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Medical Fee Schedule Addresses Compound Medications

Recently I have had a number of clients inquire about the exorbitant cost being charged by pharmacies for compound medications – usually topical anti-inflammatory agents combined with topical local anesthetics. Pharmacies have been charging upwards of $3,000 or more for a one-month supply, depending on the agents/ingredients in the compound medication. Surprisingly, all of these insurers used vendors to review the invoices for the compound medications, and none of the vendors realized that the Medical Fee Schedule addresses the maximum amount which a pharmacy may charge for the compound medications. Colorado workers’ compensation Medical Fee Schedule. W.C.R.P. 18-6 (M)(4) provides:

Compounded Drugs

  • All prescriptions shall be billed using the DoWC Z code corresponding with the applicable category for compounded topical products as follows:

▸ Category I Z0790 Fee $ 75.00 per 30 day supply.
Any anti-inflammatory medication or any local anesthetic single agent.

▸ Category II Z0791 Fee $150.00 per 30 day supply.
Any anti-inflammatory agent or agents in combination with any local anesthetic agent or agents.

▸ Category III Z0792 Fee $250.00 per 30 day supply.
Any single agent other than anti-inflammatory agent or local anesthetic, either alone, or in combination with anti-inflammatory or local anesthetic agents.

▸ Category IV Z0793 Fee $350.00 per 30 day supply.
Two (2) or more agents that are not anti-inflammatory or local anesthetic agents, either alone or in combination with other anti-inflammatory or local anesthetic agents.

  • All ingredient materials must be listed by quantity used per prescription. Category fees include materials, shipping and handling and time. Regardless of how many ingredients or what type, compounded drugs cannot be reimbursed higher than the Category IV fee.

Therefore, under the Medical Fee Schedule the maximum that a pharmacy could charge for the any compound drug is $350 for a 30-day supply, assuming that compound drug falls within Category 4 (i.e. containing two or more agents that are not anti-inflammatory or local anesthetic agents, either alone or in combination with other anti-inflammatory or local anesthetic agents). Given that I have learned that three different bill review vendors were unaware that the cost for compound drugs is governed by the Medical Fee Schedule, adjusters should make sure that their clients are being charged the appropriate amount for the prescriptions.

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