Watchdog: Part D Paid $587.7M for Mislabeled OTC Drugs

Medicare Part D sponsors paid pharmacies $587.7 million for over-the-counter drugs that were still labeled prescription-only, according to an Aug. 31 report from the HHS Office of Inspector General cited by Becker's Hospital Review. Part D does not cover OTC drugs, making the payments ineligible.

The problem centers on five drugs whose brand-name versions had switched to OTC status. More than a year after those switches, the drugs still carried obsolete prescription-only labels in the data Part D sponsors and CMS rely on to determine coverage. Because the outdated labels persisted, claims that should have been rejected were paid.

In practice, the finding points to a data-integrity gap: coverage decisions depend on accurate, current drug status information, and stale records let ineligible payments slip through despite CMS oversight. For plan sponsors, pharmacy benefit operators, and regulators, the report is a reminder that reference data quality directly drives billions in Medicare spending and where recovery efforts and tighter controls may follow.