Pending Policies - Prescription Drugs

Compounded Drug Products


Effective Date:11-01-2017



Medical policies are a set of written guidelines that support current standards of practice. They are based on current peer-reviewed scientific literature. A requested therapy must be proven effective for the relevant diagnosis or procedure. For drug therapy, the proposed dose, frequency and duration of therapy must be consistent with recommendations in at least one authoritative source. This medical policy is supported by FDA-approved labeling and nationally recognized authoritative references. These references include, but are not limited to: MCG care guidelines, DrugDex (IIb level of evidence or higher), NCCN Guidelines (IIb level of evidence or higher), NCCN Compendia (IIb level of evidence or higher), professional society guidelines, and CMS coverage policy.

This medical policy does NOT address Gender Reassignment Services (Transgender Services). This medical policy IS NOT TO BE USED for Gender Reassignment Services. Refer to SUR717.001, Gender Assignment Surgery and Gender Reassignment Surgery and Related Services

Drug compounding, the process of mixing, combining or altering of ingredients to create a customized medication is considered experimental, investigational and/or unproven.

Compounded bioidentical hormone replacement therapy (BHRT) is considered experimental, investigational and/or unproven.


See SUR707.008 Implantable Infusion Pump for criteria on coverage of intrathecal administration of compounded drugs for treatment of severe spasticity cerebral or spinal cord origin and/or severe, chronic, intractable pain.

NOTE 1: See RX501.076 Testosterone Replacement Therapies for testosterone replacement treatment for men.


Compound drugs are defined as those drugs that are changed from the original United States (U.S.) Food and Drug Administration (FDA) dosage form.

Compounding is a practice in which a licensed pharmacist, licensed physician or, in the case of an outsourcing facility, a person under the direct supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a customized medication for an individual patient in response to a licensed practitioners’ prescription. Compounding does not generally include mixing or reconstituting commercial products in accordance with the manufacturer's instructions or the product's approved labeling. Pharmacy compounding is customized in a way that is not available from major drug manufacturers.

The quality of a finished compounded drug product can be affected by numerous factors including the quality of the active pharmaceutical ingredient used and the compounding practices of the pharmacy in which the product is created.


The United States Congress has stated that “drugs should not be on the market unless the FDA [Food and Drug Administration] knows who is making them, and where they are being made, and is able to inspect the facilities in which they are being made.”

While drug compounding is an important part of ensuring that medicines are available to meet individual patient care, the quality and extent of drug compounding problems that have occurred raises legitimate concern about the quality and safety of compounded drugs and the oversight of pharmacies that compound them. The practices of compounding products that already exist in commercially available forms are likely to be harming consumers and violating the law. Although some states are taking steps to strengthen state oversight, and national pharmacy organizations are developing standards that might help strengthen oversight, individual states would need to adopt and enforce these standards. However, the effectiveness of these measures is unknown, and factors such as the availability of resources may also affect the extent of state oversight. (1)

A 1997 FDA Modernization Act states that compounding pharmacies are not manufacturers and are therefore exempt from standard FDA regulation on that basis. The act prohibited pharmacists from advertising or promoting compound drugs, but in April 2002, the United States Supreme Court ruled that the FDA could not restrict pharmacists from advertising or promoting products solely because they were compounded drugs. This action would tend to place consumers at risk, as the FDA does not have the resources to police compounding pharmacies.

Since 1990, the FDA has become aware of more than 55 product quality problems associated with compounded products, many of which resulted in product recalls. In 2001, the FDA Division of Prescription Drug Compliance and Surveillance conducted a limited survey of drugs compounded by a group of community pharmacies located throughout the United States. The goal of the survey was to gather information on the quality, purity, and potency of compounded drug products in the marketplace. The compounded products surveyed were selected from a cross-section of commonly compounded dosage forms based on the FDA’s assessment of the potential health risks resulting from improper compounding. The survey was conducted from June to December 2001. Samples of the products to be analyzed were collected from 12 compounding pharmacies that allowed specific compound products to be ordered over the internet.

Ten (34%) of the 29 sampled products failed one or more standard quality tests performed. Nine of the ten products with failing analytical results failed assay or potency testing. All of the sampled products that failed potency analyses had sub-potent results, indicating that the products contained less of the active ingredient(s) than expected. The average percent of declared potency for these nine products was calculated from the original and repeat analyses performed for each sample, with a range of 59 percent to 89 percent of expected potency. In addition to the potency failures described, two other analytical test failures were noted during the survey (i.e., a failed Limulus amebocyte lysate (LAL) test for an injectable product and a content uniformity failure for an oral product that also failed potency testing).

