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Dive Brief:
- Medicare spent more than half a billion dollars over three years on drugs it shouldn’t have paid for, according to a new report from a federal watchdog that sharpens concerns about the insurance program’s financial oversight as it buckles under growing spending.
- The HHS Office of the Inspector General audited Medicare’s Part D prescription drug benefit and found it spent $587.7 million from 2021 through 2023 on five drugs that were labeled prescription-only, despite the Food and Drug administration switching them to over the counter more than a year prior. Part D does not cover drugs that can be purchased over the counter.
- HHS OIG blamed the CMS for the inaccurate payments, saying the agency relied on outdated FDA data and failed to tell Medicare Advantage and private prescription drug plans that they should start rejecting payments for drugs. The watchdog recommended that the CMS crack down in the arena, and the CMS agreed.
Dive Insight:
Medicare Part D isn’t supposed to pay for drugs that can be purchased without a prescription. But the government’s current oversight isn’t stopping that from happening, according to the HHS OIG audit.
The watchdog dove into data from 2021 to 2023, the most recent years available, and found that Part D was paying out a larger amount each year — $184 million in 2021, $194.54 million in 2022 and $209.14 million in 2023 — for five drugs that had switched to over the counter.
The lion’s share of spending was on generic equivalents for Voltaren, a topical drug used to treat arthritis pain. The medications were prescribed 15.8 million times during the audit period and drove $562.1 million of the $587.7 million in improper reimbursements.
Other drugs analyzed were generics for Pataday and Lastacaft, eye drops used to treat itchiness and redness; Astepro, a nasal spray used to treat allergy symptoms; and Sklice, a topical lotion used to treat head lice.
The ineligible payments crept through because the CMS updated a file listing drug products that Part D plans can include in their formularies using outdated FDA data, the HHS OIG said.
In addition, regulators didn’t set a timeframe for plans to reject payments for OTC drugs sold under obsolete prescription-only labeling, according to the audit.
The HHS OIG said it shared its findings with the FDA and the CMS before publication. In December, the FDA issued a policy requiring generic drug manufacturers to update their labeling within 6 months after regulators approve a drug’s switch from prescription-only to over the counter use.
The CMS should issue similar guidance on timeframes for the MA and private prescription drug plans that participate in Part D, telling them to reject payments for drugs that have made the switch, the HHS OIG argued.
The CMS concurred with the recommendation, and indicated that it would issue guidance to Part D sponsors consistent with the updated FDA policy, according to the audit.
The CMS did not respond to questions on when it plans to publish such guidance.
Evidence of improper Medicare payments on drugs comes amid the Trump administration’s intense focus on combating fraud, waste and abuse in government programs.
And Medicare shelling out for drugs no longer covered by its Part D benefit has been a headache for the program before. For example, in 2022, Akorn Operating Company, a generics manufacturer, agreed to pay almost $8 million for continuing to sell three generic drugs under obsolete prescription-only labeling, despite their switch to over the counter.
Medicare is not in a position where it can absorb unnecessary spending. A trust fund underpinning the program’s hospital benefit is set to run dry in 2033, earlier than expected after the GOP’s “Big Beautiful Bill” passed last summer cut taxes that flowed into Medicare’s coffers.
The shortfall has added to underlying population and spending shifts in the U.S. that are cutting into Medicare’s income while increasing the program’s spending, including an older and sicker population, growth in privatized Medicare Advantage plans and rising hospital costs.
Runaway drug spending is also putting pressure on Part D, driven by market entrance of pricey specialty drugs, Americans’ hunger for GLP-1s and a sicker population needing more medications to manage conditions.
