Fraud Emerges as Compounding Drug Sales Skyrocket

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PharmacistsWhat the government is spending on “compounded” drugs that are mostly handmade by retail pharmacies has skyrocketed, drawing the attention of federal investigators who are raising concerns of fraud and overbilling.

Spending on these medications in Medicare’s Part D program, for example, rose 56 percent last year, with some of the costliest products, including topical pain creams, priced at hundreds or thousands of dollars per tube. The federal workers’ compensation program has also seen a recent spike in spending.

The spending jump, along with a sharp increase in the number of patients getting the compounded drugs “may indicate an emerging fraud trend,” said Miriam Anderson, who helped oversee a June report on the Medicare spending by the inspector general’s office at the Department of Health and Human Services.

Some of the prescriptions may not have been medically necessary — or even dispensed at all, notes the report, which also details recent fraud cases brought by U.S. attorneys in several states.

The practice of compounding drugs, which is done by mixing drugs in pharmacies or special compounding centers by licensed pharmacists, is as old as the pharmacy profession itself. By creating specifically tailored medications, compounding is aimed at patients who cannot take commercially available, FDA-approved medications.

But use among Medicare beneficiaries and federal employees in workers’ compensation insurance plans has recently soared, according to Anderson’s report and a separate Postal Service inspector general’s study of the workers’ compensation program released last spring.

Similar run-ups in spending for compounded drugs were also noted by private-sector benefit managers in recent years.

In Medicare’s drug program, known as Part D, the number of Medicare beneficiaries getting compounded drugs has grown 281 percent since 2006 to nearly 280,000 in 2015. Spending on such drugs in Medicare’s Part D grew 625 percent between 2006 and 2015, to $509 million, according to the OIG report. That is still a tiny fraction of the program’s total spending on drugs.

The fastest-growing category of compounded drugs are topical creams and gels, often used for pain. Spending on those increased 3,466 percent in the Medicare program since 2006, the report said, while the average cost per prescription hit $331, up from $40 in 2006.

A large spike in spending for compounded drugs led the U.S. Postal Service to try to hold back payments for its share of federal workers’ compensation costs last year, saying the agency overseeing the program had failed to more strictly police the use of such drugs. It eventually paid.

Overall, the federal government’s worker’s compensation program, which includes the Postal Service, saw the spending on compounded medications grow from $2.35 million in fiscal 2011 to $214 million in fiscal 2015, according to the Department of Labor, which oversees the program.

New rules from the Department of Labor went into effect July 1, aimed at slowing the spending. Among other changes, the agency will now limit initial prescriptions to 90 days.

While legitimately prescribed compounded drugs “can dramatically improve a patients’ quality of life,” it is also important to have “proper controls around billing,” said John Voliva, executive vice president of the International Academy of Compounding Pharmacists. The HHS inspector general’s report demonstrated that such controls “are not in place,” he said.

Benefits vs. Drawbacks

The studies come amid ongoing scrutiny of the drug compounding industry, particularly following a meningitis outbreak that killed 64 Americans in 2012. Those deaths were linked to a Massachusetts pharmacy that sold tainted injectable medications.

Following that outbreak, some states tightened their oversight of such pharmacies, particularly those producing products that must be sterile.

Compounding pharmacies are generally overseen by state boards of pharmacy, and the drugs they produce are not considered FDA approved. The agency does get involved, however, when it is concerned that pharmacies might not be making medications properly or have started to mass produce treatments, rather than preparing them for individual patients.

When prescribed appropriately, compounded drugs allow patients who can’t take or tolerate commercially prepared products to have special formulations mixed just for them. Patients who can’t swallow pills, for example, can get liquid formulations or those allergic to certain dyes can get products made without them.

And sometimes such drugs can be more cost-effective.

When Turing Pharmaceuticals raised the price of a drug used for patients with compromised immune systems from $13.50 a pill to $750 last year, for example, one of the nation’s largest pharmacy benefit managers partnered with a compounding pharmacy to produce its own version for $1 a pill, said Glen Stettin, senior vice president for clinical research of Express Scripts.

Nationally, since 2012, pharmacies have been required to report all the ingredients they used to make a compounded drug. The idea was to provide insurers with more information about what they were being billed for and to make sure there were no hidden ingredients.

The effect that had on drug prices is up for debate. Stettin and others say a few unscrupulous pharmacies began adding more ingredients so they could charge more.

“They are [creating] combinations of things that have never been tested together,” said Stettin. “We saw a diaper cream that was billed at $1,000, where a patient could get one over the counter for $2.50.”

In California, federal investigators say a marketer for one pharmacy paid doctors to write prescriptions for compounded pain creams formulated to include a “five-pack” of the most expensive ingredients. Then the pharmacy could bill California’s worker’s compensation program $3,000 per tube for creams it cost about $20 to make, according to a federal indictment filed in June.

In Florida, federal prosecutors also in June unsealed an indictment against a doctor who allegedly was given kickbacks — including a $72,000 BMW — for sending prescriptions to a particular pharmacy, which then billed Tricare, Medicare and other government health programs for compounded creams. Prices ranged from about $900 to $21,000 for a one-month supply, according to court documents.

