Controlling Compound Drug Costs

Rx Alert – May 2014

Careful monitoring of new clients’ claims data reveals an abundance of new, high cost Compound Drug creams. The creams – purportedly to address problems like pain or scarring – have never been approved by the FDA and have no proven efficacy! But our analyses of new clients’ data reveal the creams are now being dispensed in large number, and often at costs of $1,000 or more. We’re even seeing scripts of thousands of dollars per cream.

Our investigation into the problem reveals that Compound-creating Specialty Pharmacies have figured out a new way to generate revenue: They are taking an existing drug that’s been approved by the FDA to treat certain specific problems, and mass producing a powder version of the drug that they’ve combined with other drugs to create an unapproved custom cream. And then the pharmacies are marketing their new creams to doctors, just as Snake Oil Salesmen used to market drugs in the late 1800s before the first FDA Act was approved!

What are some examples of the new Compound Drugs that we’re seeing in our claims data analyses? There’s a pain cream – with one of the core ingredients being gabapentin (which the FDA approved as an oral treatment for shingles pain and seizures). There’s a new scar treatment cream – with one of the core ingredients being fluticasone (which the FDA approved as an anti-inflammatory for asthma). Other commonly used ingredients are flurbiprofen and ketamine (the horse tranquilzer and party drug).

Please note: Just because a drug may effectively address shingles pain – or asthma caused by inflammation – when taken by mouth – does not mean it will have any effect on muscle or joint pain – or scars – when rubbed into the skin. And no one knows whether it’s safe to use these creams topically since they’ve never been tested in clinical trials. Moreover, there’s no basis for the price tags that are being placed on these new creams.

Accordingly, every Health Plan needs to address this new development. A first step should be to analyze your claims data to determine the number of Compound creams that have already been dispensed, and at what cost. Thereafter, you should consider creating a Prior Authorization for Compound Drugs, and setting a dollar amount that will automatically trigger the Prior Authorization. But beware of setting the dollar amount too high: Our review of claims data reveals that Specialty Pharmacies are frequently adjusting their prices to $499, just to avoid Prior Auth’s of $500, or $299 to avoid Prior Auth’s of $300! You’ll also need to write a protocol to identify requirements for your PBM if a Prior Auth is triggered: Consider creating a NDC block and prohibiting the dispensing of Compound creams containing gabapentin, fluticasone, flurbiprofen and ketamine.

Here’s the bottom line: Keep a watchful eye on your claims data to detect new Compound Drugs. If you don’t, you’re likely to find your costs dramatically higher. And the extra dollars you’ll be paying may be for drugs with no proven utility.