None of the compounded products analyzed in this survey failed identity testing. In addition, none of the compounded products sampled and subjected to sterility testing (sterile injectables, pellet implants and ophthalmic products) or testing for microbial limits (the single inhalation product) failed these analytical tests.

Each year, the FDA routinely samples drug products made by commercial manufacturers and analyzes these samples in FDA laboratories. More than 3,000 drug products from commercial manufacturers have been sampled and analyzed by the FDA since fiscal year 1996. The analytical testing failure rate for commercially produced samples has been less than 2 percent. When compared to this failure rate, the percentage of sampled compounded products failing analytical testing in this survey (34%) was higher than expected.

This survey had several limitations including a small sample size, the inability to collect and complete original and repeat analysis on all product samples originally identified for the survey, and the fact that the compounding pharmacies selected for the survey were limited to those permitting internet purchase of the drug products chosen for sampling. Despite these limitations, this survey provided valuable, preliminary information on the quality of selected compounded drug products currently marketed.

Several studies, in addition to the 2001 FDA, have reported quality problems with various pharmacy-compounded drugs, including sub-potency, super-potency, and contamination. To explore these quality issues, the FDA conducted an additional survey of compounded drug products in 2006. The FDA collected both active pharmaceutical ingredient (API) and finished compounded drug product samples during unannounced visits to compounding pharmacies located throughout the country. The samples were sent to FDA field laboratories for chemical analysis to measure identity of active ingredients, potency, and uniformity of dosage. The analytical methods used were generally United States Pharmacopoeia (USP) or modified USP methods. Once all analyses were complete, FDA staff evaluated the analytical data and methods corresponding to all samples that failed at least one analytical test.

Most of the products that failed analysis did so due to sub- or super-potency, called assay, or a lack of uniformity of individual dosage units, called content uniformity. Potency ranged from 67.5% to 268.4% of the amount of drug declared on the product labeling. For content uniformity analysis of products containing multiple active components, both sub- and super-potent active components were found within the same product samples. Such variability can lead to uncertainty in dosing and raises concern for patient therapy.

The results of the survey suggest that problems with the quality of compounded drugs occur throughout the country. Of note is that all APIs passed analytical testing, supporting the notion that the observed failures of the finished drug products may be causally related to the compounding processes at pharmacies.

On November 27, 2013, the Drug Quality and Security Act (DQSA) was signed into law. This law changes some provisions to the Federal Food, Drug and Cosmetic Act (FDCA). This legislation contains important provisions relating to the oversight of compounding drugs. Section 503A describes the conditions under which certain compounded drug products are entitled to exemptions from three sections of the FDCA which requires compliance with good manufacturing practices (CGMP), labeling with adequate directions for use and FDA approval prior to marketing of product. In addition, the new law allows a compounder to become an outsourcing facility. An outsourcing facility (OF) is defined as a facility in one geographical location that is engaged in the compounding of sterile products and has voluntarily registered as a OF with the FDA and complies with the requirements of the law. (2) An outsourcing facility will be able to qualify for exemptions from the FDA approval requirements and the requirement to label products with adequate directions for use, but is not exempt from the CGMP requirements. Outsourcing facilities must comply with CGMP requirements and will be inspected by FDA according to a risk-based schedule, and must meet certain other conditions, such as reporting adverse events and providing FDA with certain information about the products they compound. The FDA plans to provide further information at a later date about how to interpret certain provisions of section 503A. (3)

Professional Guidelines and Position Statements

North American Menopause Society (NAMS)

2012 Hormone Therapy (HT) Position Statement

The term bioidentical hormone is most often used to describe custom-made HT formulations (called bioidentical hormone therapy [BHT]) that are compounded for an individual according to a healthcare provider’s prescription. The term is used by proponents of BHT to convey that the hormones they use are identical to the hormones made by the ovaries. In that regard, the term can also be used to refer to many well-tested, government-approved, brand-name HT products containing hormones chemically identical to those produced by women (primarily in the ovaries), such as 17ß-estradiol and progesterone.

Custom-compounding of HT may combine several hormones (e.g., estradiol, estrone, and estriol) and use nonstandard routes of administration (e.g., subdermal implants). Some of the hormones are not government approved (estriol) or monitored and some of the compounded therapies contain nonhormonal ingredients (e.g., dyes, preservatives) that some women cannot tolerate. Use of BHT has escalated in recent years, along with the use of salivary hormone testing, which has been proven to be inaccurate and unreliable. There may be increased risks to the women using these products. Custom-compounded formulations, including BHT, have not been tested for efficacy or safety; product information is not consistently provided to women along with their prescription, as is required with commercially available HT; and batch standardization and purity may be uncertain. The dosing of compounded progesterone is particularly difficult to assess because the levels in serum, saliva, and tissue are markedly different. Custom-compounded drug formulations are not government approved.

