(a) Compounded drugs must be authorized through prospective review prior to being dispensed. When it is necessary for medical reasons to prescribe or dispense a compounded drug instead of an FDA-approved drug or over-the-counter drug that complies with an OTC Monograph, the physician must document the medical necessity in the patient's medical chart, and in the Doctor's First Report of Injury (Form 5021) or Progress Report (PR-2) and must submit a Request for Authorization. The documentation must include the patient-specific factors that support the physician's determination that a compounded drug is medically necessary.

(b) Nothing in this Article shall invalidate a provision in a Medical Provider Network agreement which restricts physician dispensing of compounded drugs by medical providers within the network.

(c) Nothing in this Article shall permit physician dispensing of compounded drugs where otherwise prohibited by a pharmacy benefit contract pursuant to subdivision (a) of Labor Code section 4600.2.