CMS Has Limited Oversight of Selected Compounded Drugs in Medicare Part D
Summary
HHS OIG completed an audit (A-05-21-00008) of CMS oversight of compounded drugs under Medicare Part D, finding that CMS's oversight is limited because data obtained from sponsors does not provide a complete picture of compounded drug ingredients. The audit identified instances where enrollees received FDA-approved drugs potentially misidentified as compounded drugs, drugs subject to misuse (gabapentin) concurrent with opioid prescriptions, and controlled substances (ketamine) not listed on PDE records. OIG made three recommendations to CMS, all of which CMS concurred with.
“CMS does not routinely review the ingredients included in compounded drugs, it is limited in its ability to oversee sponsor efforts to ensure that quality assurance programs identify potential medication errors and potential overutilization of certain drugs.”
Part D sponsors and pharmacies dispensing compounded drugs should review their PDE reporting practices against CMS guidance, particularly for drugs prone to misuse such as gabapentin and controlled substances such as ketamine. OIG's identification of inaccurate PDE records and quality assurance gaps suggests that sponsors may face increased scrutiny on compounded drug claims, even though this audit did not result in enforcement action.
What changed
HHS OIG audit A-05-21-00008, issued April 17, 2026, examined CMS oversight of compounded drugs covered by Medicare Part D and found significant limitations. CMS does not routinely review the ingredients included in compounded drugs, which limits its ability to oversee sponsor quality assurance programs and identify potential medication errors and overutilization of certain drugs. Specific findings include enrollees receiving FDA-approved drugs potentially misidentified as compounded, concurrent prescriptions for gabapentin and opioids, and ketamine not listed on PDE records.\n\nFor affected parties, the audit signals that Part D sponsors and pharmacies involved in compounded drug dispensing should ensure accurate reporting on Prescription Drug Event records and robust quality assurance programs. While the audit did not impose penalties, CMS concurred with all three recommendations, indicating that improved oversight mechanisms will likely follow.
Archived snapshot
Apr 20, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
CMS Has Limited Oversight of Selected Compounded Drugs Prescribed to Medicare Part D Enrollees
Issued on
04/17/2026
| Posted on
04/20/2026
| Report number: A-05-21-00008
Report Materials
Why OIG Did This Review
- Qualified health care professionals create compounded drugs by combining, mixing, or altering ingredients to create a prescription drug for patients whose medical needs cannot be met by an available U.S. Food and Drug Administration (FDA)-approved drug. FDA does not approve compounded drugs and does not verify the safety, effectiveness, or quality of these drugs before they are marketed.
- Over the past several years, OIG has participated in an increasing number of fraud investigations related to compounded drugs.
- To gain an understanding of Medicare Part D program integrity as it relates to compounded drugs, we conducted an audit of CMS ’s oversight of compounded drugs covered by Part D.
What OIG Found
CMS’s oversight of selected compounded drugs prescribed to Part D enrollees is limited because the data CMS routinely obtains from sponsors (private companies that contract with CMS to provide the prescription drug benefit) does not provide a complete picture of a compounded drug’s ingredients. As a result, enrollees we selected for review were given:
- An FDA-approved reconstituted injectable drug that may have been incorrectly identified on Prescription Drug Event (PDE) records as a compounded drug. Further, we found the days’ supply dispensed by pharmacies exceeded the amount of time, indicated on the prescribing information label, that may pass between when a drug is reconstituted and when it is administered.
- Compounded drugs that included a drug (gabapentin) that CMS has identified as subject to misuse and that is known to increase the effects of opioids at the same time the enrollees had a separate prescription for that same drug. Additionally, some enrollees also received an opioid in a separate prescription during the same period.
- Compounded drugs that included a controlled substance (ketamine) that was not listed on the PDE record. Some of these enrollees also received an opioid in a separate prescription during the same period. Since CMS does not routinely review the ingredients included in compounded drugs, it is limited in its ability to oversee sponsor efforts to ensure that quality assurance programs identify potential medication errors and potential overutilization of certain drugs.
What OIG Recommends
We made three recommendations to CMS, including that it work with sponsors, as appropriate, to ensure sponsors’ claims for Part D compounded drugs are accurately reported on PDE records consistent with CMS guidance. The full recommendations are in the report. CMS concurred with all three recommendations.
Report Type Audit HHS Agencies Centers for Medicare and Medicaid Services Issue Areas Departmental Operational Issues Prescription Drug Target Groups – Financial Groups Medicare D
Notice
This report may be subject to section 5274 of the National Defense Authorization Act Fiscal Year 2023, 117 Pub. L. 263.
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