Original Research

Peer-viewed studies and review articles on managed care.

The Quandary of Compounding for MCOs: Administrative Costs, Risks, and Waste

Thomas Kaye, RPh, MBA
Blue Cross and Blue Shield of Oklahoma


Purpose: Pharmacy compounding of prescription therapies that do not have Food and Drug Administration (FDA) approval increases administrative costs to managed care organizations and may also place members at risk for poor outcomes. This paper provides health care administrators with information and tools that can be used to manage risk-encouraged practices from pharmacy compounders, and suggests methods for evaluating the medical appropriateness and benefit of such compounds.

Study design: Experiential findings.

Results: Methods indicate an effective way to manage this emerging pharmacy practice based on safety, risk avoidance, and outcomes.

Conclusion: Focused management efforts can reduce the burden of reimbursement for compounding practices that are likely to present a greater risk of medical errors than commercially prepared medications. The use of existing terms in plan contracts, such as "experimental treatments or medications," "medical necessity," or "non-FDA approved agents," can enable an editing process that provides for appropriate benefit enforcement and control.

Author correspondence:
Thomas Kaye, RPh, MBA
8302 S. Joshua St.
Broken Arrow, OK 74011
Phone: (918) 561-9901
Fax: (918) 561-9944
E-mail: Tomkaye@rxman.com

This paper has undergone peer review by appropriate members of Managed Care's Editorial Advisory Board.

No pharmaceutical company has provided funding for this paper.

This paper focuses on retail pharmacy compounded medications that are administered via oral, topical, and injectable routes. The author is not referring to sterile compounded prescriptions for injectable administration in a hospital setting or to radiological solutions prepared from appropriate infusion mixtures for use in inpatient settings.

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