Compounded drug prescriptions paid for through TRICARE's pharmacy benefit cost about $259 million in fiscal year 2013--representing about 3 percent of the total cost of prescription drugs paid for through its pharmacy benefit--up from about $5 million in fiscal year 2004.[Footnote 34] Compounded drug prescriptions containing at least 1 bulk drug substance accounted for about 98 percent of the $259 million cost.[Footnote 35] The average cost of a compounded drug that included at least 1 bulk drug substance was $557 per prescription compared to an average cost of $53 per prescription for a compounded drug that contained only FDA-approved products.[Footnote 36] More specifically, DOD data on the top 25 highest-cost compounded drugs containing at least 1 bulk drug substance showed an average cost ranging from about $848 to $9,961 per prescription.[Footnote 37] Each of these top 25 compounded drugs contained at least 1, and as many as 11, bulk drug substances. Baclofen, cyclobenzaprine hydrochloride, flurbiprofen, gabapentin, ketamine hydrochloride, and lidocaine hydrochloride powders were among the most common bulk substance included in these compounded drugs.[Footnote 38] All 25 of these compounded drugs were topical medications (e.g., creams or gels), most of which were used to treat pain. See appendix II for a list of the top 25 highest-cost compounded drugs containing at least one bulk drug substance dispensed in retail pharmacies in fiscal year 2013. DHA officials attributed the high cost of compounded drug prescriptions containing bulk drug substances to several factors, including the number of these substances used in each prescription, the aggressive marketing of compounded drugs containing these substances to providers, and the high AWP of these substances--which, according to DHA and Express Scripts officials, have been inflated by manufacturers of these substances. For example, according to Express Scripts, the AWP of bulk gabapentin increased by as much as 4,948 percent from 2011 to 2014, while the AWPs of bulk ketamine and bulk baclofen increased by as much as 1,313 percent and 1,102 percent, respectively, over the same period.
In contrast to TRICARE, Part D's payment practices for compounded drugs are more restrictive. As required by statute, under Part D, federal payments are not available for non-FDA-approved products-- including bulk drug substances--and inactive ingredients used to make a compounded drug.[Footnote 46] For example, Part D would not pay for bulk ketamine or flurbiprofen used to make a compounded topical pain medication, whereas TRICARE currently does. Medicare Advantage organizations that offer Part D benefits and Part D plan sponsors may choose to pay for bulk substances but may not submit these payments as part of the Part D transaction data CMS uses to determine federal payments to Part D plans.[Footnote 47] Officials from two Medicare Advantage organizations that include Part D drug benefits and one Part D-only sponsor we spoke with told us that they generally pay pharmacies for each ingredient in the compounded drug that is an FDA- approved product and is otherwise eligible for payment under Part D and, thus, do not pay for bulk drug substances.[Footnote 48] Officials from the remaining two Medicare Advantage organizations and one Part D- only sponsor we spoke with told us that they pay pharmacies for bulk drug substances but do not include these payments as part of the Part D transaction data they submit to CMS. Officials from the remaining three Medicare Advantage organizations and one Part D plan sponsor-- including one organization that purchases drug ingredients, including some bulk drug substances used to make compounded drugs, for its pharmacies, which it owns and operates--told us that they pay pharmacies for bulk drug substances, but do not include these payments as part of the Part D transaction data they submit to CMS.[Footnote 49]