A new report released by the U.S. Health and Human Services (Office of the Inspector General, “OIG”) expresses government’s concern about potential fraud and patient safety risks from compounded products used to treat pain. Medicare spending for such products has skyrocketed.

The OIG is currently investigating or plans to investigate pharmacies compounding and dispensing topical creams. The pharmacies are identified for investigation on the following basis:

  • Charging high dollar amounts for creams;

  • Large percentage of patients receiving identical products;

  • Increased billing;

  • Most prescriptions are coming from a single medical provider or a medical group.

Many of the pharmacies who are currently on the OIG investigative list are located in four cities: New York, Houston, Los Angeles, and Detroit. Most of the pharmacies compound pain medications using ingredients such as lidocaine or/and diclofenac sodium. These compounds are usually more expensive than non-compounded drugs with the same ingredients.

We have represented several pharmacies being audited and investigated only because they were compounding or/and dispensing expensive medications, prescribed by one or a few providers. This is an indication of potential fraud, waste or abuse. And the pharmacies must be prepared to defend themselves against such allegations. If you do compound pain creams, review the due diligence you perform in dispensing them: communicating with the prescribers and patients, documenting medical necessity for the compounds, etc. We recommend performing internal audit to determine whether you fall into this “flagged” category and adjusting dispensing practices accordingly.

Read a report prepared by Kaiser Health News.