Compound Pharmacies Under Attack By Pharmacy Benefits Managers

The several large national players in the pharmacy benefits arena have all undertaken efforts to stop paying for compound medications — custom made pharmaceuticals that are prescribed by physicians when there are no mass-produced alternatives that can address the patient’s illness, injury, or disease. These pharmaceuticals have played are significant role in helping millions of Americans with hormonal dysfunction, severe burn injuries, cancer, and many other conditions. But the pharmacy benefits managers, known as PBMs, have seen price increases in some of the ingredients used to formulate these medicines and reacted by developing plans, along with group plan sponsors, to stop paying for these medicines entirely.

The disclosures given by the PBMS, however, when denying claims processed at pharmacies, are all in violation of the federal claims regulations that govern the handling of health plan claims. These regulations require that the claims handler — as fiduciary under ERISA — disclose the specific reasons for a claim decision, including specific reference to the health plan provision(s) upon which a “not covered” claim is allegedly based.

Many health plans have not been amended to exclude compound pharmaceuticals from reimbursement, but the PBMs, acting under what they believe to be discretionary authority, have just deemed the medicines as “not covered” when in fact there are no exclusions listing these medicines as not covered in the health plans under which they administer claims.

Challenges to the illegality of the actions of the PBMs are under way, and we shall see whether their conduct can stopped by a federal court enforcing the federal regulations that govern these claims.

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