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Compounding pharmacies band together to fight coverage limits


By Steven Ross Johnson
Posted: July 31, 2014 - 5:00 pm ET
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A group of compounding pharmacies has joined a provider network launched this month, aiming to serve as an intermediary to negotiate with payers. The move comes in response to the recent decision by a number of pharmacy benefits managers to limit coverage of some custom medications.

The new United Compounding Network will establish a set of standards regarding quality, transparency and best practices, according to Julie Letwat, executive vice president of UCN.

The idea for forming UCN dates back about six months, anticipating that pharmacy benefits managers would begin to limit coverage, she said.

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Last year OptumRx, the pharmacy benefits managing division for health insurer UnitedHealth Group, stopped covering ingredients used in the compounding of over-the-counter vitamins and supplements, as well as chemicals used for making cosmetic products and medications not approved by the Food and Drug Administration. And earlier this month, giant pharmacy benefits manager Express Scripts announced that, beginning in September, it would drop coverage for 1,000 drug ingredients found in compounded drugs.

“Payers want to effectively manage costs for their clients and avoid the inherent risk of having to potentially do business with bad actors that have sprung up in the compounding industry,” Letwat said. “UCN represents a partner that plans and PBMs can negotiate with to identify fair reimbursement levels, while being able to rest assured that they are only dealing with member pharmacies that meet the highest levels of quality and best practices.”

Compounding pharmacies that produce in bulk will be excluded from joining the network, as will pharmacies owned by physicians. Membership will be limited to those pharmacies that compound specifically to fill patient prescriptions and that are independently accredited by the Pharmacy Compounding Accreditation Board.

UCN will seek to partner with benefits managers by offering such services as standardizing claims billing, reimbursement and adjudication. Letwat could not offer an estimate as to the number of firms that have joined the network, but said members will comprise the top 1% of the nation’s custom pharmacies.

Pharmacy benefits managers contend the costs for compounding medications have risen sharply in recent years. Also, issues regarding questionable marketing practices and quality control issues by some compounding pharmacies have raised questions over the safety and efficacy of these types of drugs, providing reasons to impose restrictions.

Many industry professionals cite a 2012 incident with the now-closed Massachusetts-based New England Compounding Center as the basis for their concerns. The custom pharmacy was found to have sent out steroid injections that were contaminated with fungal meningitis, resulting in 64 deaths and more than 700 people in several states getting sick.

Similarly, earlier this month, the FDA issued a warning to doctors not to use medications made by Texas-based compounding pharmacy Unique Pharmaceuticals, citing sanitary concerns within its production plant.

Follow Steven Ross Johnson on Twitter: @MHsjohnson


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