The U.S. Government is investigating a rapid increase in payments to compounding pharmacies by Tricare, the federal government’s health insurance program for military members and their families. Tricare’s spending on compounded drugs more than tripled from fiscal year 2014 to 2015, according to a Wall Street Journal article.

Compounded drugs are specially mixed by a pharmacy to make a customized medicine for a patient. They might be used if a patient has an allergy to a particular drug, need a unique dosage or a liquid version rather than a pill. Tricare reportedly spent approximately $1.75 billion on them in FY2015. However, the increase in payments for these drugs from 1.5% of the prescription drug budget in 2012 to 19% of the $9.14 billion Tricare drug budget in fiscal year 2015 is believed to be largely due to health care fraud.

The Department of Defense and Justice Department are reportedly investigating a number of pharmacies in the industry for misconduct. The Wall Street Journal reported allegations of improper payments of kickbacks to marketing professionals for cold calling military families as well as improperly written prescriptions by doctors who never met their patients in person.

In May, Tricare required its pharmacy benefits manager to begin screening all ingredients in a compounded prescription for approval by the Food and Drug Administration. The change in procedure cut the amount of government payments to compounded pharmacies to just $4 million during the first month.

Some Florida pharmacies have already been settling allegations brought by the U.S. Government under the False Claims Act. These cases were believed to originate from the government’s data mining of health care reimbursement information rather than a whistleblower.

The False Claims Act provides for rewards to whistleblowers of between 15 and 30 percent of the amount recovered for overpayments by Medicare and Medicaid, among other federal government programs, due to fraud. The law also provides for statutory penalties and treble damages for the loss to the United States.

Compounding pharmacies have been in the crosshairs of the government and whistleblowers for a number of different fraudulent schemes over the past few years, including the mass manufacturing of drugs and the payment of kickbacks to doctors. Compounded drugs are supposed to be composed individually per the prescription for the individual patient. The industry has also been under increased government regulation since a compounding pharmacy improperly mixing drugs caused a severe meningitis outbreak.

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