Medicare Part D Plans Paid $562 Million for Generic Voltaren. A Doctor’s Prescription Still Doesn’t Make an OTC Drug Part D-Eligible
A doctor's prescription cleared millions of pharmacy claims through Medicare Part D for a drug the program was never legally allowed to cover, and the bill that follows could land on beneficiaries with no warning and no open enrollment fix…
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A retiree with arthritis in both knees picks up generic diclofenac gel at the pharmacy counter for a modest copay, on a doctor’s prescription, with her Medicare Part D plan silently paying the rest. That arrangement was never supposed to exist.
A federal audit found that Medicare Part D sponsors paid $562,073,487 across 15,870,464 diclofenac claims after the arthritis gel moved to over-the-counter (OTC) status. Add four other drugs that made the same switch and the improper spending reaches $587,680,439 from 2021 through 2023. The other four include Pataday (olopatadine), Astepro (azelastine), Lastacaft (alcaftadine), and Sklice (ivermectin).
The Centers for Medicare and Medicaid Services (CMS) has agreed to issue guidance consistent with the FDA’s updated policy. The audit does not say when plans will begin rejecting these claims. What it establishes is that the coverage was never supposed to be there, which means the denial is coming with no date attached to it.
Why a Prescription Doesn’t Rescue an OTC Drug
Medicare Part D covers prescription drugs. Statute excludes over-the-counter medications, and a physician’s signature does not override that exclusion. When a molecule switches from Rx to OTC, it drops out of Part D even though the gel is chemically identical to what the plan covered a week earlier.
The prescription is not what created the payment, though, and that distinction matters. These claims cleared because generic products remained under obsolete Rx-only labels and NDCs after the switch, because CMS incorporated that outdated FDA data into its formulary file, and because CMS had not set a deadline for plans to start rejecting them. The prescription was necessary to submit the claim. It was not the reason the claim paid.
Pharmacies kept billing. Plans kept paying. Millions of diclofenac claims cleared the system before anyone flagged it, and none of those beneficiaries did anything wrong.
What the Denial Will Cost
When the guidance lands, the copay becomes the retail price. Generic diclofenac gel is cheap next to brand-name drugs and still meaningful on a fixed income, especially for a chronic condition that requires continuous use. Prices swing by pharmacy, region, and discount card, so the number that matters is the one at her own counter, not a national average.
The harder part is what the spending does not do. None of it counts toward her Part D deductible or her annual out-of-pocket cap. Once the drug is no longer a Part D drug, the money leaves her pocket without moving her toward any threshold.
It also lands on a stack that already rose this year. The standard Part B premium climbed to $202.90 in 2026, up $17.90 from $185.00 in 2025. The Part B annual deductible rose to $283, an increase of $26. The 2027 Social Security cost-of-living adjustment (COLA) is currently tracking in the mid-3% range; official figures are revealed in October. Surcharges and coverage gaps like these are the reason we mapped Medicare’s quieter cost traps, from IRMAA to premium creep, in a free guide you can grab here.
Who This Is For
If you have never filled a topical NSAID, an OTC allergy eye drop, an OTC nasal spray, or an ivermectin lice treatment through Part D, this will not touch your budget.
If any of those show up on your pharmacy printout with a plan-paid amount next to them, you are in the affected group, and the change is coming on a timeline nobody has announced.
The trap is that it looks like a formulary problem, and open enrollment reflexes tell people to shop for a plan that covers the drug. No Part D plan can cover it as a Part D drug, because every plan is bound by the same statutory exclusion. Shopping formularies does not solve this one. Some Medicare Advantage plans do offer separate OTC allowances or similar non-Part-D assistance, which is a different benefit worth asking about rather than a workaround.
Three Moves to Make Now
- Pull your last 12 months of pharmacy claims from your plan’s member portal and flag anything that switched from prescription to over-the-counter in recent years. If it appears, build the retail cost into your budget now rather than discovering it at the register.
- Ask the prescriber whether an appropriate prescription-only alternative exists, then verify it against your plan’s formulary. Do not assume a related prescription drug is both suitable and covered. Formulations carry different risks, particularly for older patients, and that judgment belongs to the prescriber.
- Price the over-the-counter version before paying cash at the pharmacy. Discount cards and pharmacy-to-pharmacy differences are worth checking, and they narrow the hit even when they fall short of a Part D copay.
The dollars in the OIG report landed on Medicare Part D’s ledger. Once the guidance arrives, the same dollars land on the beneficiary’s.
Contact [email protected] for any questions or corrections.
Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
