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Nov. 19, 2012

Public Citizen Calls for Investigation of Medicare Reimbursement Policies That Help Fuel Large-Scale Drug Compounding

Centers for Medicare and Medicaid Services Failed to Use Established Authority That Could Have Limited Practice That Led to Meningitis Outbreak

WASHINGTON, D.C. – The U.S. Department of Health and Human Services (HHS) Office of Inspector General should investigate whether financial incentives created by drug compounding reimbursement policies of the Centers for Medicare and Medicaid Services (CMS) – combined with inadequate Food and Drug Administration (FDA) action – fostered the recent outbreak of life-threatening fungal meningitis caused by tainted steroid injections, Public Citizen said today in a letter addressed to HHS Secretary Kathleen Sebelius.

CMS, through its inconsistent Medicare drug reimbursement policies concerning compounded drugs and decisions allowing routine coverage for such medication, appears to have created inadvertent financial incentives that helped large-scale production by compounding pharmacies to flourish, the letter said.

CMS, like the FDA, has authority that, if appropriately used, could greatly restrict, or even eliminate, the widespread, large-scale production and distribution of standardized drugs by compounding pharmacies — a practice that falls outside the intended scope of traditional compounding and violates FDA drug manufacturing regulations. In fact, CMS has exercised this authority in the past.

In 2007, all four regional Medicare Administrative Contractors, covering the entire country and acting on behalf of CMS, issued a denial of coverage for compounded inhalation drugs administered through a nebulizer. In statements following those denials, the local Medicare carriers noted that while “compounded drugs may be made starting with a medication approved by the FDA, the final product is not approved for safety and efficacy by the FDA and is not manufactured to strict federal standards.” The statement noted that the absence of safety testing can put patients at increased risk of injury or death.

“By failing to use this same authority to deny coverage for many other compounded drugs since then, CMS essentially has encouraged pharmacies to produce such medications at dangerously large scales,” said Dr. Michael Carome, deputy director of Public Citizen’s Health Research Group. “An independent investigation is necessary to determine exactly how these policies contributed to the current meningitis outbreak and to prevent a similar tragedy from happening in the future.”

Public Citizen asks that the investigation address the following areas of concern:

- CMS guidance documents on compounded drugs are ambiguous and conflicting, stating first, that all compounded medications manufactured in violation of the Food, Drug, and Cosmetic Act are excluded from coverage, but then, in seeming opposition to this, instructing Medicare carriers to continue reimbursing for compounded medications unless the FDA and CMS take specific actions to notify carriers to deny reimbursement;

- CMS appears to have no mechanism to implement this ambiguous guidance, as CMS has stated that it has “no regular form of coordination with FDA” to allow CMS to identify when the FDA has determined that particular compounded drugs have been produced in violation of the law and notify carriers to deny coverage;

- CMS has failed to extend its well-reasoned and justified basis for denying coverage for compounded inhalation drugs in 2007 to other compounded drugs being produced and distributed on a large scale by many compounding pharmacies; and

- At least one CMS local carrier, covering Iowa, Kansas, Missouri and Nebraska, has previously stated that it will cover certain high-risk compounded drugs for administration into the area around the spinal cord via an implantable pump under some circumstances.

To read the letter, visit http://www.citizen.org/hrg2084.


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