Navigating Insurance for Compounded Medications: Why It’s More Complex Than You Think

February 27, 2024

One of the roles of a pharmacy is to help patients navigate the options available to fund their medications. For Canadians lucky enough to have drug coverage, this means providing direct billing to group insurance plans.

While many compounded medications are covered by insurance, patients will often pay up front at the pharmacy and then submit the receipt to their insurer. You may be wondering why you have to balance the benefits of your compounded medications with the convenience of your insurance benefits.

Read on as we help you make sense of this extra step and explain why billing for a compounded medication is more complicated than for commercially available (or manufactured) drugs.

Lack of Drug Identification Numbers

Health Canada issues Drug Identification Numbers (DINs) for commercially available medications. These DINs provide standardized information about the drug, such as its manufacturer, ingredients, and strength. When a pharmacy dispenses a medication with a DIN, billing to insurance is straightforward because the DIN is recognized and accepted by insurers. Compounded medications simply do not have DINs, making it more challenging to process these types of claims.

Variable formulations

Compounded medications are tailored specifically to an individual patient and will vary in their ingredients and dosage forms. Insurance companies need to review the components of each specific compound in order to determine if they are eligible for reimbursement under their specific insurance plan.

Regulatory compliance

Health Canada regulates manufactured medications, while the Ontario College of Pharmacists oversee the compounding of medications by pharmacists in Ontario. Compounded medications are uniquely prepared for a specific patient.  It is simply not feasible for a compounded medication to undergo the same type of approval process as a manufactured drug would require when it is made the exact same way for thousands or millions of people. This means finished compounds will never be part of the Health Canada-approved drug list that gets a DIN assigned to it, and therefore compounds require additional processing by insurers.

Added expenses

Compounded drugs can be more expensive than commercially available alternatives. In some cases, prescribers or pharmacists must submit information detailing the need for the compounded medication and why manufactured alternatives are not suitable.

The uniqueness of each compounded medication is both the reason they can be such a valuable option as part of treatment, but also the reason they are more complicated to reimburse.  In the cases of some insurers, there are very restrictive rules around reimbursement of compounds. It is up to the insurance company to decide whether or not a compound will be covered or not.

That is why each compounded medication is processed by insurance on a case-by-case basis for payment to be approved. In order to support your insurance claim, at PACE Pharmacy, we can provide you with detailed documentation of your unique compounded medications. This documentation may include the ingredients used, the compounding process, the rationale for the custom formulation, and sometimes clinical evidence supporting its use.


If you have a question about coverage of your medications, ask us!