“The Rising Costs of CompoundedDrugs in Health Plans:

How Best to Manage Them”

March 1, 2016

John Grossomanides, R.Ph.

Pricewaterhouse Coopers, Manager H&W

Goals & Objectives

Identify the drugs which are increasing compound costs

Quantify the amount of cost seen in compounding drugs

Provide insight as to how appropriately control these high cost agents

2

Defining Compound Drugs

As Defined by The FDA…

“Compounding is a practice in which a licensed pharmacist, a

licensed physician, or, in the case of an outsourcing facility, a person

under the supervision of a licensed pharmacist, combines, mixes, or

alters ingredients of a drug to create a medication tailored to the needs

of an individual patient”1

1. http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding

3

Characteristics of Compounded Drugs

May include sterile and nonsterile preparations

Made up of active and/or inactive ingredients.

The active ingredient or ingredients in a compounded drug may be one or

more FDA-approved products,

Or may be bulk drug substances. (Bulk drug substances—usually raw

powders—are generally not approved by FDA for marketing in the US)

Oral liquids(Suspension/Solutions), capsules, or cream/ointments

4

Examples of compound benefits:

Adjust strength or dosage – Captopril Solution

Flavor a medication

Reformulate the drug to exclude an unwanted, nonessential

ingredient

(e.g. gluten, or a dye to which a patient may be allergic)

Change the form of the medication i.e. if they have difficulty

swallowing

Fortified Prescriptions

5

WHY is compounding a concern

High Cost of the ingredients

Increasing Drug Trend

Changes in National Council for Prescription Drug Programs (NCPDP)

claims submission standards for compounded prescriptions

Number of NDCs in First Data Bank added for bulk drug substances

grew from less <500 in 2009 to almost 2500 in 2013

Safety

6

7

CVS Caremark Presentation, M. Shelby

8

CVS Caremark Presentation, M. Shelby

Health Plan Demographics

100% Commercial

170,000 lives

3 tier copay benefit design ( $10-$30-$50)

Open formulary

No exclusions of therapeutic classes

9

Top cost drivers compound drugs

Gabapentin powder

Fluticasone propionate powder

Micronized Progesterone

Tobramycin Sulfate

Inactive ingredients: Flavoring agents, bases, Ethoxy Diglycol

10Internal data on file, 2007-2015

Other High Cost Drugs used in compounds

Ketamine

Flurbiprofen

Lipoderm

Meloxicam

Bupivacaine

Mometasone

ALL USED TOPICALLY FOR PAIN

11

Example of a Compound Prescription

12International Journal of Pharmaceutical Compounding Vol.11 No.3 May/June 2007

13

Compound Cream vs. OTC product

Medrox Rx– Manufactured for: Pharmaceutica North America Package

size: 120 grams (4 oz.) tube NDC: 45861-0005-01

Methyl Salicylate - 20% Menthol - 5% Capsaicin - -0.035%

AWP: $3.125/gram or $375.00 for a 120 gram tube

Note: the percent is the number of grams of the active ingredient per 100

grams of inert cream/gel

Compare the actual production costs as quoted to a private label OTC

pharmaceutical manufacturer for a Medrox like product: $4.91

AWP vs. Cost

14

Commercial Plan Costs Year over Year

Year 2007 2008 2009 2010 2011 2012 2013 2014

CompoundRXs

2779 1299 771 751 864 1301 2205 993

IngredientCost

$674,417 $227,316 $172,194 $176,867 $169,859 $192,354 $393,407 $527,756

AverageCost per RX

$243 $175 $223 $236 $197 $148 $178 $531

15

Internal data on file, 2007-2015

Health Plan Costs

16

Internal data on file, 2007-2015

Cost Savings Strategies

Simply Exclude Compounds from coverage

Prior Authorization

Dollar threshold

Prior failure of commercially available formulations

Require supporting medical literature from peer review journal

Coverage rules for inactive ingredients/ customized formulary

Strict Off Label use policy

RESVERATROL Anti-inflammatory dietary supplement available in over-the-counter (OTC) formulations; not an approved drug

17

THANK YOU!!

18