Fraud Increases Among 'Homemade' Drug Providers

Most varieties of healthcare fraud are similar to the kind of financial misdeeds that affect other industries: Embezzlement, billing schemes, insurance fraud and even asset misappropriation are present in healthcare just like everywhere else. All of it is alarming and it costs companies and consumers money.

However, when fraud affects actual medications or services, it can be downright scary. Such is the case with pharmacy drug compounding, which is showing an increase in fraud and, through some high profile cases, has led to severe illness/injury and even death.

What is pharmacy drug compounding?

According to the U.S. Food and Drug Administration, pharmacy drug compounding refers to the following:

In general, compounding is a practice in which a licensed pharmacist, a licensed physician, or, in the case of an outsourcing facility, a person under the supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient.

The FDA further states that compounding can involve the combining of two or more drugs. And while compounded drugs are not FDA approved, the organization's website does state why some people needed compounded drugs:

Sometimes, the health needs of a patient cannot be met by an FDA-approved medication. For example:

  • If a patient has an allergy and needs a medication to be made without a certain dye;
  • or if an elderly patient or a child can’t swallow a pill and needs a medicine in a liquid form that is not otherwise available.

ying from unsafe drugs

So here's the scary part. Poor quality control and lax practices can lead to contaminated drugs and, ultimately, deaths. An article in the Fiscal Times, "A New Source of Medicare Fraud Emerges: Handmade Drugs," reports the following:

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.

As the article notes, the scandal surrounding pharmacy drug compounding faded for a while. But new information from the Department of Health and Human Services Inspector General's Office indicates that the industry is "rife with fraud and may be overcharging Medicare and other health care providers hundreds of millions of dollars."

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. 

The article touches on three cases that exemplify the type of fraud that is growing around the pharmacy drug compounding industry.

So, if you are a  consumer who purchases compounded drugs, be careful that you have them provided by a trusted, reputable source. And if you're a Medicare provider working to prevent and detect fraud, know that drug compounding is a hot spot for fraudsters -- and the situation is likely to only get worse.