On December 4, 2006, the US Food and Drug Administration (FDA) sent out five warning letters to compounding pharmacies regarding the sale of compunded topical anesthetics. These products are sometimes used for hair removal.

According to FDA, "There have been at least two non-fatal reactions and two deaths attributed to the use of compounded topical local anesthetic creams containing high doses of local anesthetics."

Hairfacts has compiled this list:

Tiberius Inc. Custom Scripts Pharmacy (Tampa, FL)
-Betacaine LA ointment
http://www.fda.gov/foi/warning_letters/g6145d.htm

Hal's Compounding Pharmacy, Inc. (San Diego, CA)
-Anesthetic Skin Lotion
-Tetracaine 6% in DMSO Gel
-Triple Kwick Anesthetic Gel
-N*E*W* topical anesthetic
-Kwick Anesthetic Gel
-Lidocaine and Tetracaine Demi Gel
-Anesthetic Skin Gel 3+
http://www.fda.gov/foi/warning_letters/g6146d.htm

New England Compounding Center (Framingham, MA)
-Extra Strength Triple Anesthetic Cream
http://www.fda.gov/foi/warning_letters/g6147d.htm

Triangle Compounding Pharmacy (Cary, NC)
-Lasergel
-Lasergel Plus 10/10 ("associated with the death of a 22 year old female on January 5, 2005.")
http://www.fda.gov/foi/warning_letters/g6144d.htm

University Pharmacy (Salt Lake City, UT)
-Photocaine gel ("associated with the death of a 25 year old female on November 1, 2004.")
http://www.fda.gov/foi/warning_letters/g6143d.htm

For more on the possible risks of pain management with these and other methods, see this page on hairfacts:

http://www.hairfacts.com/tips/pain/painrisks.html

Laser hair removal may have pitfalls
Karl B. Hille, The Examiner
Feb 21, 2007
BALTIMORE - Cosmetic hair removal could be dangerous.

Procedures such as laser hair removal use prescription painkiller ointments, which often are not administered by a physician.

In the last six months, two women died from drug overdose after applying excessive amounts of lidocaine and tetracaine ointments followed by a plastic wrap to concentrate their effectiveness.

Full article

I believe both of those cases happened because of applying a very high compounded concentration of lidocaine, something like 10% instead of normal 4-5%, on large areas such as all over their legs and leaving it for a very long time. Yes, it's unfortunate that pharmacists are even mixing such compounds and handing it to customers without warnings of dangers.