Medicaid Encourages Use of Compounded Drugs Based on Cost

The recent outbreak of meningitis from the use of a compounded steroid that has lead to the death of 28 and sickness in many others has brought to light the safety, cost, regulation and use of compounded medications. Compounded medications are made primarily by pharmacies for patients who can not use traditional medications. Generally these medications are prepared by a pharmacist for one individual. More and more of the time though pharmacies are compounding batches of medications that they know a provider or insurer will habitually request. The compounding pharmacies are not overseen by the Food and Drug Administration (FDA) but by state regulators, however the FDA has sent warning letters or pursued other actions against pharmacies that were mass producing a compound of an FDA approved drug.

 The cost of compounded medicines can be significantly less than the version approved by the FDA and as such many insurers will cover the less expensive compounded variety and not pay for the FDA approved formula. Kaiser Health News examined the issue by looking at one drug, Makena™ which is used to prevent pre-term delivery. The FDA approved medication Makena™ was originally priced at $1,200 per dose. Pharmacies can compound the same drug for about $20 to $40 per dose. The compounded drug contains the same active ingredient and will deliver the same effect as the FDA approved drug if the compounded drug is mixed in the right amounts and in a sterile environment.

 Medicaid coverage. Kaiser Health News reported that many state Medicaid agencies will only pay for the compounded version of this medication based solely on cost. KV Pharmaceutical, the maker of the FDA approved drug, lowered the price of Makena™ to $690 per dose but even at that price, 21 doses the cost of that medication would be $14,490 to a state’s Medicaid program, Kaiser Health News reported.

 Kaiser reported that states like Louisianarequire physicians to get special permission before approving Medicaid reimbursement for the drug. Louisiana Medicaid officials went so far as to write a letter to providers stating that pharmacy made versions are a better choice, according to the Kaiser Health News story. Providers in Texas must show that a pharmacy made compound is not available before they will approve payment for Makena™, and in Kentucky physicians must show that patients had a bad reaction to a compounded medication before a prescription for Makena will be approved, according to the Kaiser Health News Report.

 The Centers for Medicare and Medicaid Services said that Medicaid programs could continue to pay for the cheaper version of the same drug, and on the same day the FDA said it would not take enforcement action against pharmacies that properly and safely made similar versions f the drug.

 Kaiser Health News reported that KV Pharmaceuticals has filed lawsuits in Illinois, South Carolina, and Georgia stating that Medicaid programs are exposing beneficiaries to “unapproved compounded versions…of uncertain quality.” Kaiser Health News examined the issues in one FDA approved drug to demonstrate the issues involved between drug manufacturers and pharmacies that make their own medicines by compounding.