The FDA has ruled that some compounding pharmacies have made claims about the safety and effectiveness of BHT unsupported by clinical trial data and considered to be false and misleading. Pharmacies have been instructed not to use estriol without an investigational new drug authorization. The FDA also states that there is no scientific basis for using saliva testing to adjust hormone levels.

NAMS recommends that BHT products include a patient package insert identical to that required for products that have government approval. In the absence of efficacy and safety data for BHT, the generalized benefit-risk ratio data of commercially available HT products should apply equally to BHT. For most women, government-approved HT will provide appropriate therapy without the risks of custom preparations. Therefore, NAMS does not generally recommend compounded estrogen- progestogen therapy (EPT) or estrogen therapy (ET) unless necessary because of allergies to ingredients contained in government-approved products. (4)

2017 Hormone Therapy Position Statement

In June 2017, NAMS released a new position statement on hormone therapy, including BHT. (7) Key points include:

Compounded bioidentical HT presents safety concerns such as minimal government regulation and monitoring, overdosing or underdosing, presence of impurities or lack of sterility, lack of scientific efficacy and safety data, and lack of a label outlining risks.

Salivary hormone testing to determine dosing is unreliable.

Prescribers of compounded bioidentical HT should document the medical indication for compounded HT over government-approved therapies, such as allergy or the need for dosing or a formulation not available in FDA-approved products.

NAMS recommendations are graded according to these categories:

Level I: Based on good and consistent scientific evidence.

Level II: Based on limited or inconsistent scientific evidence.

Level III: Based primarily on consensus and expert opinion.

The following recommendations were made in regard to BHT:

Compounded bioidentical HT should be avoided, given concerns about safety, including the possibility of overdosing or underdosing, lack of efficacy and safety studies, and lack of a label providing risks. (Level I)

If compounded bioidentical HT is prescribed, concerns about safety should be discussed, and the indication for prescribing compounded rather than government-approved bioidentical HT should be documented (allergy, medical need for lower-than-available dose, different preparation). (Level III)

International Menopause Society (IMS)

The 2016 IMS guidelines state that the use of custom compounded BHT is not recommended due to the lack of quality control and regulatory oversight, together with lack of evidence of safety and efficacy. (5)

American College of Obstetricians and Gynecologists (ACOG)

The 2012 (reaffirmed 2014) American College of Obstetricians and Gynecologists’ (ACOG) Committee on Gynecologic Practice and the Practice Committee of the American Society for Reproductive Medicine make the following recommendations related to BHT: Evidence is lacking to support superiority claims of compounded BHT over conventional menopausal HT. Customized compounded hormones pose additional risks. These preparations have variable purity and potency and lack efficacy and safety data. Because of variable bioavailability and bioactivity, both underdosage and overdosage are possible. Conventional HT is preferred over compounded HT given the available data. Despite claims to the contrary, evidence is inadequate to support increased efficacy or safety for individualized HT regimens based on salivary, serum, or urinary testing. (6)


Each benefit plan, summary plan description or contract defines which services are covered, which services are excluded, and which services are subject to dollar caps or other limitations, conditions or exclusions. Members and their providers have the responsibility for consulting the member's benefit plan, summary plan description or contract to determine if there are any exclusions or other benefit limitations applicable to this service or supply. If there is a discrepancy between a Medical Policy and a member's benefit plan, summary plan description or contract, the benefit plan, summary plan description or contract will govern.


Compounded medications are exempt by law from having National Drug Code (NDC) identification numbers.


Disclaimer for coding information on Medical Policies

Procedure and diagnosis codes on Medical Policy documents are included only as a general reference tool for each policy. They may not be all-inclusive.

The presence or absence of procedure, service, supply, device or diagnosis codes in a Medical Policy document has no relevance for determination of benefit coverage for members or reimbursement for providers. Only the written coverage position in a medical policy should be used for such determinations.

Benefit coverage determinations based on written Medical Policy coverage positions must include review of the member’s benefit contract or Summary Plan Description (SPD) for defined coverage vs. non-coverage, benefit exclusions, and benefit limitations such as dollar or duration caps.


The following codes may be applicable to this Medical policy and may not be all inclusive.

