CurrentNeighborhood Health Plan of Rhode IslandPolicy N/A

Compounded Drug Products

Defines prior authorization documentation requirements, clinical coverage criteria, continuation criteria, exclusions, and maximum coverage duration for compounded drug products under Neighborhood Health Plan of Rhode Island.

Policy Summary

PayerNeighborhood Health Plan of Rhode Island

PolicyCompounded Drug Products

Policy CodePolicy N/A

Change TypeNo material change

Effective Date

Next Review Date

Key ActionSubmit a PA request listing each active ingredient with dosage form, strengths, quantities, and manufacturer NDC OR ensure the dispensing pharmacy claim includes all active and inactive ingredients with dosage form, strengths, quantities, and manufacturer NDC; missing documentation may lead to dismissal.

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POLICY UPDATE CHANGES

No material clinical or coverage changes.

1Minimum legend drug requirement

12Maximum coverage duration (months)

Coverage Summary

Compounded drug products are covered with prior authorization when the policy criteria are met. Coverage requires submission of the documentation listed in Section I and fulfillment of the approval criteria in Section II. Coverage stance: covered_with_criteria. Status: CURRENT.

Medical-Necessity Criteria

Criteria for approval (Initial prior authorization)

Compounded drug products will be covered with prior authorization when the following criteria are met:

ALL of the following

The compounded product contains at least one legend drug.
Each of the active ingredients in the compound are FDA-approved for the indication for which the compound is being prescribed OR are for a medically accepted indication as defined in one of the following: American Hospital Formulary Service Drug information (AHFS-DI), Thomson Micromedex DrugDex, Clinical Pharmacology, Wolters Kluwer Lexi-Drugs, or peer-reviewed published medical literature indicating sufficient evidence exists to support use.
Each active ingredient in the compound are FDA-approved drugs or compendia supported AND the compound route of administration is the same as the FDA-approved route of administration for each active ingredient, if applicable.
The dosage or concentration of each active ingredient in the compound is equal to or below the FDA-approved dosage or concentration AND the prescribed dose of the compounded product falls within the FDA-approved labeling or within compendia supported dosing guidelines.
All relevant documentation (e.g. lab values, treatment plan, medical chart notes) is provided.
One of the following must be met
- There is a current supply shortage of the commercially manufactured product OR the commercial product has been discontinued by the pharmaceutical manufacturer for reasons other than lack of safety or efficacy.
- The member has a medical need for a dosage form or dosage strength that is not available commercially or manufactured.
- The member has experienced an inadequate treatment response or intolerance (e.g., allergen or adverse effects due to inactive ingredients) to all commercially available formulary first line agents, including the generic and biosimilar alternative, if available.

Operational note

Continuation of therapy (Renewal criteria)

ALL of the following

Member meets all initial criteria in sections I & II.
Member is tolerating treatment and is not experiencing any unacceptable toxicity from the drug.
Member has disease stabilization or improvement in disease (as defined by established clinical practice guidelines).

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Documentation required to initiate prior authorization

Submission of the following information is necessary to initiate the prior authorization review:

Provide either

Each active ingredient used in the compound are included on the prior authorization request (e.g. dosage form, strengths, quantities, manufacturer National Drug Code (NDC)).
The dispensing pharmacy claim has been submitted with all active and inactive ingredients used in the compound (e.g. dosage form, strengths, quantities, manufacturer National Drug Code (NDC)).

Operational note: Any compounded drug request missing the above documentation may be dismissed as invalid.

Exclusion Criteria

Exclusion criteria

The requested compounded medication contains an ingredient considered not medically necessary in a compound.

The requested compounded medication contains any ingredients that are not covered per the Neighborhood Health Plan of Rhode Island Pharmacy Benefit Exclusion policy or are being used for any non-covered indication per that policy (e.g. drugs used for cosmetic purposes).

For Neighborhood Medicaid benefit requests only: The requested compounded medication (both active and inactive ingredients) contains drugs or products whose manufacturer does not participate in the Medicaid Drug Rebate Program (MDRP).

Denial Risk

Exclusion-based denial risk

Claims will be denied if the compounded product contains ingredients that trigger exclusions. Triggers include: ingredients considered not medically necessary, ingredients listed on the plan's Pharmacy Benefit Exclusion policy or used for non-covered indications (e.g., cosmetic uses), and — for Neighborhood Medicaid requests only — any active or inactive ingredients whose manufacturer does not participate in the Medicaid Drug Rebate Program (MDRP).

Non‑medically necessary ingredients in the compound
Ingredients excluded by the Neighborhood Health Plan of Rhode Island Pharmacy Benefit Exclusion policy (including non‑covered indications such as cosmetic use)
For Medicaid only: any ingredient (active or inactive) from a manufacturer not participating in MDRP

Provider Actions & Prior Authorization

Prior Authorization

Prior authorization documentation required

Submit a prior authorization request that lists each active ingredient in the compound including dosage form, strengths, quantities, and manufacturer NDC. Alternatively, ensure the dispensing pharmacy claim includes all active and inactive ingredients with dosage form, strengths, quantities, and manufacturer NDC. Missing this documentation may result in dismissal of the request as invalid.

Documentation Required

Provide clinical supporting documentation

Provide all relevant clinical documentation to support medical necessity and alignment with FDA labeling or recognized compendia for each active ingredient.

Laboratory values
Treatment plan
Medical chart notes

For continuation (renewal), providers must document that the member meets initial criteria, is tolerating treatment without unacceptable toxicity, and has disease stabilization or improvement. Provide supporting clinical documentation (e.g., lab values, treatment plan, medical chart notes) and reference compendia or FDA alignment for each active ingredient when submitting renewal requests.

Background & Definitions

This policy governs coverage of compounded drug products requiring prior authorization and specifies that each active ingredient must be an FDA-approved drug or supported by recognized compendia (AHFS‑DI, Thomson Micromedex DrugDex, Clinical Pharmacology, Wolters Kluwer Lexi‑Drugs, or peer‑reviewed literature). It requires the compound to contain at least one legend drug, that the route of administration and dosages/concentrations align with FDA‑approved routes and dosing or compendia‑supported dosing, and that all relevant clinical documentation is provided. Up to 12 months of coverage may be authorized per FDA dosing guidance and internal policies, and compounds containing excluded or non‑covered ingredients (or, for Medicaid, products from manufacturers not participating in MDRP) will be denied.

Term	Definition
Legend drug	A drug that is required by federal or state law to be dispensed only with a prescription.
Compendia	Standard reference compendia listed: AHFS-DI, Thomson Micromedex DrugDex, Clinical Pharmacology, Wolters Kluwer Lexi-Drugs.
MDRP	Medicaid Drug Rebate Program.

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