Posted on 09/22/2026 7:28:56 AM PDT by Red Badger
(The Center Square) -
Medicare Part D sponsors made $587.7 million in ineligible payments to pharmacies for five drugs carrying obsolete prescription-only labeling more than a year after the corresponding brand-name drugs switched to over-the-counter status, a federal watchdog found.
The money won't be recovered, because the payments complied with Medicare guidance in place at the time, according to the U.S. Department of Health and Human Services' Office of Inspector General, which made the finding in an audit covering calendar years 2021 through 2023.
Medicare Part D, the federal prescription drug benefit, is delivered through private "sponsors," including Medicare Advantage organizations and standalone prescription drug plans, under contract with the Centers for Medicare & Medicaid Services.
The program covers 56 million older adults and people with long-term disabilities, according to a June 11, 2026, analysis by KFF, a nonpartisan health policy research organization, based on CMS enrollment data. Spread across the entire program, the $587.7 million works out to roughly $10.50 per enrollee. By law, Part D does not cover drugs that can be purchased without a prescription.
Over the same three years, Medicare Part D paid about $360 billion in benefits, according to CMS trustees reports, meaning the ineligible payments amounted to about 0.16% of Part D benefit payments.
The bulk of the ineligible payments, $562.1 million, was tied to generic versions of Voltaren, a topical drug used to treat arthritis pain, spanning 12 drug codes and nearly 16 million prescription drug events, the claims records Medicare uses to track prescriptions filled. The other four drugs, Pataday and Lastacaft (both eye drops for itchy eyes caused by allergens), Astepro (a nasal spray for hay fever symptoms), and Sklice (a lotion that treats head lice), accounted for the remaining $25.6 million.
The payments continued because CMS relied on FDA data to identify drugs that had switched from prescription-only to over-the-counter status, while FDA had not set a specific timeframe for generic manufacturers to update their labeling after a related brand-name switch.
"FDA did not set a timeframe until it issued the 6-month policy effective on December 8, 2025," Melissa Rumley, a spokesperson for the inspector general's office, told The Center Square. "As a result, some generic drug manufacturers continued producing and selling OTC drugs as Rx-only inventories under NDCs associated with obsolete Rx-only labeling."
CMS also had not set a deadline for Part D sponsors to stop paying for drugs under obsolete prescription-only codes.
The audit followed a 2022 case in which a drug manufacturer, Akorn, agreed to pay $7.9 million to resolve allegations it caused false claims to be submitted to Medicare by continuing to sell three generic drugs under obsolete prescription-only labeling after the related brand-name drugs switched to over-the-counter status.
The Food and Drug Administration issued a policy effective Dec. 8, 2025, directing generic drug manufacturers to update their labeling at the earliest possible time and within six months of a brand-name switch.
The inspector general found the payments specifically complied with CMS's Formulary Reference File and guidance in place at the time, Rumley told The Center Square.
CMS concurred with the inspector general's recommendation to issue guidance setting a timeframe for Part D sponsors to reject payments for outdated prescription-only labeling, Administrator Dr. Mehmet Oz wrote in a July 20 letter responding to the audit. The recommendation remains open, with the inspector general's tracker listing an update expected by Feb. 27, 2027.
CMS did not respond to a request for comment. Rumley, the HHS inspector general spokesperson, responded to questions by email. The audit was issued Aug. 31, 2026, and posted publicly Sept. 2, 2026.
An unnamed sixth drug that switched from prescription-only to over-the-counter status during the audit period had no improper payments, the inspector general found. The policy gap will remain until CMS issues its promised guidance on when Part D sponsors must reject payments for OTC drugs carrying obsolete prescription-only labeling.
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The error was only 0.16% of the total, except that amounted to $588 million. I’m glad we have the FDA looking out for us.
“while FDA had not set a specific timeframe for generic manufacturers to update their labeling after a related brand-name switch.”
Happens all the time - the professional ‘poor’, i.e. those that spend all their time figuring out how to game the system instead of actually working, will get prescriptions for meds that are available for less $$$, OTC, so that they don’t need to pay for them - should be illegal - either it is OTC or it is prescription, they should NOT be both.
