Drugs and biologicals for use in the facility which are ordinarily furnished by the facility for the care and treatment of inpatients are covered. Such drugs and biologicals are not limited to those routinely stocked by the SNF but include those obtained for the patient from an outside source, such as a pharmacy in the community. When a facility secures drugs and biologicals from an outside source, the facility must assume financial responsibility for the necessary drugs and biologicals, i.e., the supplier looks to the facility, not the patient, for payment.

The drug or biological must be either 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).

Drugs not included, or approved for inclusion, in the drug compendia are nevertheless covered if such drug (1) was furnished the patient during hisprior hospitalization; (2) was approved for use in the hospital by the hospital's pharmacy and drug therapeutics (or equivalent) committee; and (3) is required for the continuing treatment of the patient in the SNF.

Combination drugs are covered if the combination itself or all the therapeutic ingredients of the combination are included, or approved for inclusion, in any of the designated drug compendia. Under the limited circumstances mentioned in B. above, a combination drug approved by a hospital pharmacy and drug therapeutics committee may also be covered as an extended care service.

Drugs and biologicals furnished by a facility to an inpatient for use outside the facility are, in general, not covered as extended care services. However, if the drug or biological is deemed medically necessary to permit or facilitate the patient's departure from the facility, and a supply is required until they can obtain a continuing supply, the drugs or biologicals would be covered as an extended care service. Drugs and biologicals furnished to outpatients of SNF's are not covered.