Compounded Pharmaceuticals in the Department of Defense

Floor Speech

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Mr. DURBIN. Mr. President, we all know the Department of Defense's record with bungled acquisitions that led to $500 hammers and $7,000 coffee makers. The Pentagon has a tough time keeping up with unscrupulous contractors who have figured out how to get rich on the taxpayer's dime, and unfortunately I have learned of yet another example of this.

Several dozen pharmacies around the country specialize in compound pharmaceuticals. These are drugs that are combinations of two or more prescription medications. Many of these pharmacies are on the up-and-up, helping people, and our servicemembers, recover from illnesses or wounds. But a good number of these compounding pharmacies have linked up with high-pressure salesmen and disreputable physicians to scam the Department of Defense out of as much as $1.2 billion in taxpayer money in this year alone.

The sales pitch went like this. A U.S. servicemember, a military retiree, or their spouse might get a phone call at home asking whether a TRICARE beneficiary is suffering from pain. The telemarketer might ask a few simple questions, get a little bit of personal information, and suddenly, weeks later, prescription creams would start showing up in the mail. In other cases, a food truck may pull up in front of a military base. If a servicemember wanted a hot dog, he or she could listen to a pitch about compounded pharmaceuticals and sign a piece of paper. In many cases, that servicemember had no idea they were signing up for an expensive prescription that might have no medical value. These sneaky marketers would pass personal information on to doctors, often hundreds or thousands of miles away, who would then write prescription after prescription, never having seen the patient.

These ointments and creams were then custom made by a compounding pharmacy, and the bill was sent to the Department of Defense. According to health officials in the Department of Defense, one of these pain creams had a value of about $150 each. But the Defense Health Program was billed more than $9,000 each. This scam has added up to big dollars. In 2004, the Department of Defense spent just $5 million on compound pharmaceuticals. By 2014, as these efforts began to ramp up, the total rose to $514 million. In April of 2015, just 1 month alone, the bill to the Pentagon was nearly $500 million. DOD says the total cost of compound pharmaceuticals for this fiscal year could be as much as $1.2 billion.

What is tragic about this waste of money is that it could have been prevented. In 2013, the Pentagon considered policy changes it could make to the approval process for compound pharmaceuticals. DOD officials came under heavy pressure, both from Members of Congress and from some of these companies, not to move forward.

This pressure continued right up through March of this year.

Finally, in May, the Department of Defense was able to institute a screening procedure to get at this problem. And the costs charged to TRICARE have dropped dramatically--down to $10 million per month.

Let me repeat that. The Department paid $500 million for compound drugs in April. The Department changed its approval process, and it now pays $10 million a month for compound drugs. I met with Assistant Secretary for Health Affairs Dr. Jonathan Woodson about this. He is confident that this safeguard--and others--will protect the taxpayer in the future. Regrettably, in this case, the horse ran out of the barn and cost the American taxpayer $1.2 billion before anyone could stop these scams. But no one can escape the long arm of the law forever. The Department of Justice has opened more than 100 criminal investigations, and $60 million has been recovered so far. The DOD has suspended 26 providers for wrongdoing, and identified 71 individuals or entities who are believed to be associated with these scheme.

As vice chairman of the Defense Appropriations Subcommittee, working with Chairman Cochran, we have the responsibility to look after how the Pentagon is spending its funds. I bring this episode to light because there are many lessons to be learned about the need to demand a bureaucracy agile enough to catch profiteers and about the ways that congressional oversight can hamper enforcement rather than encourage it. I hope my colleagues takes those lesson to heart.

I will also say that Thad Cochran and I will continue to root out these incidents wherever they occur and work in partnership with the department to provide for our servicemembers in ways faithful to the taxpayer.

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