"Compounded prescription drug products can contain: (1) all Part D drug product components; (2) some Part D drug product components; or (3) no Part D drug product components. As defined in [CFR] §423.120(d), only compounds that contain at least one ingredient that independently meets the definition of a Part D drug, and that do not contain any ingredients covered under Part B as prescribed and dispensed or administered, may be covered under Part D. Only costs associated with those components that satisfy the definition of a Part D drug are allowable costs under Part D because the compounded products as a whole do not satisfy the definition of a Part D drug.(Source: Medicare Prescription Drug Benefit Manual, Chapter 6 – Part D Drugs and Formulary Requirements, (Rev. 18, Issued: 01-15-16, Effective: 01-15-16; Implementation: 01-15-16) https://www.cms.gov/ Medicare/ Prescription-Drug-Coverage/ PrescriptionDrugCovContra/ Downloads/ Part-D-Benefits-Manual-Chapter-6.pdf)
For a Part D compound to be considered on-formulary, all ingredients that independently meet the definition of a Part D drug must be considered on-formulary. Bulk powders (i.e., Active Pharmaceutical Ingredients for compounding) do not satisfy the definition of a Part D drug and are not covered by Part D. For any non-Part D ingredient of the Part D compound, the Part D sponsor’s contract with the pharmacy must prohibit balance billing the beneficiary for the cost of any such ingredients.
Sponsors treating compounds as non-formulary products should be applying the cost sharing associated with an exceptions tier, regardless of whether the compound contains brand name or generic products. For a Part D compound considered off-formulary, transition rules apply such that all ingredients that independently meet the definition of a Part D drug must become payable in the event of a transition fill and be covered if an exception under §423.578(b) is approved for coverage of the compound.
The labor costs associated with mixing a compounded product that contains at least one Part D drug component can be included in the dispensing fee (as defined in 42 CFR §423.100). For compounds containing all generic products, the generic cost-sharing should be applied. If a compound contains any brand name products, the Part D sponsor may apply the higher brand name cost-sharing to the entire compound. For low income subsidy (LIS) beneficiaries the copayment amount is based on whether the most expensive ingredient that independently meets the definition of a Part D drug in the Part D compound is a generic or brand name drug." [emphasis added]
“Section 10.4 - Extemporaneous CompoundsAnd from another source ...
(Rev. 2; Issued: 07-18-08; Effective/Implementation Date: 07-18-08)
Compounded prescription drug products can contain:
(1) all Part D drug product components; (2) some Part D drug product components; or (3) no Part D drug product components. Only costs associated with those components that satisfy the definition of a Part D drug are allowable costs under Part D because the compounded products as a whole do not satisfy the definition of a Part D drug. The labor costs associated with mixing a compounded product that contains at least one Part D drug component can be included in the dispensing fee (as defined in 42 CFR 423.100). For compounds containing all generic products, the generic cost-sharing should be applied. If a compound contains any brand name products, the Part D sponsor may apply the higher brand name cost-sharing to the entire compound.”
(page 5, https://www.cms.gov/ Medicare/ Prescription-Drug-Coverage/ PrescriptionDrugCovContra/ downloads/ Chapter6.pdf)
"[FAQ] Q13. Does Medicare Part D cover drugs that are compounded?and then in another Frequently Asked Question, the same answer text is proceeded by "No.":
Answer: This depends on the components of the compounded medication. A compounded prescription drug product may be covered if it contains at least one FDA approved drug component, although reimbursement is limited to the compounding fees and FDA approved component(s) only. Bulk powders are not FDA approved drug products and therefore are not covered under Part D. A compounded drug must also be prescribed for a 'medically accepted indication'."
(original https://www.medicarepartdappeals.com/ content/ frequently-asked-question#Q13) (no longer online as of 05/11/2021 - see instead: C2C Innovative Solutions, Inc. (C2C), https://partdappeals.c2cinc.com/Prescribers/Frequently-Asked-Questions, https://partdappeals.c2cinc.com/Part-D-Enrollees-Representatives/Frequently-Asked-Questions)
"[FAQ] Q22. Does Medicare Part D cover drugs that are compounded?
Answer: No. This depends on the components of the compounded medication. A compounded prescription drug product may be covered if it contains at least one FDA approved drug component, although reimbursement is limited to the compounding fees and FDA approved component(s) only. Bulk powders are not FDA approved drug products and therefore are not covered under Part D. A compounded drug must also be prescribed for a 'medically accepted indication'." [emphasis added]
(original - https://www.medicarepartdappeals.com/ content/ frequently-asked-question#Q22) (no longer online as of 05/11/2021 -see instead: C2C Innovative Solutions, Inc. (C2C), https://partdappeals.c2cinc.com/Prescribers/Frequently-Asked-Questions, https://partdappeals.c2cinc.com/Part-D-Enrollees-Representatives/Frequently-Asked-Questions)