CPT Codes



G0333, J3490, J3590, J7599, J7604, J7607, J7609, J7610, J7615, J7622, J7624, J7627, J7628, J7629, J7632, J7634, J7635, J7636, J7637, J7638, J7640, J7641, J7642, J7643, J7645, J7647, J7650, J7657, J7660, J7667, J7670, J7676, J7680, J7681, J7683, J7684, J7685, J7699, J7799, J7999, J8499, J8999, J9999, Q0513, Q0514, Q9977, S9430

ICD-9 Diagnosis Codes

Refer to the ICD-9-CM manual

ICD-9 Procedure Codes

Refer to the ICD-9-CM manual

ICD-10 Diagnosis Codes

Refer to the ICD-10-CM manual

ICD-10 Procedure Codes

Refer to the ICD-10-CM manual

Medicare Coverage:

The information contained in this section is for informational purposes only. HCSC makes no representation as to the accuracy of this information. It is not to be used for claims adjudication for HCSC Plans.

The Centers for Medicare and Medicaid Services (CMS) does have a national Medicare coverage position.

A national coverage position for Medicare may have been developed since this medical policy document was written. See Medicare's National Coverage at <>.


1. FDA: Columbia Laboratories Press Release has issued an approvable letter to Adeza Biomedical for their 17-alpha-hydroxyprogesterone caproate (trademarked Gestiva™). Available at: <> (accessed 2014 April 1).

2. H.R. 3204-The drug quality and security act, Professional Compounding Centers of America (2013). Available at: <> (accessed 2014 April 1).

3. FDA- Compounding quality act. U.S. food and drug administration (2014). Available at: <> (accessed 2014 April 1).

4. Position Statement: The 2012 Hormone Therapy Position Statement of the North American Menopause Society. Menopause: The Journal of the North American Menopause Society. (2012) 19(3):257-271.

5. International Menopause Society: 2016 IMS Recommendations on women’s midlife health and menopause hormone therapy. (2016). Available at: <> (accessed 2017 June 23).

6. Committee on Gynecologic Practice and the American Society for Reproductive Medicine Practice Committee. Compounded Bioidentical Menopausal Hormone Therapy. (2012 reaffirmed 2014). Available at: <> (accessed 2014 April 29).

7. Position Statement: The 2017 Hormone Therapy Position Statement of the North American Menopause Society. Menopause: The Journal of the North American Menopause Society. (2017) 24(7):1-26.

Federal Register – List of Bulk Drug Substances That may be used in Pharmacy Compounding. 1999 January 7. Available at: <> (accessed 2014 March 25).

8. El-Kattan, A. F., Asbill, C.S., et al. Effect of formulation variables on the percutaneous permeation of ketoprofen from gel formulations. Drug Delivery (2000) 7:147-53.

9. Beetge, E, duPlessis, J., et al. The influence of the physicochemical characteristics and pharmacokinetic properties of selected NSAIDs on their transdermal absorption. International Journal of Pharmaceutics. (2000) 193:261-4.

10. Ozaki, M., Minami, K., et al. Transdermal ketoprofen mitigates the severity of postoperative sore throat. Canadian Journal of Anesthesia. (2001) 48:1080-3.

11. Curdy, C., Kalia, Y.N. Piroxicam delivery into human stratum corneum in vivo: iontophoresis versus passive diffusion. Journal of Control Release. (2001) 76:739.

12. Osterwalder, A., Reiner, V., et al. Tissue absorption and distribution of ketoprofen after patch application in subjects undergoing knee arthroscopy or endoscopic carpal ligament release. Arzneimittleforschung. (2002) 52:822-7.

13. Sheu, M.T., Chen, L.C., et al. Simultaneous optimization of percutaneous delivery and adhesion for ketoprofen poultice. International Journal of Pharmaceutics (2002) 233:257-62.

14. Ceschel, G.C., Maffei, P., et al. Correlation between the transdermal permeation of ketoprofen and its solubility in mixtures of a pH 6.5 phosphate buffer and various solvents. Drug Delivery (2002) 9:39-45.

15. Cheong, H.A., Choi, H.K. Enhanced percutaneous absorption of piroxicam via salt formation with ethanolamines. Pharmaceutical Research (2002) 19:1375-80.

16. Whitefield, M., O'Kane, C.J., et al. Comparative efficacy of a proprietary topical ibuprofen gel and oral ibuprofen in acute soft tissue injuries: a randomized, double-blind study. Journal of Clinical Pharmacy and Therapeutics (2002) 27:409-17.

17. Machen, J., and M. Whitefield. Efficacy of a proprietary ibuprofen gel in soft tissue injuries: a randomized, double-blind, placebo-controlled study. Indian Journal of Clinical Practice (2002) 56:102-6.

