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Medicare's Oversight of Compounded Pharmaceuticals Used in Hospitals


A 2012 nationwide meningitis outbreak caused by contaminated injections, which were produced by a standalone compounding pharmacy, raised concerns about compounded sterile preparations (CSPs). Subsequent OIG work found that almost all acute-care hospitals use CSPs and most contract with standalone compounding pharmacies to provide at least some of these products. CMS oversees the safety of CSPs prepared and used in Medicare-participating hospitals through the hospital certification process, in which State survey agencies or CMS-approved accreditors assess hospital compliance with requirements for drug compounding. This study provides information about the extent to which Medicare's oversight of hospitals addresses recommended practices for CSPs. In 2013, Congress passed the Drug Quality and Security Act, which clarifies the Food and Drug Administration's authority over standalone compounding pharmacies.


We reviewed the practices of the five entities that oversee hospitals that participate in Medicare-namely, CMS and the four hospital accreditors approved by CMS. Through consultation with experts in CSP oversight, OIG identified 55 recommended practices for CSP oversight in acute-care hospitals. Representatives from each oversight entity participated in a structured interview and completed a questionnaire about how their respective surveys of hospitals incorporate these recommended practices. We analyzed the data from the interviews and the questionnaire to determine the extent to which Medicare's oversight addresses recommended practices for CSP oversight.


Oversight entities address most of the recommended CSP-related practices at least some of the time. However, only one oversight entity always reviews hospital contracts with standalone compounding pharmacies. Oversight entities may also lack the human capital required to thoroughly review hospitals' preparation and use of CSPs. Surveyors receive limited training specific to compounding, and most oversight entities do not routinely include pharmacists on hospital surveys. Finally, although most oversight entities are considering changes to how they oversee hospitals' preparation and use of CSPs, none of them are considering changes to how they oversee hospitals' contracts with standalone compounding pharmacies.


CMS should (1) ensure that hospital surveyors receive training on standards from nationally recognized organizations related to safe compounding practices and (2) amend its interpretive guidelines to address hospitals' contracts with standalone compounding pharmacies. CMS concurred with both recommendations.