OIG identifies $587.7 million in Part D payments involving obsolete prescription labeling
Sep 20, 2026 edition · GC-2026-0023 · Published 2026-09-20 · Version 2 · Announced
OIG attributes $587.7 million in ineligible Part D payments to obsolete prescription labeling and oversight gaps. The audit recommends a sponsor-rejection timeframe; it does not itself impose a universal new cutoff.
What happened
OIG’s audit, issued August 31 and posted September 2, found $587.7 million in ineligible Part D payments for five drugs during 2021–2023. Payments continued more than a year after corresponding brand-name products switched to over-the-counter use, while generic products retained obsolete prescription-only labels. The finding concerns the identified drugs and audited period. It is neither a newly imposed fine on every sponsor nor a statement that the entire amount has already been recovered.
OIG found that CMS’s formulary reference file relied on outdated FDA prescription-status information and that CMS had not specified when sponsors should reject payments after an Rx-to-OTC switch. CMS concurred with the recommendation to issue that timeframe guidance. The report separately describes FDA’s December 2025 policy that manufacturers update labels as early as possible and within six months of the brand switch. That manufacturer-labeling period should not be converted into a universal six-month sponsor-rejection rule that the audit did not establish.
Scope and timing
- Authority status
- Announced
- Applicability
- Operationally relevant
- Audience
- Health systems, Provider networks
- Jurisdiction
- Federal
- Affected functions
- Managed Care, Compliance, Revenue Cycle
- Responsible owner
- Managed Care
Why it matters
Label status, formulary reference data and sponsor payment edits may change on different schedules. Treating one timetable as another can obscure the actual control gap.
Recommended action
Review how pharmacy and plan systems detect Rx-to-OTC changes, identify affected products and resolve stale reference data. Monitor CMS’s response to the audit for sponsor-specific rejection guidance before treating a proposed timeframe as final.
Sources
- Part D payments for OTC drugs under obsolete prescription labelingOfficial · HHS OIG · 2026-09-02 · Source review 2026-09-06
Complete edition and supplemental material
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