High reimbursement drug products have been an underground current in the practice of pharmacy for over a decade. However, only in the past 5 or 10 years has this part of the industry expanded enough to bring federal attention.

Federal Attention

In 2016, the Office of Inspector General (OIG) called attention to significant growth in spending for compounded drugs (customized medications tailored to meet the needs of individual patients). Specifically, OIG found that Medicare Part D spending for compounded drugs grew by 625 percent from 2006 to 2015 and spending for topical compounded drugs such as creams, gels, and ointments to relieve pain grew at an even faster pace.

The OIG for the United States Department of Health and Human Services (HHS) is charged with identifying and combating waste, fraud, and abuse in the HHS’s more than 300 programs, including Medicare and programs conducted by agencies within HHS, such as the FDA and CDC.

How and Why?

The cause of this phenomenon is simple: the PBMs have grown so large that they are not worried about millions or even tens of millions of dollars of reimbursements. Of the 301 million Americans that have pharmacy coverage, 274 million are managed by one of top 10 payors.

Therefore, only a few therapeutic classes (e.g. diabetes) get any real attention from PBM actuaries. Attention is divided according to “Per Member Per Month” (PMPM) – or in other words, cost for each enrolled member each month.

Accordingly, high reimbursement drugs have focused on dermatology because when averaged across all members, the cost is almost negligible. All of a sudden, the 12 to 18 month “lifetime” of drugs doesn’t seem so long.

Consequences of Fraudulent Billing

There have been many fraud investigations and subsequent guilty pleas in the past few years. Per reporting from Frier Levitt, two major health insurance companies have already started to terminate pharmacies from their Medicare Part D network due to billing patterns on topical treatments.

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