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KRS Global Blog

Compounding Pharmacies Engaging in Profiteering With “Designer Medications”?

Compounding medications are becoming more commonplace, and more expensive. These designer drugs include a baby rash cream that costs $1600 and a compounded pain treatment cream costing $2388 for a 30 days supply. Many pharmacy benefits managers and healthcare plans are saying that the compounding trend has gotten out of hand. “While creams typically contain about four ingredients, the $8,500 scar cream contained 13 ingredients, and the $2,300 pain cream had 18 ingredients, according to Catamaran [a pharmacy benefits manager]. The $1,600 diaper rash ointment had only two ingredients, one an organic floral extract.” (New York Times, 8/14/14)
Last year Congress passed legislation that would improve the federal oversight of compounding pharmacies, in the wake of the New England Compounding Center’s fungus-contaminated steroidthat reportedly led to the death of 64 people. The FDA still lacks the authority to regulate compounding medications, consequently, consumers are often left to deal with untested products and high prices when doctors prescribe compounded medications.
According to the New York Times, part of the problem is a result of billing practices. Since a compounding pharmacy can list and individually bill for each ingredient there is a tendency to add additional products. For example, the $2,388 topical cream for muscle pain contains two muscle relaxants, one local anesthetic, a nonsteriodal anti-inflammatory, a neuropathic pain treatment medication and a cream base. A typical treatment regime for muscle pain would cost significantly less than $200.  (New York Times, 8/14/14)  There is little or no research to prove that these “super medications” work any more effectively than traditional pain medications.
The healthcare insurance companies are now going to start restricting payments for these medications. “Express Scripts, the largest pharmacy benefits manager, has said it will stop paying for more than 1,000 ingredients used in compounding, cutting spending by its health plan clients on such medicines by 95 percent. It said such spending had grown to $171 million in the first quarter of this year from $28 million in the first quarter of 2012.”  (New York Times, 8/14/14)
Some states are beginning to pass laws to control spending on compounded drugs, specifically for workers’ compensation, according to the New York Times report. So far California has enacted legislation, Ohio established a $600 cap per prescription, and Georgia is looking at setting a limit on the number of ingredients allowed in each compounded medication.   (New York Times, 8/14/14)
As expected there is push-back from the compounding pharmacies.  Profits could be at risk.  The compounding pharmacies make many arguments supporting their exorbitant pricing.  One common reason they use for support is that patients depend on specially formulated medications if they have specific allergies or other conditions, like an inability to swallow pills. These are reasonable concerns, but perhaps an insufficient reason to charge thousands of dollars for creams and ointments that likely cost a small fraction of that amount to produce.  There is a fine line between meeting patient and market demands and profiteering.   It is reasonable to question whether some of these companies have crossed that line.