OIG Takes Notice as Compound Drug Use Skyrockets

Compound drug use skyrocketsThe cost of compounded topical drugs to the country’s Medicare program has skyrocketed over the past several years, and that’s gotten the attention of a government watchdog agency.

In a recently released report, The U.S. Department of Health and Human Services Office of Inspector General (OIG) found that Medicare Part D spending for these drugs was 24 times higher in 2016 than in 2010.

Compounded drugs are medications that are customized specifically for a patient in which individual ingredients are mixed together. They are usually prescribed when commercially available drugs do not meet a patient’s needs.

The explosive growth has triggered concern over the potential for fraud and abuse, particularly given that these drugs are typically very expensive – ranging in price from a few hundred to thousands of dollars per month. Between 2006 and 2015, Medicare Part D spending for these drugs shot up to $508 million from $70 million, a 625 percent increase.

As a result, OIG has stepped up its investigations into the prescribing of compounded medications. The agency found that 557 of the 2,388 pharmacies whose records were reviewed had questionable Part D billing for compounded topical drugs in 2018, each billing high amounts for at least one of five measures that OIG developed to sniff out fraud, waste or abuse. The pharmacies billed $300.3 million for compounded topicals in 2016, more than 90 percent of all Part D billing for these drugs nationwide.

OIG also noted that 124 prescribers raised concern because of the large amounts of compounded drugs they ordered and which were dispensed by the pharmacies in question. The prescribers that were included in the review each ordered more than $250,000 in compounded topical drugs dispensed at these pharmacies in 2016.

This kind of fraud is not new. Federal prosecutors have been charging physicians, pharmacists and sales reps with illegal kickback schemes, among other crimes, associated with the prescribing and distribution of compounded medication.

The Department of Justice has focused on fraud within the TRICARE program, which provides healthcare benefits to members of the military, their families and veterans. As we previously wrote about, TRICARE spending on compounded pain medicines began to skyrocket around 2012 as pharmacies, often working with independent marketing companies, aggressively marketed the drugs to doctors and patients.

In addition, patients have been recruited to participate in schemes whereby they take part in “research studies” for compounded medications that may not be medically necessary, receiving some kind of remuneration in return.

The high number of prescriptions warrants further investigation, according to the OIG, which has recommended that CMS clarify Part D policies for coverage of the drugs and use of utilization management tools. Specifically, OIG has recommended that CMS, among other things, conduct additional analysis on the drugs and conduct training for Part D sponsors relating to fraud and safety concerns and follow up on the pharmacies and prescribers identified in its report.

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