This past June, we issued a client alert regarding an uptick in the Department of Justice and Department of Defense’s coordinated efforts to conduct investigations into alleged violations of the False Claims Act (FCA) for claims submitted to TRICARE and further noted that the Department of Labor (DOL) had joined the enforcement actions for what they perceive as alleged overbilling for compounded medications. (See, Feds Increasing Enforcement on Pharmacies for Past Billing to TRICARE and the Department of Labor).  Since that alert, it appears that the DOL and at least two Congressional Committees have now targeted compounded drugs that are being paid for under the Federal Employees’ Compensation Act (FECA). 

In early September, the DOL posted notice of an information collection request (ICR) in the Federal Register (81 Fed. Reg. 61255) and requested comment. The DOL has proposed that the treating physician(s) of injured federal workers covered under FECA submit form CA-26, “Authorization Request Form and Certification / Letter of Medical Necessity for Compounded Drugs.”  The forms will require that treating physicians certify that compounded drugs are medically necessary to treat the work-related injury or illness for which they are prescribed. 

On October 5, 2016, two Congressional Committees submitted a joint comment to the ICR.  The letter from Representatives Robert C. “Bobby” Scott of the Committee on Education and the Workforce and Elijah E. Cummings of the Committee on Oversight and Government Reform note that, “…serious concerns have been raised about exorbitant prices being charged to the Federal Employees’ Compensation Act (FECA) program for ‘compounded drugs’ that lack demonstrated efficacy for the condition for which they are prescribed.” The letter went on to note that a lack of any oversight over FECA payments for compounded drugs has allowed the costs to the program to “skyrocket” from approximately $2.5 million to $400 million in just the past five years. 

One particular paragraph of the letter should hold special interest to any healthcare providers or pharmacies that have prescribed or fulfilled prescriptions for compounded drugs for beneficiaries under the FECA program:

           While there is a medical need for a narrow range of compounded drugs, questions have been raised about the efficacy and medical necessity for almost all of the payments made by the FECA program for compounded drugs.  Further, fraud investigations by Inspectors General found that kickbacks are being paid by compounding pharmacies to doctors to write prescriptions for compounded drugs that have no demonstrated medical benefit – with middlemen being paid a commission for each prescription written.  The programmatic weaknesses revealed by these fraudulent schemes need to be addressed.