Question of the Day October 22, 2013 Is this explanation of how sales reps make huge sums of money and how Average Wholesale Prices are set artificially high true? This is from a comment from a reader that I also posted on blog to make sure everyone saw the comment and as a reminder to read the comments--If this is in fact true then how many potential health care fraud cases are out there in the compounding world? And if the sales rep is making this much then how much are compoundng pharmacies really making, especially off of compounded pain creams? If this is not how it works, then how does it work?

Sue, Here is how the fraud works with these "COMPOUNDED PAIN CREAMS" - and why a sales rep can make "$50,000 - $500,000" a year: 1. The compounding pharmacy buys raw "active pharmacy ingredients" from Medisca, Letco Medical, PCCA, etc. 2. Medisca and these other companies set artificially high "Average Wholesale Prices (AWP)" for these ingredients, but then sell these ingredients for 1/10th the price (or lower) to the compounding pharmacy. So, a pharmacy may have ingredients in a compounded pain cream that have an AWP of $2,800 for a month supply (360 grams of cream), but their cost is less than $300 for that same medication. 3. These compounding pharmacies then bill insurance, including Medicare Part D, "the full price" based upon these artificially inflated AWP prices. 4. Some insurance companies pay 50 - 90% of the billed charges - thinking they "got a deal", but in reality, they got "exploited for financial gain", because the AWP price lists have nothing to do with on