First and foremost, what is a compound drug/compound medication? Compound drugs are prepared by licensed pharmacists, per a prescription from a doctor. “Compounding” occurs when a pharmacist either alters the dosage, alters the strength, combines components or active ingredients, or prepares a drug product from chemicals or bulk drug substances. 8 CCR section 1735(a). Compound drugs can come in several forms, such as creams, drops, capsules, and gels.

When we attempt to negotiate a lien and are presented with billing that contains compound medicines, we immediately notice the steep price. In several instances, a lien representative will provide copies of National Drug Codes (NDC), numbers which identify the various expensive compound powders/ingredients contained within each compounded drug, that has been prescribed to an applicant. The lien representatives expect us to pay for each powder used in creating a compound drug prescribed to one applicant. This is problematic to an insurance carrier responsible for paying a physician’s bill, because each compounded drug typically contains several expensive powders, but only very small amounts of each powder are used to create the one medicine for an individual applicant.

How then, can we challenge a compound med lien? Labor Code section 5307.1(e)(2) requires compounded drug products to be billed by each ingredient, with each ingredient identified using the applicable National Drug Code (NDC) of the ingredient and the corresponding quantity. If the compounded drug product is dispensed by a physician, the maximum reimbursement shall not exceed 300% of documented paid costs, but in no case more than twenty dollars ($20) above documented paid costs. “Documented paid cost” requires that the provider show evidence of the unit price paid for each component used to create the compound drug, as documented by invoices, proof of payment, and inventory records. LC § 5307.1(e)(6)(E).

This means that when we are negotiating a lien on a compound medication, we can request the lien claimant to produce 1) copies of all NDCs used for each specific prescription, 2) the corresponding quantity of each ingredient used, and 3) evidence of the exact cost that the physician paid for the prescription of a compound medication, ie. produce invoices, proof of payment, inventory records.

Effective April 1, 2013, 8 CCR section 1735.3 states that for each compounded drug product, the pharmacy records shall include: the master formula record, the date the drug product was compounded, the identity of the pharmacy personnel who compounded the drug product, the identity of the pharmacist reviewing the final drug product, the quantity of each component used in compounding the drug product, the manufacturer, expiration date and lot number of each component, (If the manufacturer name is demonstrably unavailable, the name of the supplier may be substituted), the equipment used in compounding the drug product, a pharmacy assigned reference or lot number for the compounded drug product, the expiration date of the final compounded drug product, and the quantity or amount of drug product compounded.

More likely than not, a lien claimant will have difficulty obtaining all of the above records and information, and this should hopefully induce settlement of their liens for much less than their demand.