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Health and Human Services Inspector General Daniel Levinson didn’t mince words in May of 2011 when he sharply criticized nursing homes for misusing potentially dangerous drugs to sedate troublesome patients.

Levinson said the public should be “outraged” to hear that government warnings to avoid using the anti-psychotic drugs in people with dementia often went unheeded. He went on to accuse manufacturers of “putting profits before safety” by aggressively marketing these drugs for just such uses.

“Government, taxpayers, nursing home residents, as well as their families and caregivers should be outraged — and seek solutions,” he said in a statement released along with a highly critical audit.

But Levinson’s investigative unit, citing major budget and staffing cuts, is scrapping a planned new audit to identify the problem nursing homes and the medicines being misused, an ongoing practice that violates federal rules requiring that patients “be free from unnecessary drugs.”

That scheduled audit is among several high-profile investigations the OIG is postponing or canceling, including a review of the state insurance exchanges that are set to open later this year as a key provision of the Affordable Care Act. The Center for Public Integrity first reported on the scrapped projects last week.

News of the cutbacks brought a quick retort from advocates who have fought for years to focus attention on the over-prescribing of drugs in nursing homes. Five such groups wrote to Levinson earlier this week calling the decision “disappointing and alarming” and asking that it be reconsidered.

The groups behind the letter were California Advocates for Nursing Home Reform, San Francisco; Center for Medicare Advocacy, Washington; Legal Aid Justice Center, Charlottesville, Va; Long Term Care Community Coalition, New York, and the National Consumer Voice for Quality Long-Term Care, Washington.

“Nursing homes are understaffed and they give people drugs to sedate them,” said Janet Wells, a Washington consultant and patient advocate who signed the letter.

The organizations urged the OIG to help protect residents from reckless prescribing of medications that “sedate and restrain them and put them at risk of serious illnesses and death. The human and financial costs of failure to hold nursing homes accountable are extreme. ”

The letter pointed out that Levinson had spoken out for reforms in announcing findings from the previous audit in May 2011. That audit found that almost 305,000 of 2.1 million elderly persons who lived in nursing homes in the first six months of 2007 had a prescription for at least one atypical antipsychotic drug. These drugs are intended to treat psychiatric conditions.

The OIG report said that 88 percent of these prescriptions were written “off-label,” meaning the drugs were being used for purposes that had not been approved by the Food and Drug Administration. In some cases, pills were prescribed despite warnings from the FDA that using them for treating dementia patients could be dangerous. In all, unapproved uses and improperly documented claims for these drugs cost Medicare $116 million in one six-month period, the report found.

The advocates who wrote to Levinson noted that the Inspector General’s aggressive stance had spurred discussion among federal officials and some proposals that have since reduced the use of these drugs. But they said more needs to be done.

For instance, the OIG reported in 2012 that almost all nursing home residents receiving atypical antipsychotic drugs did not have proper assessments and care plans that met federal requirements.

“Without teeth in the enforcement process, we don’t believe individuals will ever be adequately protected from over-drugging for the convenience of nursing home staff,” said Wells. She added: “We feel they are dropping the ball at a crucial time.”

The American Health Care Association, which represents about 9,000 nursing homes nationwide, concedes a problem exists, but said its members are making progress in curbing drug misuse.

“This issue will not diminish. Now, more than ever before, skilled nursing care centers are focused on safely reducing the off-label use of antipsychotics in residents living with dementia,” Greg Crist, the trade group’s senior vice president of public affairs, said in a prepared statement. Crist added that the industry has set a goal to reduce use of these medications by 15% before the end of 2013, and “we are encouraged by our progress.”

Matthew Bennett, Senior Vice President of the Pharmaceutical Research Manufacturers of America (PhRMA), the drug industry’s lobbying arm, said in a prepared statement that drug companies “are committed to providing truthful and non-misleading information about their medicines” and “ensuring that promotional materials provided to health care professionals are accurate and not misleading.”

The HHS inspector general’s office, in a statement released Wednesday, said that it had no quarrel with advocates over the need for closer scrutiny of nursing homes. The office said that it was “continuing to do new work to identify if there are concerns involving atypical antipsychotics with children and adverse events in nursing homes.” The statement added: “We always have to make tough decisions about how we utilize our resources. The more limited the resources, the more difficult our decisions become.”

The HHS Inspector General, the largest such unit in the federal government, expects to lose a total of 400 staffers — or about 20 percent of the workforce — from its peak strength of 1,800 last year. About 200 of those staffers will have departed by the end of this year, and the other 200 are slated to depart by the end of 2015. The HHS office is responsible for oversight of 24 cents out of every tax dollar spent by the federal government.

As a result of the cuts, the OIG has said it “will not be able to keep pace” with the rapid growth of taxpayer-subsidized health care anticipated under the Affordable Care Act, the signature health reform effort of the Obama administration, and will have to trim other efforts to combat health care fraud and abuse and other waste.

An OIG document states that agency officials made the decision to cut projects based on “relative risks to federal dollars and program beneficiaries, known or suspected vulnerabilities and opportunity for impact—as well as the costs associated with each review.”

Yet some of the canceled audits might have exposed policy failures and returned money to the federal treasury. The planned audit into computer security at state marketplaces — known as exchanges — that will sell individual health insurance policies under the Obama health care law, for instance, was intended in part to review whether billions of dollars in federal grants were properly spent.

Another scrapped audit was to seek repayment of $3 billion or more that Medicare paid to drug companies for drugs not approved for safety and effectiveness from 2006 through 2010.

The inspector general’s office also is delaying an unspecified number of investigations into poor quality care in hospitals as a result of its “significantly reduced” travel budgets and the high cost of paying experts to review medical files.

This policy decision may result in a “potentially high-risk hospital not being reviewed” and “potentially erroneous claims not being reviewed,” according to agency documents.

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