Questions for Medicare in meningitis outbreak

"If the FDA determines a company is producing compounded drugs in violation of (federal law), Medicare will not reimburse for drugs produced in that facility," said HHS spokesman Tait Sye. "The FDA's regulatory authority over compounding pharmacies is more limited by statute than it is for typical drug manufacturers. We urge Congress to strengthen the FDA's authority."

FDA records show that in 2006 the agency issued a warning letter to the New England Compounding Center for producing anesthetic creams, but officials were unable to say if Medicare was alerted.

In a separate case, Medicare seems to have taken sweeping action on its own without much prodding from the FDA. In 2007, Medicare stopped coverage for compounded inhalation drugs used to treat lung disease.

"Compounded drugs are not considered interchangeable with FDA-approved products," said an information bulletin at the time from Noridian, a major Medicare payment contractor. "The absence of testing for safety and effectiveness has the potential of putting a patient at increased risk of injury, illness or death."

Michael Carome, deputy director of Public Citizen's health research group, says Medicare's policy on compounded drugs seems "internally contradictory."

"They do appear to have a policy for which the default setting is that Medicare does not cover drugs that have not been approved by the FDA," said Carome. "That essentially applies to many, if not all, drugs made by compounding pharmacies."

Medicare's defenders say the agency may be reluctant to act for a number of reasons. Cutting off compounding pharmacies could aggravate drug shortages. Also it could open Medicare to a political counterattack from industry, even charges of rationing.

But Carome, a physician who once served in an HHS regulatory office, says the alternative is that compounding will continue with little federal oversight and recurring outbreaks.

If Medicare had expanded its compounding crackdown beyond just lung disease medications, "that might have prevented the widespread use of these drugs," Carome said. "Without coverage, things don't get used."