I bought a universal tub spout that doesn't have a rear flang like my original. Do I need to make a modification using putty or something to protect from water getting down inside the wall. The new spout has a drain hole close to the wall and water does leak out.

Seal the pipe at the wall, then install the spout.

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The new spout has a drain hole close to the wall and water does leak out.

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This sounds like a slip on spout, (see image). If, after tightening the set screw it leaks from the rear then you have rolled the "O" ring out of position. Go back and take it off. Put the "O" ring back in position and take a piece of sancpaper and smooth off the ridge on the front of the copper stubout. Bevel it down so it doesn't catch the "O" ring and roll mnit out of position. Now reinstall the spout. Better now? Good luck, Tom