Medicare Part D drug plans paid pharmacies $587.7 million from 2021 through 2023 for five drugs that should no longer have been covered, because their brand-name versions had already become available over the counter, federal auditors found. The HHS Office of Inspector General, in an audit issued August 31, 2026, traced nearly all of the money to generic versions of Voltaren arthritis gel that kept being sold under outdated prescription-only labels. OIG said weak CMS oversight let the payments through and recommended new guidance; CMS agreed.
The five drugs and where the money went
Part D covers only drugs that require a prescription. Once the Food and Drug Administration approves a brand-name drug’s full switch to over-the-counter sale, generic makers must switch their own labels or stop marketing the prescription version. According to the OIG audit, some generic makers kept selling products under the old prescription-only labels, and Part D plans kept paying for them.
Auditors reviewed all Part D payments for drugs that switched to over-the-counter status in 2020 through 2022, allowing a one-year grace period for existing inventory. Five of the six drugs that switched in that window generated ineligible payments totaling $587.7 million across 16.8 million prescription claims and 35 product codes:
- Voltaren (diclofenac sodium), a topical arthritis pain gel that went over the counter on February 14, 2020: $562.1 million for about 15.9 million claims.
- Pataday (olopatadine), an allergy eye drop that switched the same day: $25.5 million for 885,950 claims.
- Astepro (azelastine) nasal spray, switched June 17, 2021: $95,703.
- Lastacaft (alcaftadine) eye drops, switched December 10, 2021: $3,413.
- Sklice (ivermectin) lotion for head lice, switched October 27, 2020: $1,469.
Annual payments for the five drugs rose over the period, from $184 million in 2021 to $194.5 million in 2022 and $209.1 million in 2023. Eight generic versions of Voltaren were still being sold as prescription-only products in 2023, nearly three years after the brand became available on store shelves.
Checking what a drug plan really covers. Formularies change as drugs move over the counter, and the medication and cost tracker in The Medicare Cost & Coverage Protection Kit keeps a running list of each medicine, its coverage status and what it costs at the counter.
How the payments slipped through
OIG identified two gaps at CMS. First, CMS builds its monthly Formulary Reference File, the list of products Part D plans may put on their formularies, partly from FDA data. When a generic maker failed to update its labeling, the FDA’s National Drug Code Directory continued to list the product as prescription-only, so the outdated codes stayed in CMS’s file. Second, CMS allows existing prescription-labeled inventory to be sold under Part D after a switch, but it never set a deadline for plans to start rejecting those claims.
The FDA had its own gap. It had not set a timeframe for generic makers to update their labels and relied on complaints from other manufacturers to begin its notification process. The problem was not new. In September 2022, drug manufacturer Akorn agreed to pay $7.9 million to resolve Justice Department allegations that it caused false claims to Part D by selling three generics under obsolete prescription labels.
OIG shared its findings with CMS and the FDA during the audit. Effective December 8, 2025, the FDA adopted a policy requiring generic makers to update their labeling “at the earliest time possible and within 6 months” after a brand-name drug’s full switch, and said it will notify manufacturers that their products can no longer be marketed under misbranded prescription labels.
What CMS agreed to do
OIG recommended that CMS issue guidance setting timeframes for Part D plans to reject payments for over-the-counter drugs sold under outdated prescription labels. CMS concurred and said it would issue guidance consistent with the new FDA policy. OIG’s recommendation tracker lists the item as open and unimplemented, with an update expected February 27, 2027.
OIG is not seeking to recover the $587.7 million. It said the plans’ payments complied with CMS’s reference file and its guidance on existing inventory, so the fix it is seeking is prospective.
What this means for people on Medicare
The finding does not require beneficiaries to repay anything, and it does not mean pharmacists did anything improper when they filled a prescription. But the audit carries practical lessons for older adults who use these products.
Diclofenac gel, olopatadine eye drops and azelastine nasal spray are now widely sold without a prescription. As CMS acts on OIG’s recommendation, Part D plans can be expected to stop paying for the old prescription-labeled versions, and people who have been filling them through a drug plan may find them no longer covered. Anyone in that position can compare the shelf price of the over-the-counter version with the copay previously paid and ask a doctor or pharmacist whether the store-bought product is an appropriate substitute.
The dollars also matter beyond the pharmacy counter. Part D is financed mostly by general federal revenue, but enrollee premiums are set to cover roughly a quarter of the cost of basic coverage. Payments for drugs the program should not cover add to the spending that taxpayers and beneficiaries share, at a time when plans are also absorbing the cost of the Part D out-of-pocket cap, set at $2,100 for 2026. OIG described Voltaren as a topical drug used to treat arthritis pain, a condition common among older adults. Its generics accounted for about 96 percent of the ineligible payments.
Part D plans cannot cover over-the-counter products as a drug benefit, though OIG noted that plans may provide them at no cost from their own administrative budgets. Many Medicare Advantage plans also offer separate over-the-counter allowances as a supplemental benefit. Those allowances vary by plan and are worth checking during Medicare’s Open Enrollment Period, which runs October 15 through December 7. Plan formularies and allowance details are listed on Medicare’s Plan Compare tool.
When a familiar prescription moves to the store shelf
A drug that shifts from a plan’s formulary to the retail aisle changes where the money comes from, and households managing several medications need a clear picture of which items are covered, which are not and what each one costs over a year.
The Medicare Cost & Coverage Protection Kit includes a medication and cost tracker, the new Part D out-of-pocket cap and 51 state Medicare cost-help packs, which help sort covered prescriptions from store-bought ones and identify programs that ease the remaining drug costs.
Map out a medication list with The Medicare Cost & Coverage Protection Kit.
This article was prepared with AI assistance and reviewed against the linked official sources.