Bkmk
..if I am not mistaken, all drugs, whether they be Rx or OTC have a National Drug Code...if a physician prescribed, let’s say, Tylenol Extra Strength, which is OTC, I would think that there would be edits in place to prevent Medicare (and Medicaid, also....) payment for this non-prescription item....
We need laws that penalize tax-subsidized state agencies and
govt workers (paid with tax dollars) that facilitate these frauds.
Call Congress
US Capitol switchboard
(202) 224-3121.
Call the White House
Comments: 202-456-1111
Switchboard: 202-456-1414
TTY/TTD Comments: 202-456-6213
Send a letter to the White House
1600 Pennsylvania Ave NW
Washington, DC 20500
Pretty much anything government run is corrupt, full of fraud and mismanagement... on Federal department we need is defense. The rest can go.
Well many of the Medicare Advantage products give recipients a quarterly stipend to buy non prescription health products. Welfare by any other name is still welfare. Not to mention a back door way to redistribute tax dollars to corporations.
Omeprasole is an example. I have a Rx and can get it thru my PPO/Medicare program. It is also OTCounter at the same dosage.
Why?
Here is a suggestion. The insurance/medicare programs profit by skimming a %age.
“guidance in place at the time”
This and similar SWAMP LINGO are a major problem.
An employee, a contractor, a vendor, a lawyer, a consultant .... the swamp agree that if they all agree that an inefficient, self-serving practice will be done then it is legal because they all agreed to it. None of the direct parties are harmed.
Only the taxpayers are harmed and they are not in the swamp.
Yes, it would sound like a simple computer correction to stop that.
Finally! Someone called this out!
I work in medicine. I see tons of stuff like this. It’s not someone being evil. It’s someone who “feels” someone should have access to care they can’t afford (I can see this sentiment, I can. These aren’t bad people - just unrealistic people) so they can manipulate an old trick to get things done we see it all the time.
The only evil is when the company that person works for sees an opportunity to sell more product using those tricks. Same fraud, different keyboard.
And it happens all the time. If the insurance company finds that someone is operating a used MRI out of a veterinarian clinic without the maintenance overhead - they won’t report it as fraud. They’ll use it to save themselves money.
They don’t want to fix things no one wants to fix things. Not when the malfunction has the possibility to fill pockets.
“Omeprasole is an example. I have a Rx and can get it thru my PPO/Medicare program. It is also OTCounter at the same dosage.
Why?”
Here’s why, the FDA approval for OTC.
Dosage: OTC Prilosec is available only as once-daily 20 mg tablets. Prescription Prilosec (omeprazole) comes in a wider range of doses: 10 mg, 20 mg, and 40 mg.
Approved uses: OTC Prilosec is used to self-treat heartburn, whereas the prescription version is FDA approved to treat GERD, peptic ulcers, erosive esophagitis, and Zollinger-Ellison syndrome. When taken with certain antibiotics, prescription Prilosec can also treat H. pylori infections
.
Duration of use: OTC Prilosec should be limited to 14-day courses, not repeated within four months (unless your healthcare provider approves). Dr. Rao says prescription PPI use can be long-term when prescribed by a licensed healthcare professional, such as a gastroenterologist.
Medicare part D is for the elderly and only those who pay the premium for part B can get part D. So, screaming about fraudulent working age recipients doesn’t work here. It’s up to the pharmacy to filter those prescription requests.
Sometimes a particular drug is made in several versions, one prescription and also OTC.
Ultimately, it’s up to the pharmacist.
The only thing I’ve ever seen Medicare pay for is Aspirin, and they don’t always. I’m a pharma tech - there is no way I can think of to force Medicare to pay for OTC drugs.
You run the insurance and it rejects or it pays out. Sometimes there are ways around early refill denials, but not for non-formulary drugs, which OTC’s come back as. I’m guessing it’s a flaw in Medicare’s billing practices.
It really isn’t up to the pharmacist. If a doctor prescribes ibuprofen 800mg tablets, that is prescription strength - we HAVE to dispense what the doctor sent. If they send 200mg strength, which is OTC, we can fill it and bill it to a coupon card or the patient can buy it on their own and we put the prescription on file.
If a dentist wants a patient to take 3 tablets of 200mg ibuprofen three times daily after a tooth extraction, we can’t choose to dispense 600mg tablets in their place. We have to reach out and have the prescriber send for the stronger tablets.
All health insurance is a scam.
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