Medicare Part D sponsors made $587.7 million in ineligible payments to pharmacies for five drugs carrying obsolete prescription-only labeling more than a year after the corresponding brand-name drugs switched to over-the-counter status, a federal watchdog found.

The money won't be recovered, because the payments complied with Medicare guidance in place at the time, according to the U.S. Department of Health and Human Services' Office of Inspector General, which made the finding in an audit covering calendar years 2021 through 2023.

Medicare Part D, the federal prescription drug benefit, is delivered through private "sponsors," including Medicare Advantage organizations and standalone prescription drug plans, under contract with the Centers for Medicare & Medicaid Services.

The program covers 56 million older adults and people with long-term disabilities, according to a June 11, 2026, analysis by KFF, a nonpartisan health policy research organization, based on CMS enrollment data. Spread across the entire program, the $587.7 million works out to roughly $10.50 per enrollee. By law, Part D does not cover drugs that can be purchased without a prescription.

Over the same three years, Medicare Part D paid about $360 billion in benefits, according to CMS trustees reports, meaning the ineligible payments amounted to about 0.16% of Part D benefit payments.

The bulk of the ineligible payments, $562.1 million, was tied to generic versions of Voltaren, a topical drug used to treat arthritis pain, spanning 12 drug codes and nearly 16 million prescription drug events, the claims records Medicare uses to track prescriptions filled. The other four drugs, Pataday and Lastacaft (both eye drops for itchy eyes caused by allergens), Astepro (a nasal spray for hay fever symptoms), and Sklice (a lotion that treats head lice), accounted for the remaining $25.6 million.

The payments continued because CMS relied on FDA data to identify drugs that had switched from prescription-only to over-the-counter status, while FDA had not set a specific timeframe for generic manufacturers to update their labeling after a related brand-name switch.

"FDA did not set a timeframe until it issued the 6-month policy effective on December 8, 2025," Melissa Rumley, a spokesperson for the inspector general's office, told The Center Square. "As a result, some generic drug manufacturers continued producing and selling OTC drugs as Rx-only inventories under NDCs associated with obsolete Rx-only labeling."

CMS also had not set a deadline for Part D sponsors to stop paying for drugs under obsolete prescription-only codes.

The audit followed a 2022 case in which a drug manufacturer, Akorn, agreed to pay $7.9 million to resolve allegations it caused false claims to be submitted to Medicare by continuing to sell three generic drugs under obsolete prescription-only labeling after the related brand-name drugs switched to over-the-counter status.

The Food and Drug Administration issued a policy effective Dec. 8, 2025, directing generic drug manufacturers to update their labeling at the earliest possible time and within six months of a brand-name switch.

The inspector general found the payments specifically complied with CMS's Formulary Reference File and guidance in place at the time, Rumley told The Center Square.

CMS concurred with the inspector general's recommendation to issue guidance setting a timeframe for Part D sponsors to reject payments for outdated prescription-only labeling, Administrator Dr. Mehmet Oz wrote in a July 20 letter responding to the audit. The recommendation remains open, with the inspector general's tracker listing an update expected by Feb. 27, 2027.

CMS did not respond to a request for comment. Rumley, the HHS inspector general spokesperson, responded to questions by email. The audit was issued Aug. 31, 2026, and posted publicly Sept. 2, 2026.

An unnamed sixth drug that switched from prescription-only to over-the-counter status during the audit period had no improper payments, the inspector general found. The policy gap will remain until CMS issues its promised guidance on when Part D sponsors must reject payments for OTC drugs carrying obsolete prescription-only labeling.