Billing Compound Drugs

by  Christine Woolstenhulme, QCC, QMCS, CPC, CMRS
May 9th, 2016

Unclassified HCPCS codes can only be used when there is not a specific HCPCS code available for the drug being billed.
Each NDC associated with an unclassified drug code should be submitted on a separate claim line following the instructions specified in the Manual for Physicians and Providers- Coding and Filing Claims-Unclassified Drugs.
All of the following information is required to be submitted for reimbursement of a compound drug
or any drug billed with unclassified drug codes:
• Valid NDC for each active ingredient utilizing the 11 digit numeric format
• NDC Description
• NDC quantity using an AWP unit price (AWPU) associated with the NDC submitted for the dose
administered to the member.
Example of information required to accompany an unclassified drug:

HCPCS Code           NDC                  Description                    NDC Quantity*

J3490                    00000000070      Compounding Fee           1

J3490                     38779067303      Morphine 50mg/ml          2.00

J3490                     38779052403      Bupivacaine 20mg/ml      0.80

J3490                     38779056106      Clonidine 1mg/ml            0.04


*Two decimals.
NDC quantity is based upon the numeric quantity administered to the patient based upon the unit of measurement (AWPU).
The standard unit of measurement (UOM) codes are:
F2 = International Unit
ML = Milliliter
UN = Unit
Compound drugs considered for reimbursement must meet all the following criteria:
• There must be a valid prescription order from a physician with at least one FDA approved
ingredient that has a recognized NDC number;AND
• There is no commercially available product comparable to the compound product; AND
• There is good evidence in the medical literature to support the use of all active ingredients; AND
• ALL active ingredients are prescribed for the specific diagnosis; AND
• The intended route of administration for the compounded prescription is supported by medical
and scientific evidence AND
• None of the active ingredients are addressed in another medical coverage guideline with coverage limitations disallowing it to be considered a medical necessity.
• *EXCEPTION: Bulk powders that have a valid NDC number that are used in compounding drugs
for the treatment of severe spasticity of cerebral or spinal cord origin and severe, chronic,
intractable pain for use in infusion pumps meet the definition of medical necessity.
Substances primarily utilized as stabilizing agents, that are inert ingredients, or diluents used in the compounded drug, are considered incidental to the preparation of the compound and are
NOT eligible.


Billing Compound Drugs. (2016, May 9). Find-A-Code Articles. Retrieved from

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