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Compounding Pharmacies at a Crossroads:
Regulatory Concerns and Consumer Demand
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In an era in which weight loss drugs dominate news headlines and telehealth platforms put prescriptions just a click away, Americans are reimagining medicine's potential—and how they access it.
This has driven new interest in compounding pharmacies, which promise bespoke solutions crafted to meet individual needs and sometimes claim to deliver the chemical equivalents of cutting-edge drugs.
Despite the enthusiasm, many Americans remain unclear about the regulations governing these facilities and which agencies, if any, are responsible for ensuring the safety and efficacy of their products.
What is compounding?
The independent nonprofit U.S. Pharmacopeia Convention (USP) defines compounding as “combining, admixing, diluting, pooling, or otherwise altering a drug product or bulk drug substance to create therapies tailored to patients' unique or specific needs.” Similarly, the Food and Drug Administration (FDA) considers compounding to occur when ingredients are combined, mixed, or altered to create a sterile or non-sterile medication "tailored to a patient's specific needs.”
The FDA further notes that compounding may be performed by a licensed pharmacist, licensed physician, or under the supervision of a licensed pharmacist, typically within pharmacies, hospitals, or clinics. As discussed below, while compounding does not generally include making exact copies of commercially available drugs, restrictions on compounding may be lifted in cases of drug shortages.
Compounded medications can be valuable options for ensuring appropriate dosing for pediatric or geriatric patients, providing alternative administration methods for those unable to swallow standard pills, or offering formulations without allergens such as preservatives or dyes. Compounding can also provide patients access to discontinued (but not formally discredited) therapies and medicines in times of specified shortage.
While compounded drugs play a crucial role in providing tailored treatments, they do not undergo the same FDA approval process as standard medications. Several of the FDA's web pages, including one on compounding laws and policies, declare, "Compounded drugs are not FDA-approved." Similarly, USP publications state, "USP has no role in enforcement." Instead, compounding pharmacies are overseen by state boards of pharmacy.
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Alison Falb Named Vice President for Health Policy | |
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Applied Policy CEO Jim Scott has announced the promotion of Alison Falb to Vice President for Health Policy, effective immediately.
"Since joining Applied Policy as Health Policy Director two years ago, Alison has played an essential role in expanding our pharmaceuticals division," said Scott. "We knew her professional background would uniquely position her to negotiate a complex regulatory landscape. But Alison's commitment to truly understanding each client's individual needs has been equally important to her success."
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Before joining Applied Policy, Falb was a Regulatory Counsel at the Food and Drug Administration, where she worked in the Office of Therapeutic Biologics and Biosimilars and the Division of Policy Development in the Office of Generic Drug Policy. She also previously served as a Senior Advisor at the Center for Medicare & Medicaid Innovation at the Centers for Medicare & Medicaid Services.
Falb, who holds a J.D. from Fordham University School of Law, said she was pleased with how readily her experience in the federal government translated to the private sector. “Importantly, the goal has remained the same—achieving better health outcomes. I look forward to continuing my journey with Applied Policy, and I hope to make an even greater impact in this new role.”
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Join NVHPF on September 17 for
'ACA: Past, Present, and Future'
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As the Affordable Care Act (ACA) approaches its fifteenth anniversary, it stands as one of the most significant healthcare reforms in U.S. history. The landmark legislation has not only expanded Medicaid to millions of low-income Americans but also revolutionized access to health insurance through the creation of state and federal exchanges. The result has been a dramatic reduction in the number of uninsured.
At noon ET on Tuesday, September 17,
the Northern Virginia Health Policy Forum
will host a conversation with two experts uniquely positioned to discuss the current status of the ACA and its future trajectory:
Jeff Wu, Deputy Director for Policy for the CMS Center for Consumer Information and Insurance Oversight, and
Kris Haltmeyer, Vice President of Policy Analysis for the Blue Cross Blue Shield Association.
We hope that you will join us.
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Now Streaming: The Applied Policy Podcast Considers
Reimbursement for Medical Devices
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In the latest episode of The Applied Policy Podcast, host Louisa Hart speaks with Applied Policy's Chief Medical Officer, Dr. Bill Rogers, about securing Medicare reimbursement for new drugs and medical devices.
An emergency physician, Rogers finds the process similar to puzzling out complex medical problems, and he enjoys the challenge.
