmacy
Professional compounding pharmacies know the insurance game inside and out. Many compounding pharmacies will also provide a Universal Claim Form with each prescription so that the patient can submit it to their insurance company for possible reimbursement.
At VillageRx, our pharmacists work directly with insurance companies to maximize your chances of getting coverage.
Ask About Ingredient Substitutions
Smart compounding pharmacies can often work around the “one bad ingredient” problem. Sometimes they may be able to remove the ingredient in question. Other times they might call your physician and see if the non-covered ingredient can be switched for one that is covered by your insurance plan.
Submit Claims for Reimbursement
Even if your insurance won’t pay upfront, you might get money back later. Some insurance companies provide opportunities for reimbursement of out-of-pocket expenses when you submit proper documentation.
Ways to Save Money on Compounded Medications
If insurance won’t help, these money-saving strategies can make compounded medications more affordable:
Compare Pharmacy Prices
Not all compounding pharmacies charge the same prices. Call several pharmacies to compare costs for your specific medication. Prices can vary significantly between providers.
Ask About Payment Plans
Many compounding pharmacies offer payment plans or sliding scale fees for patients paying out of pocket. Don’t be afraid to ask about financial assistance programs.
Look for Pharmacy Discount Programs
Some compounding pharmacies partner with discount programs or offer their own customer loyalty programs that can reduce costs over time.
Consider Mail-Order Options
Some compounding pharmacies offer mail-order services that might be cheaper than local pickup, especially for ongoing prescriptions.
Check for Manufacturer Assistance
If your compounded medication contains ingredients from major pharmaceutical companies, check if those companies offer patient assistance programs.
What the Future Holds for Compounded Medication Coverage
The landscape for compounded medication coverage is slowly changing, but challenges remain. According to recent data from the Peterson-KFF Health System Tracker, the cost of retail prescription drugs has become a top health policy issue for consumers and policymakers:
Increased Regulation May Help
The Drug Quality and Security Act (DQSA), which was enacted on November 27, 2013, made important updates to the Federal Food, Drug and Cosmetic Act regarding human drug compounding. As regulations improve, insurance companies might become more comfortable covering these medications.
Technology Improvements
Better billing systems and electronic health records might eventually solve the coding problems that make insurance claims so difficult to process.
Cost Pressures Continue
The cost of retail prescription drugs has become a top health policy issue for consumers and policymakers. This pressure might force insurance companies to find better ways to cover necessary compounded medications.
When Compounded Medications Are Worth the Cost
Even without insurance coverage, compounded medications can be worth the investment in these situations:
No Commercial Alternative Exists
If your condition requires a specific combination or dosage that no drug company makes, compounded medications might be your only option.
Multiple Allergies or Sensitivities
When you’re allergic to common fillers, dyes, or preservatives in commercial drugs, custom compounding can remove these problematic ingredients.
Pediatric or Geriatric Needs
Children and elderly patients often need different dosage forms or strengths that aren’t commercially available.
Discontinued Medications
When pharmaceutical companies stop making a medication you depend on, compounding pharmacies can often recreate it.
If you need specialized services like veterinary medication compounding or antifungal treatments, the custom approach might be essential for effective treatment.
Final Thoughts
Insurance companies don’t cover compounded medications mainly because they lack FDA approval, standardized billing codes, and cost more than regular drugs. The “one bad ingredient” rule and network restrictions make coverage even harder to get.
However, you’re not powerless in this situation. Work with your doctor to get prior authorization, partner with experienced compounding pharmacies, and explore ingredient substitutions. Even if you can’t get full coverage, you might qualify for partial reimbursement.
Remember that compounded medications serve an important medical need when standard drugs don’t work. While the cost can be high, the health benefits often justify the expense when you truly need a customized solution.
If you’re struggling with insurance coverage for compounded medications, contact VillageRx to discuss your options. Our experienced pharmacists can help you navigate insurance requirements and find the most cost-effective solutions for your medication needs.