is a separate question.
The Center for Medicare and Medicaid Services (CMS), which is part of HHS and runs the Medicare, regularly decides whether to cover diagnostic tests, medications, surgical procedures and other medical treatments. It bases those decisions on whether the intervention is reasonable and necessary. For drugs, that almost always means that the medication has received approval from the FDA.
We believe that Medicare's policy manual clearly establishes the agency's authority to deny coverage for compounded drugs, said Carome.
But he admits that the manual is internally contradictory. In a section of the manual related to compounded drugs, CMS says that compounded drugs that have not received FDA approval - which describes essentially all compounded drugs - are excluded from Medicare coverage.
If the FDA has not approved the manufacturing and processing procedures used by these (compounding) facilities, the FDA has no assurance that the drugs these companies are producing are safe and effective, the manual adds.
But the same section also says that payment for such a drug does not stop unless CMS notifies the local carriers that it contracts with to process Medicare claims that it is appropriate to do so.
Clearly, if compounded drugs weren't covered to the extent they are, there wouldn't be an economic environment that allows large-scale compounding to continue, said Carome.