New DHA Screening Process Brings Drug Compounding Costs to 2% of April Levels

by U.S. Medicine

August 9, 2015

DHA Pharmacy Chief Says “Nefarious Actors” Targeted Beneficiaries

By Annette M. Boyle

George Jones, PharmD, MS

George Jones, PharmD, MS

WASHINGTON — In April, the Defense Health Agency (DHA) spent $18 million a day in compound drug claims. By July, the daily costs had dropped to $360,000 as a result of newly implemented screening processes and a crackdown on fraudulent prescriptions.

Through the early part of this year, claims for compound drug products skyrocketed. In the first quarter, compounded drugs accounted for more than 20% of all DHA pharmacy expenditures but only 0.5% of the total number of prescriptions for only 0.4% of all beneficiaries.

Topical creams to treat pain accounted for the biggest increases in compound drugs costs in recent years, rising from $5 million in 2004 to $514 million in 2014 to more than $500 million in the month of April alone.

As of May 1, TRICARE began screening all ingredients in compound drugs to ensure they are FDA-approved and covered by TRICARE. Screening was further tightened on May 11 to address the continued influx of claims for compounds of “dubious clinical evidence and excessive cost,” according to the DHA.

The agency will continue to cover most compound drugs. For those not covered, pharmacists who are compounding the prescriptions often will be able to substitute ingredients that meet TRICARE standards. Providers also may provide evidence of a compound’s safety, effectiveness and appropriateness for their patient’s needs with requests for prior authorization to gain coverage of specific compounds.

Closing the Loophole

Two trends contributed to the increase in compound drug prescriptions and their costs, said George Jones, PharmD, MS, chief of pharmacy operations for DHA. “Nationally, there’s been a drive to individualize therapies, which included a marketing push for specialty creams and tablets. Another key component has been the involvement of nefarious actors who saw a loophole in health benefit coverage for our beneficiaries. Some exploited that to some degree, while others engaged in flat-out fraud.”

Historically, pharmacies have compounded ingredients to make medications tailored to a patient’s needs in forms, dosages or combinations that are not available commercially. Over the years, pharmacies that specialize in compounding have developed their own products with proprietary bases to which they then add specific ingredients to treat pain or for other uses, Jones told U.S. Medicine.

The Food and Drug Administration (FDA) has provided an exemption for these proprietary bases, so they have not had the same level of review for safety and efficacy as FDA-approved products. Until recently, DHA could not independently analyze their components, but recent upgrades now allow the agency to run a report on the individual ingredients and see if they have been found to be safe and effective by the FDA.

By law, DHA can only provide FDA-approved medicines to its beneficiaries. A Government Accountability Office report in October 2014 found that paying for many of these compounds put the agency out of compliance with its own regulations. The new screening process brings TRICARE into compliance by automatically rejecting any product that is not FDA approved. Commercial insurers have implemented similar controls, Jones noted.

The screening process also kicks out nutritional supplements. “We started to see a sharp rise in compounds with nutritional supplements,” Jones said. “There are two problems with these compounds: One, the pharmacy benefit does not cover nutritional supplements, except in the case of a metabolic deficit that needs to be treated. Second, we have issues verifying that the ingredient list is accurate, let alone that the ingredients are effective.”

Some of the ingredients are highly promoted on websites and health-oriented TV shows but have not shown efficacy in a randomized controlled trial. “Reservatrol, for instance, is popping up in a lot of compounds, but there is no evidence it works and, as a nutritional supplement, it’s not covered by TRICARE,” Jones said.

Cracking Down

In some cases, the questions about a compound medication go well beyond whether the ingredients have FDA approval or are covered by TRICARE. In the months preceding the new screening process, some compounding pharmacies turned the traditional model for filling compound drug prescriptions on its head — creating medications for which they then aggressively sought patients, Jones recounted. Others engaged in fraud — selling drugs to patients who never received a legitimate prescription.

Jones said he received a call from one of these direct marketers who asked whether he was a TRICARE beneficiary and whether he experienced any pain. “Like 9 out of 10 people, I said, ‘Yes.’ They said they had a great pain cream for back and knee pain.” When Jones said he did not have pain in those locations, the marketer said it would also work for foot and hand pain, or migraines, if he had those.

“A lot of beneficiaries were getting those marketing calls and in some cases received medication whether they requested it or not, with some pharmacies generating prescriptions without the patient ever being seen by a physician,” he added.

Claims for compound drugs generated by these aggressive and often fraudulent marketing methods ran as much as $10,000-$15,000 for a single prescription. With the new administrative controls, the average cost of compound prescriptions fell from $6,889 in April to $200.

The DoD is working with federal authorities to shut down compounding pharmacies engaging in illegal activities. In addition, the fraud office and the Office of the General Counsel are referring all cases of providers and pharmacies for whom payment of claims has been suspended to the relevant state licensing boards.

“Unfortunately, some of these folks are still trying to figure out how to beat the screening process for medically unnecessary products,” Jones said.

Protecting Patients

The changes in coverage have not shut down access to compound drugs entirely. Since the screening began, “we have covered more than 55,000 compound prescriptions that meet criteria and our standards of safety and effectiveness. In other cases, a number of commercially available products with proven track records meet the need and have been recommended in place of unproven compounds,” he noted.

For patients, the changes improve safety, while controlling costs and ensuring access to medically necessary compounds. Jones said beneficiaries should be confident that “in those cases where compound medication has evidence and is appropriate, we will make sure the patient gets that medicine.”

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