Compound Drugs
Revised: 01-23-2012
Compound Drugs
A compound drug consists of two or more ingredients. The quantity at the line level should reflect the way the NDC is normally
billed.
Example: if the NDC is normally billed per milliliter, the quantity at the line should be the total number of milliliters dispensed for
the entire prescription – not the number of containers of normal saline used.
Pharmacies will be paid only for the ingredients which are normally covered by DHS.
Commercially Available Products
If room stable commercially available products are compounded, reimbursement is limited to the rate of the commercially available
product (WAC plus 2% or the SMAC plus dispensing fee).
Compounded Products, Preparations, and Oral Drugs
Compounded liquid oral drugs (e.g., solutions, suspensions, emulsions) are covered only for children and for aphagic adult
recipients, and only when a commercial liquid version of the drug is not available.
Compounded capsules are covered only if a tablet or capsule commercial version of the drug is not available in the strength
prescribed, and if the appropriate strength cannot be achieved using half or quarter tablets.
Compounded Topical Products
Compounded topical products are not covered when a product that contains the same combination of active ingredients in the
same strengths is commercially available from a pharmaceutical manufacturer, regardless of the package size that is
commercially available.
Example: If the prescription is for 15 grams of an ointment and the commercially available version is available only in 30 gram
tubes, MHCP will not cover 15 grams of the compounded product.
Compounded Intravenous (IV) & Total Parenteral Nutritional (TPN) Drugs
Compounded IV and TPN drugs are covered according to FDA guidelines regarding approved indications and preparation.
The basis for determining the amount of payment shall be the lower of the:
 Usual and customary price charged to the public
 Actual acquisition cost of the drugs plus a fixed dispensing fee
 Maximum allowable cost (PDF) plus a fixed dispensing fee
 Specialty Pharmaceutical Reimbursement rate (PDF), plus a dispensing fee
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The pharmacy dispensing fee is $3.65 except when dispensing intravenous solutions which must be compounded by the
pharmacist the dispensing fee shall be $8 per bag, $14 per bag for cancer chemotherapy products and $30 per bag for total
parenteral nutritional products dispensed in one liter quantities, or $44 per bag for total parenteral nutritional products dispensed in
quantities greater than one liter.
If room stable commercially available products are compounded, MHCP reimbursement is limited to the rate of the commercially
available products (AWP minus 15% plus $3.65 dispensing fee).
Indicate the route of administration in the appropriate field of your pharmacy software. Use the SNOMED value that corresponds
with the route the compounded prescription is being administered.
Routes of administration eligible for the enhanced dispensing fee are:
intravenous central route
intravenous peripheral route
intralymphatic route
intravascular route
intravenous route
intra-arterial route
intraperitoneal route
Indicate the number of units prepared in the “finished units” field. Finished units are the final number of IV bags, IV cassettes, or
TPN bags prepared. The “finished units” value is used to determine the number of dispensing fees that apply to the claim.
“Finished units” does not refer to the quantity of solution or drug dispensed.
Example I: For three 1,000 ml bags of a TPN solution, enter “3” for finished units, not 3,000. This is a very important
distinction.
Example II: For an antibiotic prepared in a separate bag for each dose and given three times daily for five days, enter “15” in the
“finished units,” not the total number of milligrams of antiobiotic used, nor the number of milliliters dispensed.
TPN only: Enter the diagnosis code 994.2 in your software’s diagnosis code field. Diagnosis codes are not required for any other
compounded product.
For chemotherapy claims, the drug NDC is checked against the American Hospital Formulary Service (AHFS) class of drugs
10:00:00, antineoplastic drugs, for assignment of the appropriate dispensing fee. A diagnosis code is not needed.
Compound Drug Specific Billing Requirements for NCPDP D.0
Compound Drug Type
Compound Drug
Route of
Number of Finished
Diagnosis Code
Indicator
Administration
Units
Oral
required
required
required
if applicable
Topical
required
required
required
if applicable
Sterile intravenous
required
Appropriate SNOMED
required
if applicable
compound
code
Intravenous chemo
required
Appropriate SNOMED
required
N/A
code
TPN
required
Appropriate SNOMED
required
994.2
code
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Systematized Nomenclature of Medicine Clinical Terms (SNOMED CT) SNOMED CT) terminology which is available from the
International Health Terminology Standard Development Organization (www.ihtsdo.org/snomed-ct/).
Compound Billing and Rejected Claim Options
Bill compounded IV and TPN drugs to DHS using NCPDP D.0 POS software or the MN–ITS Interactive Pharmacy (NCPDP) claim
format.
Bill compound drug claims by reporting each ingredient in the compound.
MHCP will pay for a compounded claim in full only if each ingredient used meets MHCP billing standards (e.g., the manufacturer
must have signed a Medicaid rebate agreement, the NDC must not be expired, and the ingredient must not be otherwise excluded
from coverage).
 If one or more of the ingredients in a compounded preparation require a diagnosis, enter the appropriate diagnosis code in the
diagnosis field of the POS software
 If one of the ingredients in a compounded preparation requires prior authorization, please contact the MHCP Prescription
Drug PA Review Agent at 1-866-205-2818
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When the pharmacy submits compounded claims through their POS software the pharmacy will receive information from MHCP
about whether or not one or more of the ingredients are not covered and how much MHCP will pay per line item. If the pharmacy
chooses to accept the stated amount as payment in full for the compounded drug, the pharmacy must respond by entering “08” in
the Submission Clarification Code field of their POS software.
If the pharmacy decides not to accept MHCP allowed amount as payment in full, the pharmacy cannot charge the recipient. The
pharmacist may want to determine why MHCP denied one or more of the NDCs. The pharmacy may check to see if a product
exists that can be used in place of the denied ingredient(s) that MHCP will cover. The pharmacy may also consider checking with
the prescriber to see if an alternative product can be dispensed. If the allowed amount is accepted, the pharmacy may not bill the
recipient for the uncovered portion.
When billing compounded drugs through POS software or MN–ITS Interactive Pharmacy (NCPDP) enter the SNOMED route of
administration code in the route of administration field.