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Medicaid pays $200 million for unapproved drugs

| Monday, Nov. 24, 2008

WASHINGTON -- Taxpayers have shelled out at least $200 million since 2004 for medications that have never been reviewed by the government for safety and effectiveness but are still covered under Medicaid, an Associated Press analysis of federal data has found. Millions of private patients are taking such drugs, as well.

The availability of unapproved prescription drugs to the public may create a dangerous false sense of security. Dozens of deaths have been linked to them.

The medications date back decades, before the Food and Drug Administration tightened its review of drugs in the early 1960s. The FDA says it is trying to squeeze them from the market, but conflicting federal laws allow the Medicaid health program for low-income people to pay for them.

The AP analysis found that Medicaid paid nearly $198 million from 2004 to 2007 for more than 100 unapproved drugs, mostly for common conditions such as colds and pain. Data for 2008 were not available, but unapproved drugs are being sold. The AP checked the medications against FDA databases, using agency guidelines to determine if they were unapproved. The FDA says there may be thousands of such drugs on the market.

Medicaid officials acknowledge the problem but say they need help from Congress to fix it. The FDA and Medicaid are part of the Health and Human Services Department, but the FDA has yet to compile a master list of unapproved drugs, and Medicaid -- which may be the biggest purchaser -- keeps paying.

"I think this is something we ought to look at very hard, and we ought to fix it," said Medicaid chief Herb Kuhn. "It raises a whole set of questions, not only in terms of safety, but in the efficiency of the program -- to make sure we are getting the right set of services for beneficiaries."

At a time when families, businesses and government are struggling with health care costs and 46 million people are uninsured, payments for questionable medications amount to an unplugged leak in the system.

Sen. Charles Grassley, R-Iowa, has asked the HHS inspector general to investigate.

That unapproved prescription drugs can be sold in the United States surprises even doctors and pharmacists. But the FDA estimates they account for 2 percent of all prescriptions filled by U.S. pharmacies, about 72 million scripts a year. Private insurance plans cover them.

The roots of the problem go back in time, tangled in layers of legalese.

It wasn't until 1962 that Congress ordered the FDA to review all new medications for effectiveness. Thousands of drugs on the market were supposed to be evaluated. But some manufacturers claimed their medications were "grandfathered" under earlier laws, and even under the 1962 bill.

Then, in the early 1980s, a safety scandal erupted over one of those medications. E-Ferol, a high potency vitamin E injection, was linked to serious reactions in some 100 premature babies, 40 of whom died.

In response, the FDA started a program to weed out drugs it had never reviewed scientifically. Yet some medications continue to escape scrutiny.

Sometimes, the medications do not help patients. In other cases, the FDA says, they have made people sicker, maybe even killed them. This year, for example, the FDA banned injectable versions of a gout drug called colchicine after receiving reports of 23 deaths. Investigators found the unapproved drug had a very narrow margin of safety, and patients easily could receive a toxic dose leading to complications such as organ failure.

In most cases, doctors, pharmacists and patients are not aware the drugs are unapproved.

"Over the years, they have become fully entrenched in the system," said Patti Manolakis, a Charlotte pharmacist who has studied the issue. Only a few unapproved drugs are truly essential and should remain on the market, she added.

Tackling the problem is made harder by confusing -- and sometimes conflicting -- laws, regulations and responsibilities that pertain to different government agencies.

Medicaid officials said their program, which serves the poor and disabled, is allowed to pay for unapproved drugs until the FDA orders a specific medication off the market. But that can take years.

Compare that with Medicare, the health care program for older people.

Medicare's prescription program is not supposed to cover unapproved drugs. Medicare has purged hundreds of such medications from its coverage lists but continues to find others.

It might be easier to sort things out if the FDA compiled a master list of unapproved drugs, but the agency hasn't. FDA officials say that would be difficult because many manufacturers do not list unapproved products with the agency. Yet, the AP found many that were listed -- a possible starting point for a list.

Among the drugs the AP's research identified were Carbofed, for colds and flu; Hylira, a dry skin ointment; Andehist, a decongestant, and ICAR Prenatal, a vitamin tablet. Medicaid data show the program paid $7.3 million for Carbofed products from 2004 to 2007; $146,000 for Hylira; $4.8 million for Andehist products, and $900,000 for ICAR.

Grassley said the system is failing taxpayers and consumers.

FDA officials say they tell Medicaid and Medicare when the agency moves to ban an unapproved drug, so the programs can stop paying.

"The situation is complicated by the fact that Medicaid and Medicare have a different regulatory regime than FDA does," said FDA compliance lawyer Michael Levy. "There are products that we may consider to be illegally marketed that could be legally reimbursed under their law."

The FDA began its latest crackdown on unapproved drugs two years ago and has taken action against nine types of medications and dozens of companies. Typically, the agency orders manufacturers to stop making and shipping drugs, and it has seized millions of dollars' worth of medications. But federal law does not provide fines for selling unapproved drugs, and criminal prosecutions are rare.

Some manufacturers of unapproved drugs say their products predate FDA regulation and are "grandfathered in."

"These are drugs that don't require an FDA approval," said Bill Peters, chief financial officer of Hi-Tech Pharmacal in Amityville, N.Y. "These are products with active ingredients that have been on the market for a long time." The company is moving away from older products, Peters said, and its new market offerings are FDA-approved.

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