Coalition: Compounded Pain Creams Are 'Snake Oil for 21st Century'

Thursday, June 30, 2016 | 3

The Coalition Against Insurance Fraud decried compounded pain creams as "snake oil for the 21st century" in a report published by three attorneys this month.

"Snake oil for the 21st century is being peddled by pharmacies with claims of miraculous compounding pain creams," attorneys Carol Crisci, Jason Hanford and Barak Kassutto of Chartwell Law Offices wrote. "Debunking compounded pain creams — a snake oil for modern times — is a task the entire insurance industry must embrace."

Workers' compensation providers must be especially vigilant, as they are one of "today’s main targets after health insurance programs largely have stopped covering compounds," the attorneys wrote.

Pharmacies that crank out compounded creams are not required to register with the federal government, and states don't inspect them much, either, the Coalition Against Insurance Fraud report said.

In this vacuum of oversight, spending on compounded drugs has skyrocketed, rising from $28 million to $171 million between 2012 and 2014, according to pharmacy benefits manager ExpressScripts.

A single tube of compounded pain cream can retail for up to $10,000, and there's a troubling lack of safety data available on the creams, the attorneys said.

The creams contain ingredients also available in over-the-counter products such as Bengay and Lidocaine, which retail for $10 to $15, compared to a compounded cream that may go for $2,800.

Compounding pharmacies "aggressively market their wares" to doctors, pain-management specialists or surgeons allied with claimants' attorneys, doing "everything possible to entice physicians into prescribing their creams," the attorneys wrote.

A 2014 fraud case involving compounded creams led to the indictment of Kareem Ahmed for allegedly paying $25 million in kickbacks to California doctors for prescribing the creams.

In California, compounded creams are the fastest-growing pharmaceutical cost, rising from $10 million in 2006 to $145 million in 2013.

Tricare, an insurer that covers members of the military and their families, paid $23 million for compounded pain creams in 2010 but by 2014 was paying $513 million.

The FBI is investigating the use of pain creams as a result.

The “vast majority of these compound creams — some of which cost in excess of $40,000 — are nothing more than elaborate shams to steal from the Tricare program and military personnel,” said U.S. Attorney Lee Bentley.

In order to stop fraud, Crisci, Hanford and Kassutto recommend carriers and attorneys make "a concerted effort" to:

• Identify the players (compounding pharmacists, physicians and others).
• Determine the business models of, and relationships among, the players (pay to prescribe, ownership and direct sales).
• Quantify the costs of using components, coding and available caps.
• And develop responses such as legislation, data mining from insurers and TPAs, using existing state remedies, and deploying RICO/fraud investigations and litigation.