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As Rogers observes, while the FDA considers whether a drug or medical device is "safe and effective," the statutory threshold for Medicare coverage is whether the drug or device is "reasonable and necessary." He describes the sense of accomplishment the Applied Policy team finds in helping clients secure the coverage and reimbursement that will make their products accessible to Medicare and other insured beneficiaries.
Rogers brings more than a clinical perspective to his understanding of reimbursement. His 14 years of work with the Centers for Medicare & Medicaid Services (CMS) gave him an appreciation of reimbursement from the payor's perspective. He knows that payment "can't be haphazard." Instead, as he tells Hart, "It's going to be complicated."
Click the icon above to listen to the conversation now. Links to all episodes are available on our website or through Apple, Spotify, or Amazon Music.
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11 Years of the Two-Midnight Rule | |
By Meghan Basler, CPC, Senior Health Policy Associate | |
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October 1 will mark 11 years since CMS established the ‘two-midnight rule’ for inpatient admissions of Medicare beneficiaries.
Contentious from the outset, the rule had a halting rollout, delayed by Congressional actions and agency revisions.
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As the Medicare payment model has evolved, the rule has taken on new relevance, forcing providers, health plans, and policymakers to reconsider its implications.
CMS adopted the two-midnight rule after the Recovery Audit Contractor program and the Office of Inspector General (OIG) repeatedly identified significant improper Medicare payments for short-stay inpatient admissions. The OIG determined that many of these stays should have been billed as outpatient services, which generally result in lower payments. CMS defines 'improper' as not meeting program requirements. It is not synonymous with fraud or abuse. For example, a hospital admission could be deemed improper if an auditor determines that the service could have been provided on an outpatient basis.
The length of a Medicare beneficiary's hospital stay has significant implications. CMS specifies that a three-day inpatient hospital stay is required for a beneficiary to be eligible for Medicare coverage of skilled nursing facility services. Moreover, the difference in cost-sharing between inpatient and outpatient care means that how a hospital visit is billed directly impacts a patient’s financial responsibility.
Introduced in the Fiscal Year 2014 Inpatient Prospective Payment System (IPPS) Final Rule, the two-midnight rule specifies that Medicare will pay for inpatient hospital admissions when a physician reasonably expects the patient's care to require a stay that crosses two midnights, and the medical record supports this expectation. CMS established the rule to curtail short inpatient (Medicare Part A) billing for services that could be appropriately billed as outpatient (Medicare Part B).
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Applied Policy Vice President of Healthcare Services Carl Mallory and Health Policy Associate Will Henkes briefly traded the shores of the Potomac for the waters of the Gulf of Mexico last month for an excellent cause. The two proudly represented Applied Policy at the 18th Annual DHR Health Fishing for Hope Tournament on South Padre Island, Texas, on August 24.
The event raised over $450,000 for the Hope Family Health Center, a 501(c)(3) non-profit organization that serves as the only safety-net clinic in Texas's Rio Grande Valley.
For Mallory, "The event was an opportunity for us individually and as an organization to honor the selfless commitment of all DHR staff in supporting the Hope Family Health Center's mission to provide comprehensive medical services to uninsured families and individuals across the Rio Grande Valley."
Henkes concurred, saying that he was moved to learn of the direct impact Hope Family Health Center's work has on patients, their families, and their community. "And," Henkes observed, "Unlike Carl's and my fishing efforts, the fundraiser was a massive success!"
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Carl Mallory poses with what we have been advised was not the event's
prize-winning catch.
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Will Henkes realizing that fishing on the Gulf of Mexico is more challenging than fishing at his grandfather's stocked pond. | |
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CMS Holds Listening Session on
Medicare Health Equity Services
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On August 23, CMS Leadership held a virtual discussion with various stakeholders focusing on Medicare Health Equity Services, particularly in the context of rural and tribal health services. The conversation included providers, patients, program managers, local service representatives, and other key stakeholders. CMS Leadership posed questions about Social Determinants of Health (SDoH) Risk Assessment, PIN and CHI Codes, and Community-Based Organizations (CBOs) to gain insights and improve services. | |
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With November 5 circled on every calendar in Washington and Congress facing a September 30 deadline to avert a government shutdown, we are not expecting significant legislative activity as Congress returns from recess this week.
However, there is healthcare legislation pending. Some bills may garner attention during the lame-duck session later this year, while others could be influenced by the outcome of the election.
