Pharmacy Alert: OIG Audits of Compounding Pharmacies on the Rise

In a recent trend, compounding pharmacies have been receiving notices of audit from the Office of Inspector General (“OIG”) of the U.S. Department of Health and Human Services (“HHS”). In the notice, OIG requests that the pharmacies submit prescription-related documents including, without limitation, compound formulas and recipes. OIG is also requesting that pharmacies provide answers to survey questions (e.g., reasoning for not using generic in the compound).

The OIG has released several opinion letters and reports highlighting its concerns with the increase in Medicare Part D spending associated with compounding drugs, especially highly reimbursable topical drug products.  Since 2015, the OIG has devoted significant resources to monitoring trends in Part D spending and identifying questionable billing practices by pharmacies. By way of an example, a compounding pharmacy owner was sentenced to 2.5 years for running a $14M healthcare fraud scheme involving, among other things, a pharmacy that filled and dispensed compounded prescription drugs based on pre-printed prescriptions that offered “check-the-box” options on the form to maximize the amount of insurance reimbursement for the compounded drugs. OIG exercises its healthcare oversight role in various manners such as participating (or taking a lead) in federal criminal investigations in healthcare fraud, civil false claims act investigations, and exclusion of providers from participating in Medicare and Medicaid programs.

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 critical process to avoid future enforcement action.

How Frier Levitt Can Help

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 experienced attorney regarding proper compliance with potential OIG audits of your compounding pharmacy.