The Office of the Inspector General for Health and Human Services (OIG) recently issued a report addressing payment for compounded topical medications by the Medicare D program. The report provides a roadmap for law enforcement, insurance companies, professional boards and pharmacy benefit managers (PBM) to investigate both pharmacies and prescribers. The report confirms long held concerns about particular activities and is a harbinger of future enforcement actions.
The OIG evaluated 2,388 pharmacies and found approximately 550 engaged in questionable billing for compounded topical drugs, and 124 prescribers associated with these pharmacies, were identified as having highly questionable prescribing patterns. The OIG determined that Part D spending for compounded topical drugs was 24 times higher in 2016 than in 2010, and over one quarter of the pharmacies with questionable billing were in the New York, Houston, Detroit, and Los Angeles areas.
The OIG report identified five indicia of fraud to determine that certain pharmacies were engaging in suspect conduct. The metrics that the OIG explored included:
- Percent of beneficiaries for whom the pharmacy billed at least one compounded topical drug
- Number of beneficiaries for whom the pharmacy billed for identical compounded topical drugs
- Average dollar amount per compounded topical drug
- Number of compounded topical drugs ordered by a single prescriber
- Percent increase in total amount billed for compounded topical drugs from 2015 to 2016
Of the 124 prescribers with suspect prescribing patterns, each ordered more than $250,000 of compounded topicals dispensed by the pharmacies having questionable billing, for a total of $73.1 million. This amount accounted for almost 23 percent of all Part D spending for compounded topical drugs in 2016. The OIG also identified that more than one-third of the 124 prescribers with suspect prescribing patterns were podiatrists.
The OIG report concluded with a series of recommendations to the Centers for Medicare and Medicaid Services (CMS) to address, what the OIG determined, is a problem with billing of topical compounds to the Part D program. The recommendations include that CMS should:
- Clarify Part D policies for coverage of compounded topical drugs and use of utilization management tools
- Conduct additional analysis on compounded topical drugs
- Conduct training for Part D sponsors on fraud schemes and safety concerns related to compounded topical drugs
- Follow up on pharmacies with questionable Part D billing and the prescribers associated with these pharmacies
The OIG further stated that it will communicate separately with CMS and provide the identities of the pharmacies found to have questionable Part D billing for compounded medication.
CMS responded to the report by agreeing with all of the OIG’s recommendations. Moreover, CMS confirmed that it would follow up on pharmacies with questionable Part D billing and the prescribers associated with these pharmacies. CMS stated that it will review the referrals and “take action” as appropriate, which may include sharing this information with plan sponsors and law enforcement.
Pharmacies and prescribers would be wise to heed the warnings set forth by the OIG. All parties involved in the marketing, prescribing and filling of compounded drugs, billed to Federal healthcare plans, should review their practices and affiliations considering the OIG’s findings and recommendations. A thorough internal review, combined with the development of robust standard operating procedures, is a valuable process to avoid future enforcement action.
Frier Levitt has a long history of counselling pharmacies and prescribers on proper practices related to compounding and prescribing. We assist pharmacies and prescribers alike in evaluating their particular practices for compliance with applicable Federal and state laws and regulations. Contact Frier Levitt to speak to an attorney.
