A New Source of Medicare Fraud Emerges: Compounded Drugs

https://www.thefiscaltimes.com/2016/07/18/New-Source-Medicare-Fraud-Emerges-Handmade-Drugs

By Eric Pianin
July 18, 2016

The somewhat murky world of pharmacy drug compounding was rocked by scandal in 2012 with the disclosure that 64 people had died and nearly 800 others had been sickened by a multi-state outbreak of fungal meningitis and other infections caused by a New England company’s sale of mislabeled and contaminated medications.

After years of criminal prosecutions, civil suits and huge financial settlements, that controversy finally began to fade.

But a recent report by the Department of Health and Human Services Inspector General’s Office has sparked a new concern that the compounded drug industry, which provides specialized mixed drugs tailored to consumers’ needs, is rife with fraud and may be overcharging Medicare and other health care providers hundreds of millions of dollars.

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At the same time, Medicare spending on compounded drugs rose by 56 percent last year, with roughly 280,000 beneficiaries qualifying for purchases. The demand for these drugs -- which often cost hundreds or thousands of dollars for single tube of a topical cream, for example -- has dramatically increased over the years, with government-financed spending reaching $509 million last year.

Pharmacists and doctors create these medications by combining or changing drug ingredients to cater to patients who cannot use commercially available products because of allergic reactions or other side effects. The most astounding growth rate has been in the purchase of popular topical creams and gels used to reduce pain. Spending on those has increased 3,400 percent since 2006, according to the IG’s report.

Government investigators say that the sharp increase in Medicare spending for these specialty drugs combined with a huge spike in the number of people seeking them suggests a pharmaceutical market rife with fraudulent activity. “These spending trends, coupled with recent fraud cases involving compounded drugs, signals the need for action,” the inspector general’s report asserted.

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