To combat rising spending, Express Scripts in 2014 drew up a list of about 1,000 ingredients used by compounders for which it would no longer pay, saying they were high priced and were not any safer or more effective than other treatments. Many of its clients, including the military health program Tricare, have incorporated that list into their health plans.

Since the limit, Express Scripts says it has seen its clients’ spending on pharmacy-made drugs fall sharply. The list has also prompted two antitrust lawsuits filed against Express Scripts in federal court by compounding pharmacies.

Awaiting Action

What actions Medicare will take — and the effectiveness of a July 1 2016 change in how such medications are paid for in the federal compensation program — remain unclear. The Medicare report does not make any recommendations, although investigators expect to issue a follow up report that will.

In its March 2016 report, the inspector general criticized a lack of action by the Labor Department to address the growing spending, saying that it estimated the Postal Service “has incurred over $81.8 million in excessive compound drug costs and nearly $4.1 million in excessive administrative fees” for the past two fiscal years.

Following that, the Labor Department issued new rules it says will “contain the cost of compound drugs … but still allow for appropriate medical treatment,” according to Leonard J. Howie III, director of the Office of Workers’ Compensation Programs.





Medicare Slow to Adopt Telemedicine

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Lady worried at laptop.jpgDonna Miles did not feel like getting dressed and driving to her physician’s office or to a hospital health clinic near her Cincinnati home. For several days she had a sore tongue that was discolored with raised white spots thinking that maybe it could be thrush, a painful mouth infection. 

So when Miles, 68, awoke on a wintry February morning and the pain had not subsided, she decided to see a doctor by simply turning on her computer and logging into, a service offered by her Medicare Advantage plan. She spoke to a physician, who used her computer’s camera to peer into her mouth and who then sent a prescription to her pharmacy. “This was so easy,” Miles said.

For Medicare patients, it’s also incredibly rare.

Nearly 20 years after such videoconferencing technology has been available for health services, it is used by fewer than 1 percent of Medicare beneficiaries. There are only two Medicare Advantage insurers offering the virtual visits, and the traditional Medicare program has tightly limited telemedicine payments to certain rural areas. And even there, the beneficiary must be present at a clinic, a rule that often defeats the goal of making care more convenient.

Congress has maintained such restrictions out of concern that the service might increase Medicare expenses. The Congressional Budget Office and other analysts have said giving seniors access to doctors online will encourage them to use more services, replacing what Congress says [in their opinion] would be more costly than visits to emergency rooms and urgent care centers.

In 2012, the latest year for which data is available, Medicare paid about $5 million for telemedicine services — barely a blip compared with the program’s total spending of $466 billion, according to a study in the journal Telemedicine.

“The very advantage of telehealth, its ability to make care convenient, is also potentially its Achilles’ heel,”  a Rand Corporation analyst told a House Energy and Commerce subcommittee in 2014. “Telehealth may be ‘too convenient.’ ”

But the telemedicine industry says letting more beneficiaries get care online would reduce doctor visits and emergency care. Industry officials as well as the American Medical Association, the American Hospital Association and other health experts say it’s time for Congress to expand use of telemedicine in Medicare.

Popular Outside Medicare

“There is no question that telemedicine is going to be an increasingly important portal for doctors and other providers to stay connected with patients,” former Surgeon General Richard Carmona said in an interview.

Some health experts say it’s disappointing that most seniors can’t take advantage of the benefit used by many of their children who have coverage in pre-65 individual plans.

“Medicare beneficiaries are paying a huge price” for not having this benefit, said Jay Wolfson, a professor of public health at the University of South Florida in Tampa. For example, he said, telemedicine could help seniors with follow-up appointments that might be missed because of transportation problems.

Aetna and UnitedHealthcare cover telemedicine services for members younger than 65, regardless of whether enrollees live in the city or in the country. About 37 percent of large employers said that they expect to offer their employees a telemedicine benefit this year, according to a survey last year by Towers Watson, an employee benefits firm. About 800,000 online medical consultations were completed in 2015, according to the American Telemedicine Association.

Medicare’s tight lid on telemedicine is showing signs of changing. In addition to Medicare Advantage plans, several Medicare accountable care organizations, or ACOs — groups of doctors and hospitals that coordinate patient care for at least 5,000 enrollees — have begun using the service. Medicare Advantage plans have the option to offer telemedicine without the tight restrictions in the traditional Medicare program because they are paid a fixed amount by the federal government to care for seniors. As a result, Medicare is not directly paying for the telemedicine services; instead, the services are paid for through plan revenue.

Republicans and Democrats in Congress are also considering broadening the use of telemedicine; some of them tried unsuccessfully to add such provisions to a recent law.

This year, Medicare expanded telemedicine coverage for mental health services and annual wellness visits — when done in certain rural areas and when the patient is present at a doctor’s office or health clinic.

“Medicare . . . is still laboring under a number of limitations that disincentivize telemedicine use,” said Jonathan Neufeld, clinical director of the Upper Midwest Telehealth Resource Center, an Indiana-based consortium of organizations involved in telemedicine. “But ACOs and other alternative payment methods have the possibility of changing this dynamic.”

