Uncomfortably Numb: The Dark Side of Inappropriate Drug Use in Nursing Homes

Editor’s Note: An abridged version of this article was published in The Hill on December 14, 2011.

At a time when policymakers are focused on improving the quality of care and decreasing costs in government health programs, one change should be obvious: it’s time to end conflicts of interest and misaligned financial incentives to long term care (LTC) pharmacies that are endangering nursing homes residents and likely running up the cost of the Medicare Program.

The risk of drug-induced harm to Medicare beneficiaries in nursing homes is unacceptably high today. Research shows that as many as half of all nursing home residents may be given inappropriate prescriptions, increasing the risk of expensive and unnecessary hospitalizations.1,2 A May 2011 report3 by the HHS Office of Inspector General found that 51 percent of Medicare claims for one kind of prescription – atypical antipsychotic drugs – were wrong, either not used for medically accepted conditions or not documented as having actually been administered to the resident. And 22 percent of these claims were not administered in accordance with government standards.

Importantly, 83 percent of Medicare claims for atypical antipsychotic drugs for nursing home residents were associated with off-label conditions and 88 percent of the drug claims were for residents diagnosed with dementia. The Food and Drug Administration has warned that the use of antipsychotic drugs for behavioral symptoms can nearly double the risk of death for older persons with dementia.4
There are many explanations for inappropriate prescribing and dispensing in the nursing home setting, but misaligned financial incentives deserve special scrutiny. Certain pharmacies associated with long-term care facilities, known as LTC pharmacies, collect millions of dollars each year for increasing utilization of certain Medicare Part D drugs in nursing homes.5,6 Three LTC pharmacy entities control about 90 percent of the national LTC pharmacy market,7 which gives them extraordinary market power to extract financial concessions from pharmaceutical manufacturers in exchange for “moving share” in nursing homes. 
In addition, LTC pharmacies typically employ the pharmacists serving the nursing home.8 Part of the pharmacists’ role is to make recommendations about drug selection and modification. Government rules require nursing home medical staff to act upon pharmacists’ reports, and studies indicate that nursing home physicians generally adhere to the recommendations of the LTC pharmacist.9 With such incredible power over drug regimens in a nursing home, a LTC pharmacist who is employed by the LTC pharmacy faces an unfortunate and potentially unavoidable conflict of interest in making recommendations about drug selection when his/her employer stands to gain or lose financially from that drug selection.
Amazingly, LTC pharmacists are not required to disclose to the nursing home medical staff nor patients that a conflict of interest exists. Thus, while federal law10 requires pharmaceutical manufacturers to report payments to physicians to guard against any bias or influence, there is no similar requirement to disclose payments made to nursing home pharmacies that promote drugs to unaware physicians who prescribe for our nation’s most defenseless beneficiaries.11 

The Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) have expressed serious concerns about these misaligned financial incentives and conflicts of interest in LTC pharmacies.12 Yet, despite multiple sub-regulatory attempts13 by CMS and HHS to address these issues, these incentives and conflicts are still a fact of life in nursing homes today.
Costs of these misaligned incentives and conflicts of interest to the Medicare Program are hard to quantify because LTC pharmacies are not required to disclose the incentives or the drugs they are promoting. However, an analysis14 presented recently by the Medicare Payment Advisory Commission (MedPac) should prompt a deeper examination.

In 2009, just 8 percent of beneficiaries accounted for 40 percent of total Medicare Part D spending, according to MedPac. These “high-cost” beneficiaries filled 111 prescriptions per year, more than 2.5 times the prescriptions filled by other beneficiaries. Further, their average prescription cost was more than 2.5 times that of other beneficiaries, due in part to more prevalent use of brand name drugs when a generic alternative was available. And, not surprisingly, MedPac found that one of the common attributes of high-cost beneficiaries is that they are more likely to reside in nursing homes.

While further study needs to be conducted to learn more about what is driving Medicare beneficiaries to consume higher volumes of more expensive drugs in nursing homes, financial incentives designed to drive drug utilization are a part of the story that cannot and should not be ignored any longer.

To address these conflicts of interest and misaligned incentives, CMS is now proposing to change the current nursing home pharmacy delivery model for Medicare to require LTC facilities to use the services of a licensed pharmacist who is independent and not affiliated with the facility’s pharmacy.15 Congress should go further and provide CMS with the authority to prohibit LTC pharmacies from receiving financial incentives that are designed to prefer, protect or maintain a drug manufacturer’s product utilization.  

