Compound Drugs - How to bill

by  Christine Woolstenhulme, CPC, CMRS, QCC, QMCS
August 10th, 2015

Pharmacy compounding is a has been done for many years.  It is a tradition that offers customized care to meet the specific needs of individual patients.  Modern technology and innovative research techniques have allowed more pharmacists to customize medication to meet a patients needs. 

Through compounding, a prescriber and pharmacist can adjust medications to the exact dosage needed by the patient.  Due to differences in patients’ body size, drug tolerance, or various organ failures, commercially available medications often do not provide the exact strength a patient requires.  Compounding is mainly used to avoid non-compliance. 

Speciality Compounding has been useful in making medications easier to take and more effective.  It can be personalized for patients that my need specific strengths, dosage forms, flavors or ingredients excluded from medications due to allergies or other sensitivities.

How to Bill:

All outpatient drug claims billed must include the NDC, NDC quantity, and NDC Unit of Measure (UOM).
The following table provides the required billing data elements:
Element Element Information
National Drug Code (NDC)
NDC format (5-4-2)
Drug Unit of Measure (UOM)
Valid unit of measures are:
F2 (international unit)
GR (gram)
ML (milliliter)
UN (unit)
Drug unit quantity Dispensing quantity
An invoice is required for each claim. Electronic submitters should indicate that they have an invoice available upon request by putting "Documentation Available Upon Request" in the electronic equivalent of Item 19 of the CMS 1500 claim form. WPS Medicare will send an ADS (development) letter requesting the invoice, which is needed to make the payment determination. If you do not indicate the availability of the invoice, or if you do not return it in a timely fashion, the claim may be denied as unprocessable.
Reporting of compound drugs should be billed in the following manner:
The Service Line data should be repeated and...
  • Modifier KP should be used on the first service line (primary drug)
  • Modifier KQ should be used on the second service line (subsequent drug)
  • Modifier KQ can be repeated as many times as it takes to report compound drug
The UOM codes are:
F2 = international unit
GR = gram
ML = milliliter
UN = unit (each)
If the drug administered is composed of more than one ingredient (i.e., compound drugs) and the claim is billed on a UB‐04 or CMS-1500 form, each NDC must be represented in the service line. The HCPCS code should be repeated as necessary to cover each unique NDC.
Enter a KP modifier for the first drug of a multiple drug unit or dose formulation and enter a modifier of KQ to represent the second or subsequent drug formulation.


Compound Drugs - How to bill. (2015, August 10). Find-A-Code Articles. Retrieved from

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