Compounded Drug Products
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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.
No material clinical or coverage changes.
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).
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)).
Exclusion Criteria
Exclusion criteria
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
Coding and Documentation Codes
| No codes listed |
Claims documentation requirement
Dispensing pharmacy claims must include all active and inactive ingredients used in the compound with dosage form, strengths, quantities, and manufacturer National Drug Code (NDC). This information can be submitted on the dispensing claim instead of on the PA request to satisfy documentation requirements.
Provider Actions & 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.
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. |
Revision History
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