Formulary Exclusions & Non-FDA Compounded Medications

Formulary Exclusions & Non-FDA Compounded Medications

        (especially Low Dose Naltrexone and off-label use)

1. What “Formulary Exclusion” Means

A formulary is your insurance plan’s official list of covered medications.
If a medication is excluded, it means the insurer has chosen not to cover it under any circumstances — even with a prior authorization or appeal, unless a medical exception is granted.

Common Reasons for Exclusion

  • Cost containment: insurer has preferred “tiered” alternatives

  • Non-FDA approval: the medication or compounded formulation lacks FDA approval

  • Off-label use: prescribed for a condition not listed on the FDA label

  • Bulk powder compounding: the active ingredient is sourced in raw form rather than from a manufactured FDA-approved product

🔍 Example: Compounded Low Dose Naltrexone (LDN) is excluded from most Medicare Part D formularies because it’s not an FDA-approved finished drug and is considered “experimental or unproven” for many conditions — despite extensive clinical evidence supporting its off-label use.

2. Understanding Compounded & Non-FDA Medications

Compounded Medications

Compounding is when a pharmacist creates a medication tailored to the patient — adjusting the dose, removing allergens, or combining ingredients.

Why they’re often denied:

  • Not FDA-approved as a “finished” drug product

  • May be made using “bulk” (raw) powders not approved for that use

  • Insurers claim safety/efficacy cannot be guaranteed without FDA oversight

However, Medicare and private insurers can cover compounded drugs if:

  • Every active ingredient is part of an FDA-approved drug,

  • The compounded formula is “reasonable and necessary” for treatment,

  • It’s prescribed by a licensed provider and dispensed by a licensed pharmacy.

3. Off-Label Use & Why It Matters

Off-label use means a medication is prescribed for a condition or at a dosage not specifically listed on its FDA-approved labeling.
This practice is common and legal — the FDA regulates manufacturers, not physicians.

Insurers’ stance:
They often deny coverage for off-label uses unless:

  • Supported by recognized compendia (e.g., DrugDex, AHFS, NCCN), or

  • Backed by peer-reviewed medical evidence showing effectiveness for the diagnosed condition.

⚖️ Example: LDN (1.5 – 4.5 mg) is off-label because the FDA-approved form of naltrexone (50 mg) is for opioid/alcohol dependence — but off-label low-dose use is well-documented for autoimmune and inflammatory disorders.

4. How to Challenge Formulary & Compounding Denials

Step 1 – Request a Coverage Determination

Ask your plan in writing to reconsider coverage for the compounded or excluded medication.
Include:

  • Provider’s Letter of Medical Necessity

  • Supporting peer-reviewed studies

  • Explanation of why FDA-approved alternatives are not appropriate

Step 2 – File a Level 1 Appeal

If denied, submit an appeal citing:

  • Your plan’s obligation under CMS § 423.578 (Part D exception requests)

  • Supporting evidence from clinical literature

  • Any prior success or improvement with the medication

Step 3 – Escalate to Independent Review

Under Medicare Part D:

  • Level 1 → Redetermination by plan

  • Level 2 → Reconsideration by an Independent Review Entity (IRE)

  • Level 3 → Administrative Law Judge (ALJ) hearing (if over $180 in dispute)

🧾 AKG Advocacy Tip: Keep copies of every page — denials, evidence, provider statements, research articles — and label them clearly for your record or appeal packet.

5. Key Evidence to Include in Your Appeal

✅ Physician’s detailed Letter of Medical Necessity (diagnoses, dosage, treatment history)
✅ Published peer-reviewed studies supporting the off-label use
✅ Documentation of failure or intolerance to formulary alternatives
✅ Pharmacy compounding log or verification of ingredient source (if available)
✅ Patient statement describing impact and improvement

6. Example Denial Reason vs. Rebuttal

Denial ReasonHow to Respond
“Medication not FDA-approved.”Clarify that compounding from approved ingredients is permitted under 21 U.S.C. § 353a and is widely accepted in clinical practice.
“Use is experimental or investigational.”Cite peer-reviewed studies and recognized compendia demonstrating efficacy.
“Medication not on formulary.”Request a formulary exception under CMS guidelines citing lack of effective alternatives.
“Bulk ingredient not covered.”Provide evidence that compounded LDN uses pure naltrexone hydrochloride identical to FDA-approved product, only in adjusted dosage.

7. Real-World Example: Low Dose Naltrexone (LDN)

IssueInsurer ArgumentHow to Counter
Non-FDA-approved“LDN not an FDA-approved finished product.”Compounding from an FDA-approved ingredient is permitted; physician supervision ensures safety.
Off-label use“Not FDA-approved for autoimmune disease.”Cite studies on LDN’s immune-modulating and anti-inflammatory effects (e.g., Younger et al., Pain Med 2013).
Formulary exclusion“Excluded medication category.”File an exception request demonstrating no alternative provides equivalent benefit or tolerance.

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