No son or daughter of a vulnerable beneficiary in a LTC facility should ever have to worry that their parent may be receiving a drug because of the financial interests of the company that is delivering it. Furthermore, the Medicare Program can’t afford the growing costs of unnecessary and dangerous drug overutilization in nursing homes. These misaligned incentives in the Medicare program put our nation’s most frail Medicare beneficiaries at a greater risk for serious harm in nursing homes. We owe it to these Medicare beneficiaries to take them out of harm’s way.

1. Lau DT, Kasper JD, Potter DEB, Lyles A. Potentially inappropriate medication prescriptions among elderly nursing home residents: their scope and associated resident and facility characteristics. Health Serv Res. 2004;39:1257–1276.  
2. Lau et al (2005). Hospitalization and death Associated with Potentially inappropriate medication Prescriptions Among Elderly Nursing Home Residents. Archives of Internal Medicine. 165: 68-74.
3. United States. Dept. of Health and Human Services. Office of Inspector General. Medicare Atypical Antipsychotic Drug Claims for Elderly Nursing Home Residents. May 2011. OEI-07-0800150.
4. FDA. Public Health Advisory: Deaths with Antipsychotics in Elderly Patients with Behavioral Disturbances. April 11, 2005. Accessed at: http://www.fda.govon December 14, 2011.
5. Johnson & Johnson paid $3,098,673 in rebates for the drug Levaquin to Omnicare at an annualized rate in 2002 according to an internal Johnson & Johnson email that was entered into evidence in United States v. Johnson & Johnson, et al. Accessed at The 2010 Form 10-K for PharMerica Corporation reads “For the years ended December 31, 2008, 2009 and 2010, rebates recorded as a reduction in cost of goods sold were $34.7 million, $34.1 million, and $37.2 million, respectively.”
6. According to the HHS Office of Inspector General, 54% of the pharmacy directors interviewed reported that their pharmacy receives rebates from drug manufacturers either directly or through group purchasing organizations. For example, one pharmacy director explained that if 90% or more of the insulin she sells is from a particular manufacturer, she receives a 1% rebate. See HHS, Office of Inspector General, ‘‘Availability of Medicare Part D Drugs to Dual-Eligible Nursing Home Residents,’’ June 2008. Available online at
7. Managed Health Care Associates (MHA), Omnicare, and PharMerica Corporation serve 90 percent of all LTC facility residents according to website of Long Term Care Pharmacy Alliance. Accessed at on December 14, 2011
8. According to the HHS Office of Inspector General, 80% of nursing home administrators reported that the consultant pharmacists who perform their drug regimen reviews are employees of the LTC pharmacy that provides Part D drugs to their residents. See HHS, Office of Inspector General, ‘‘Availability of Medicare Part D Drugs to Dual-Eligible Nursing  Home Residents,’’ June 2008. Available online at  
9. HHS, Office of Inspector General, ‘‘Availability of Medicare Part D Drugs to Dual-Eligible Nursing Home Residents,’’ June 2008. Available online at  
10. Section 6002 of the Affordable Care Act added section 1128G to the Social Security Act requires manufacturers of drugs, devices, biologicals, or medical supplies covered under title XVIII of the Act (Medicare) or a State plan under title XIX (Medicaid) or XXI of the Act (the Children’s Health Insurance Program, or CHIP) to report annually to the Secretary certain payments or other transfers of value to physicians and teaching hospitals.  
11. According to the HHS Office of Inspector General, only 3 of the pharmacy directors interviewed reported that their pharmacies disclosed receipt of rebates to nursing homes or to physicians. See HHS, Office of Inspector General, ‘‘Availability of Medicare Part D Drugs to Dual-Eligible Nursing Home Residents,’’ June 2008. 13. Available online at
12. Michael O. Leavitt, Secretary of Health and Human Services. Report to Congress – Review and Report on Current Standards of Practice for Pharmacy Services Provided to Patients in Nursing Facilities. 2005. Accessed at: See also: Patrick Conway, Chief Medical Officer and Director, Office of Clinical Standards and Quality, Centers for Medicare & Medicaid Services, Department of Health and Human Services. Statement to U.S. Senate Special Committee on Ageing. The Overutilization of Atypical Antipsychotics in Long-Term Care Settings, Hearing, November 30, 2011. Accessed at:
13. See, for example, Part C&D Weekly Bulletin for the week ending May 12,2006. Centers for Medicare and Medicaid Studies. Accessed at:  
14. MedPAC, September 16, 2011. Beneficiaries with high drug spending under Part D. Accessed at
15. See Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011). “Medicare Program; Proposed Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2013 and Other Proposed Changes; Considering Changes to the Conditions of Participation for Long Term Care Facilities” (RIN 0938-AQ86)