Drugs and biologicals for use in the hospital, which are ordinarily furnished by the
hospital for the care and treatment of inpatients are covered. Three basic requirements
must be met for a drug or biological furnished by a hospital to be included as a covered
hospital service. (1) The drug or biological must represent a cost to the institution
in rendering services to the beneficiary. (2) It must either be included, or approved
for inclusion, in the U.S. Pharmacopoeia, the National Formulary, or the U.S. Homeopathic
Pharmacopoeia; or, except for those unfavorably evaluated, in AMA Drug Evaluations
(the successor publication to New Drugs) or Accepted Dental Therapeutics (the successor
publication to Accepted Dental Remedies); or be approved by the pharmacy and drug
therapeutics or equivalent committee of the medical staff of the hospital for use
in the hospital. (3) The drug or biological must be reasonable and necessary as specified
in HI 00620.010.
An investigational drug ordinarily is not considered as reasonable and necessary since
its efficacy has not been established. Therefore, even if a drug or biological is
approved by an appropriate hospital committee, the reasonable cost of an investigational
or other non-approved drug or biological (e.g., Laetrile) cannot be reimbursed. This
exclusion applies whether or not the drug or biological is administered during an
otherwise covered hospital stay. (An exception has been made, however, for certain
cancer drugs known as group C drugs, approved and distributed by the National Cancer
Institute, in cooperation with the Food and Drug Administration for treatment by physicians
who agree to participate in approved studies.)