Compounding the problem of drug safety and efficacy

Half a billion dollars in fraud claims surrounding the sale of compounded creams, used to treat pain and other ailments are being investigated by the Department of Justice (DOJ). Federal investigators are examining allegations that certain compounded products lack efficacy and that certain pharmacies overbilled for the drug products. Some compounded cream companies, allegedly, charged more than $10,000 for a single prescription of cream. The fraud, which has most significantly impacted the federal military health care program, TRICARE, is similar to other instances of fraud, like one, which led to the arrests on February 23, 2016 of the co-owners of a Dallas company that marketed pain and scar creams for North Texas drug compounding pharmacies.

The Products

The specialty creams at issue are promoted as a safe and effective way to heal quickly and alleviate pain or cramping. Such products have gained notoriety from professional athlete pitches, including one promoted by retired NFL quarterback Brett Favre. The creams are often promoted on the internet or by telemarketers. Brett Favre promoted a pain cream called RX Pro made by World Health Industries Inc. of Jackson, Mississippi. According to a Wall Street Journal source, RX Pro is one of the companies under investigation by the Federal Bureau of Investigation (FBI). The problems surrounding the products’ efficacy stems from the fact that the FDA does not test or approve the safety and effectiveness of all compounded drug products. The lack of testing arises because, typically, compounding is a process where a pharmacist combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient. It is not feasible for the FDA to evaluate the efficacy of every compounded product.


In fiscal year (FY) 2015, TRICARE spent $1.75 billion on compounded drugs. That figure was 18 times higher than the amount paid in 2012. The defense department believed the spending rise was the result of fraud. As a result, TRICARE introduced a screening process into its compound drug policy, to curb abuse and limit military spending on the sometimes controversial compounded drug products.

Texas Fraud

The men associated with the Texas fraud co-owned and co-operated CMG RX LLC., which primarily marketed compounded pain and scar creams to current and former U.S. military members and their families. Neither of the men had any medical, nursing, or pharmaceutical licensing or education. CMGRX was formed in 2014 but ceased operations in 2015 when TRICARE announced the changes to its coverage of compounded drugs.  According to the DOJ, the co-owners scheme to defraud TRICARE caused the military health care program to suffer an actual loss of more than $65 million. The scheme involved CMGRX paying TRICARE beneficiaries $250 per month for each prescription and disguised those payments as grants for participating in a TRICARE-approved “Patient Safety Initiative” or “PSI Study” to evaluate the safety of the drugs. In reality, the study was not approved or overseen by a medical professional of any kind. The true purpose was to compile a list of beneficiaries who had filled prescriptions.


The co-owners paid kickbacks to physicians for every prescription they wrote. The co-owners also entered into marketing service agreements with various compounding pharmacies. Under those agreements, the compounding pharmacies agreed to pay a percentage of their gross revenue received for CMGRX-generated claims. The conspirators allegedly purchased various homes and luxury vehicles with the proceeds of their scheme.  They could now face fines and prison time.


The compounded creams have been the subject of several past and ongoing investigations. As compounding pharmacies have transitioned from entities that tailored drugs in small batches for individual patients to large-scale entities operating on the order of pharmaceutical manufacturers, a new kind of compounded drug product has emerged—compounded pain creams are a prime example. Due to a limited enforcement mechanism to ensure the safety and effectiveness of those drugs, in some cases, fraud and contamination have brought harm to patients and the industry. More careful prescribing and purchasing mechanisms, like the one implemented by TRICARE, have made some impact to slow the harm of fraudulent marketing for these products. However, the drugs are still for sale, and, if the ongoing investigations are any indication, consumers are still buying.