18. Padilla, M., Clark, G.T., et al. Topical medications for orofacial neuropathic pain: a review. Journal of the American Dental Association (2002) 131:184-95.

19. FDA – Pharmacy Compounding. Report: Limited FDA survey of Compound Drug Products. Center for Drug Evaluation and Research (2003 January 23). Available at: <http://www/> (accessed 2014 April 1).

20. Hong, J.Y., Lee, I.H. Suprascapular nerve block or a piroxicam patch for shoulder tip pain after day case laparoscopic surgery. European Journal of Anesthesiology (2003) 20:234-8.

21. Sabra, K. Standards for Pharmacy Compounding. American Journal of Health System Pharmacy (2003 August 1) 60(15):1593.

22. United States General Accounting Office (GAO) Statement of Janet Heinrich – Director of Health Care-Public Health Issues. Prescription Drugs: State and Federal Oversight of Drug Compounding by Pharmacies. Testimony before the committee on health, education, labor, and pensions, U.S. Senate (2003 October 23).

23. Goldman, M.P. Sodium-tetradecyl sulfate for sclerotherapy treatment of veins: is compounding pharmacy solution safe? Dermatologic Surgery (2004 December) 30(12 Pt. 1):1454-6; discussion 1456.

24. Trisel, L.A., Gentempo, J.A., et al. Using a medium-fill simulation to evaluate the microbial contamination rate for USP medium-risk-level compounding. American Journal of Health System Pharmacy (2005 February 1) 62(3):285-8.

25. National Community Pharmacists Association (NCPA) – Federal court upholds pharmacists’ ability to compound drugs landmark decision a victory for millions of patients. Alexandria, Virginia: (2006 June 2) 2006 Press Release.

26. Held, M.R., Begier, E.M., et al. Life-threatening sepsis caused by Burkholderia cepacia from contaminated intravenous flush solutions prepared by a compounding pharmacy in another state. Pediatrics (2006 July) 118(1): e212-5.

27. – Bouts, Bruce. The Misuse of Compounding by Pharmacists. (2005 November 26) Available at: <> (accessed 2017 June 23).

28. Dodd, J.M., Flenady, V., et al. Prenatal administration of progesterone by vaginal suppository to reduce the incidence of spontaneous preterm birth. Cochrane Database System Review (2006) (1): CD004947.

29. FDA—2006 Limited FDA Survey of Compounded Drug Products. U.S Food and Drug Administration – Center for Drug Evaluation and Research (2006). Available at: <> (accessed 2009 April 14).

30. FDA—Consumer Update: The special risks of pharmacy compounding. Food and Drug Administration. (2007 May 31). Available at: <> (accessed 2009 April 14).

Policy History:

Date Reason
11/1/2017 Document updated with literature review. Removed the following Exception language: “See RX501.062 for coverage criteria on Progesterone Therapy as a Technique to Reduce Preterm Delivery in High-Risk Pregnancies”.
8/1/2016 Reviewed. No changes.
7/1/2015 Document updated with literature review. The following changes were made in Coverage: 1) Added “Compounded bioidentical hormone replacement therapy (BHRT) is considered experimental, investigational and/or unproven.” 2) Added note to refer to policy RX501.076 Testosterone Replacement Therapies for the testosterone replacement treatment for men.
9/1/2014 Document updated with literature review. Coverage unchanged.
5/1/2012 Rationale revised, 2012 Hormone therapy position statement of the North American Menopause Society (NAMS), (Bioidentical Hormones) was added to policy.
1/1/2012 Document updated with literature review. Coverage unchanged.
9/15/2009 Revised/updated entire document, no change in coverage position. Compounded drugs are considered experimental, investigational and unproven.
9/15/2007 Codes Revised/Added/Deleted
5/15/2007 New Medical Document

Archived Document(s):

Title:Effective Date:End Date:
Compounded Drug Products06-15-202111-14-2022
Compounded Drug Products03-15-202006-14-2021
Compounded Drug Products11-01-201803-14-2020
Compounded Drug Products11-01-201710-31-2018
Compounded Drug Products08-01-201610-31-2017
Compounded Drug Products07-01-201507-31-2016
Compounded Drug Products09-01-201406-30-2015
Compounded Drug Products05-01-201208-31-2014
Compounded Drug Products01-01-201204-30-2012
Compounded Drug Products09-15-200912-31-2011
Compounded Drug Products09-15-200709-14-2009
Compounded Drug Products05-15-200709-14-2007
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