Increased Spending in Compounded Drugs Could Involve Fraud

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Assortment of pills in news article at Young Law Group website. Also representing REMS

Federal spending for compounded drugs has exploded recently and there are concerns some portion of the increase is due to fraud or overbilling, according to recent media reports. Last year, we wrote a post about the increase in Tricare fraud among compounding pharmacies. Recent data reports suggests other programs, including Medicare Part D and federal workers’ compensation, have now been afflicted. Part D has increased its spending for this medicine by more than 600 percent over the last ten years to $508 million, according to a report released by the OIG.

Topical treatments account for over 40 percent of the government’s spending in this area. This has been a dramatic rise since 2006, when they accounted for just 9 percent of all spending. These compounded medicines are used to treat scars, wrinkles and pain. It has gotten so bad that the nation’s largest PBM, Express Scripts, stopped paying for them.

There has also been an explosion in claims for compounded drugs in the federal workers’ compensation program. Federal employees are covered by the Federal Employees’ Compensation Act, which provides a portion of their salary and covers medical bills in the event they are injured on the job. The Department of Labor administers the FECA and the Postal Service is the largest participant. The Postal Service reimburses the DOL for benefits paid out.

In order to slow increases in spending, the DOL has now limited the initial fill duration for prescriptions to 90 days. Initial prescriptions for greater periods are subject to review for medical necessity. These new rules went into effect July 1.

In another attempt to address problems in the compounding of drugs, the FDA has issued two draft guidance documents that restrict compounding copies of commercially available drugs. The agency contends that these copies needlessly expose patients to drugs not evaluated for safety, effectiveness and quality.

The FDA is also trying to restrict office-use compounding, where pharmacies ship large supplies of pharmaceuticals to doctor’s offices, by limiting compounded drugs to cases with patient prescriptions. The FDA does not want to allow pharmacies to make large batches of medications without going through the typical approval process.

If you are aware of fraud or kickbacks at a compounding pharmacy, please call one of our health care whistleblower attorneys at 1-800-590-4116. We offer a free consultation regarding reporting evidence of compounding fraud to the U.S. Government through the False Claims Act.