As Applied Policy reported earlier this year, cybersecurity in healthcare is a growing concern, with the average data breach now costing approximately $10 million. The ransomware attack on Change Healthcare (CHC) this spring brought renewed attention and prompted Congressional investigations into the issue. CHC has acknowledged that the breach may have exposed health insurance information, medical records, and other personal details, including Social Security numbers, of nearly one-third of Americans.
The Healthcare Cybersecurity Act of 2024, which was introduced in response to the Change attack, would direct the Cybersecurity and Infrastructure Security Agency and the Department of Health and Human Services to collaborate on enhancing healthcare cybersecurity. Co-sponsored by Sen. Jacky Rosen (D-NV), Sen. Todd Young (R-IN), and Sen. Angus King (I-ME), the legislation reflects growing public concern over data privacy and enjoys bipartisan support.
Meanwhile, legislators and regulators continue to work towards agreement on how to provide Medicare beneficiaries with timely access to breakthrough medical technologies. The Trump Administration's Medicare Coverage of Innovative Technology (MCIT) rule allowed for "national Medicare coverage on the date of FDA market authorization, continuing for four years." However, the Biden Administration repealed the rule in 2021, promising to replace it with the Transitional Coverage for Emerging Technologies (TCET) rule.
When TCET was slow to materialize, frustration over the delay became palpable. The Advanced Medical Technology Association (AdvaMed) even posted a clock tracking the days since the repeal of MCIT.
Congresswoman Suzan DelBene (D-WA) and Congressman Brad Wenstrup (R-OH) introduced the Ensuring Patient Access to Critical Breakthrough Products Act in March 2023. Echoing the MCIT rule, the bill would allow designated medical breakthrough devices to be temporarily covered under Medicare during a four-year transitional period following FDA approval. It also mandates that CMS assign payment codes within three months of approval.
In June, the House Ways and Means Committee voted in favor of the bill, the current version of which does not include diagnostic products.
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On the Docket/Under Review | |
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Applied Policy is following these rules under review at the Office of Management and Budget:
- Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program (CMS-2433)
- Administrative Simplification: Modifications to NCPDP Retail Pharmacy Standards (CMS-0056)
- HHS Notice of Benefit and Payment Parameters for 2026 (CMS-9888)
- Amendments to Rules Governing Organ Procurement Organizations (CMS-3409)
- Appeal Rights for Certain Changes in Patient Status (CMS-4204)
- Mitigating the Impact of Anomalous Increases in Billing on Medicare Shared Savings Program Financial Calculations (CMS-1799)
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Enhancing Coverage of Preventive Services under the Affordable Care Act (CMS-9887)
See all rules under OMB review here.
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Insight Joke of the Month for September | |
September's Spotlight Read:
Gray Matters, A Biography of Brain Surgery
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Do you know someone with a brain tumor? Theodore H. Schwartz, M.D., a professor of minimally invasive neurosurgery at Weill Cornell Medicine, says that the odds are you do or will. In his book Gray Matters, A Biography of Brain Surgery, he also explains why the diagnosis is not a death sentence.
Brain tumors are among several conditions considered in Gray Matters, which also includes in-depth discussions of sports injuries, stroke, epilepsy, Parkinson's, and penetrating head trauma.
Clinicians will appreciate the book's opening tribute to Harvey Cushing, often hailed as the "father of neurosurgery," which sets the tone for the technical explanations and historical citations that follow. However, Gray Matters was not written only for medical professionals. Schwartz's balance of clinical insights, personal storytelling, and inclusion of medical cases from popular culture (Michael J. Fox, Bob Saget, Eva Peron, Lance Armstrong, and the Lincoln and Kennedy assassinations, among others) results in a text that captivates the lay reader.
Among the cases included in the book is that of Schwartz's father, who developed Broca's aphasia while hospitalized for another condition. It is a heart-rending tale that emphasizes the importance of patient advocacy and saying what needs to be said while one has the ability to speak.
Kirkus Reviews describes Schwartz as "a warm and insightful" author who "provides a remarkable account of a crucial but misunderstood field." You'll finish the book with a greater appreciation for the marvel that is the human brain and the urge to hold those you love just a little bit closer.
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Questions, comments, or concerns? Please contact us at news@appliedpolicy.com | | |
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Applied Policy, L.L.C., is a health policy and reimbursement consulting firm strategically located minutes from Washington, D.C.
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