AARP wants Congress to allow all Medicare beneficiaries to have coverage for telemedicine services, said Andrew Scholnick, a senior legislative representative for the lobbying group. “We would like to see a broader use of this service,” he said. He stressed that AARP prefers that Medicare patients use telemedicine in conjunction with seeing their regular doctor.

The American Medical Association has endorsed congressional efforts to change Medicare’s policy on telemedicine, as has the American Academy of Family Physicians. “We see the potential for it . . . to improve quality and lower costs,” said Robert Wergin, president of the academy and a family doctor in Milford, Nebraska. He said such technology can help patients who are disabled or don’t have easy transportation to the doctor’s office.

Anthem, which provides its telemedicine option to about 350,000 Medicare Advantage members in 12 states, expects the system to improve care and make it more affordable. “It’s also about the consumer experience and giving consumers the convenience of being face to face with a doctor in less than 10 minutes, 365 days a year,” said John Jesser, an Anthem vice president. 

While seniors are more likely to have more complicated health issues, telemedicine for them is no riskier than for younger patients, said Mia Finkelston, a family physician in Leonardtown, Maryland, who works with American Well, a firm that provides the technology behind That’s because the online doctors know when they can handle health issues and when to advise people to seek an in-person visit or head to the emergency room, she said.

“Our intent is not to replace their primary care physician, but to augment their care,” she said.

A Head to Head Match – 401k vs Whole Life Insurance

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Couple sitting on the beach sandIn talking about the best ways to save for retirement, an interesting idea is to compare investing in retirement plans to saving money via a whole life insurance policy. One misconception with life insurance is the myth that someone has to pass away for life insurance to be of any benefit.  

Nothing is further from the truth.

Life insurance inherently has benefits that can be used while you are alive but these never get mentioned in mainstream media. A few television personalities emphatically say that term life insurance is the only way to go because it is inexpensive and the extra money can be used to invest in mutual funds rather than purchasing whole life insurance. This does not work for the majority of people.

The mantra of “buy term and invest the difference” usually turns out to be “buy term and spend the difference.” It simply illustrates that people do not know what they do not know.

Term life insurance is straight forward. It is inexpensive life insurance at younger ages that covers you for a certain number of years (typically 10-30) after which it terminates.

Whole life insurance however is the opposite…it covers you for your whole entire life, is more expensive than term insurance because it accumulates cash value (term life insurance does not). 

The reason whole life insurance premiums are higher than term insurance is because the coverage costs are averaged over your entire life time. Therefore whole life insurance premiums are higher if purchased when you are younger and less costly as you age.

To use a simple analogy, whole life is like buying a house (builds equity) and term is like renting (no equity).

If this were the only difference between the two types of insurance than the television pundits might have a case however the devil remains in the details. A whole life insurance policy should be the foundation of any financial plan, even ahead of a qualified retirement plan (for example, 401k). Lets compare the features.

Qualified Retirement Plans:

Tax deferred/tax deductible; IRS approved; limits on contributions; employer match..sometimes; can invest in the stock market; loan provision (typically limited to 50k and loans must be repaid or become taxable); limited to the plan’s investment options; creditor protection; must have income to contribute; subject to taxation at ordinary income tax rates; no guaranteed retirement income.

Whole Life Insurance:

Tax deferred (not tax deductible); no limits on contributions; tax-free income and withdrawals; no mandatory withholdings; tax free to heirs; penalty free access to money under age 59 1/2; no required minimum distributions at age 70 1/2; has guaranteed costs, expenses and contribution amounts; can take a loan over 50k (no limits) and no loan repayments required; unlimited investment options (i.e. rental real estate); can be used as collateral (i.e. small business loan); estate tax free; liquid (access to funds at anytime without penalty;no hardship required); disability protection (automatic funding of retirement if you become disabled); use as your own bank (a source of financing); self completing (provides income for spouse if you die and college education for children); judgement proof (protection against creditors and lawsuits in many states); potential for dividends (more beneficial than employer match as it can potentially guarantee future tax free retirement income); protection from future income tax rate increases; guaranteed to grow every year (you know what the account will be worth in the future); guaranteed retirement income (if structured correctly); not stock market based (protection against market risk); long-term care benefits (protects against the costs of health care in retirement); retirement income flexibility (allows you to spend down your other assets in retirement); provides money for terminal and chronic illnesses; and last but not least..death benefit money when you need it most.

So why aren’t these benefits ever mentioned by the media? Because it takes too much time to obtain them or is the “status quo” an easier way to inform people? Max out your 401k and buy term insurance. Realizing how difficult it is for people to look outside the box for alternatives from what a person is accustomed to however when looking at the benefits provided by whole life insurance, the extra “perceived” cost (versus term insurance and qualified retirement plan) certainly makes it worth consideration.

Qualified retirement plans, like the 401k, were never meant to be a primary source of retirement savings but were deemed a supplement to social security. 

Whole life insurance should be in almost everyone’s financial plan and definitely deserves a serious look.