Compounded Drugs and Medicare Part B

Medicare Part B generally covers most medically necessary doctors’ services. These services can include some limited outpatient prescriptions and biologicals, preventative care, durable medical equipment, hospital outpatient services, laboratory tests, x-rays, mental health care and some home health.

Providers must timely submit claims to a Medicare Administrative Contractor (MAC) using Healthcare Common Procedure Coding System (HCPCS) codes in order to receive Medicare Part B reimbursement. However, numerous problems associated with reimbursement of compounded drugs under Medicare Part B have been identified by the Office of the Inspector General (OIG) in a recent report titled, “Compounded Drugs Under Medicare Part B: Payment and Oversight” (OIG Report).

Some problems identified in the OIG Report include:

  • Not having a compounded code for Medicare Part B claims;
  • Billing all compounded drugs under the “not otherwise classified” (NOC) codes;
  • The manual review of all claims containing NOC codes to determine payment amount(s) as there are no nationally established payment amounts for compounded drugs;
  • No existing requirement for providers to identify the compounding pharmacy on Part B claims; and
  • Using numerous compounding codes for compounded medications.

Ultimately, the OIG Report recommended that the Centers for Medicare and Medicaid Services (CMS) implement changes to the way Medicare Part B claims for compounded drugs are tracked, identified and paid. OIG recommended that CMS create a system to systematically identify all claims for compounded drugs through the use of specific codes that would distinguish compounded drugs from other drugs billed under NOC codes.

Recommended changes include in the OIG Report included the following:

  1. Establishing a method to identify Part B claims for compounded drugs;
  2. Possibly requiring providers to identify the pharmacy that produced the compounded drug on the Part B claim(s); and
  3. Possibly conducting descriptive analyses of Part B claims for compounded drugs.
Ultimately, CMS agreed with the first recommendation, conditionally agreed with the third and rejected the second claim, though issues related to public safety need to be addressed.
Baer Law will continue to monitor this an similar legislative and regulatory changes related to compounding pharmacies and compounded medications.