Purpose

To determine the extent of implementation of the five recommendations included in our initial audit report, Rebates and Discounts on Physician-Administered Drugs (2010-S-72).

Background

Physician-administered drugs, such as chemotherapy, are administered to patients by a medical professional in an office setting. To reduce Medicaid costs for prescription drugs, the federal government established the Medicaid Drug Rebate Program, which allows states to recover a portion of their Medicaid prescription drug costs by obtaining rebates from drug manufacturers. Medicaid programs also obtain savings through the 340B Drug Pricing Program, which requires drug manufacturers to discount, at the time of sale, the price of drugs sold to certain qualified providers. Providers are required to pass on the savings to Medicaid when they submit claims for 340B drugs.

Our initial audit report, which was issued on July 24, 2012, determined the Department of Health had neither maximized rebate collections on physician-administered drugs nor ensured the proper billing for 340B drugs. These problems cost the Medicaid program an estimated $24.3 million. We made five recommendations to the Department to recover Medicaid overpayments and improve controls to allow for additional rebate collections and ensure providers bill physician-administered drugs at the discounted drug acquisition cost.

Key Findings

Department officials made progress in addressing the problems we identified in the initial audit. However, significant Department actions are still needed as millions of dollars in rebates remain uncollected. From April 2011 through January 2014, the Department had not collected about $26.2 million in available rebates, due considerably to delays in fully implementing some of our initial report's recommendations. Of the five prior recommendations, two have been implemented and three have been partially implemented.

Key Recommendations

Officials are given 30 days after the issuance of the follow-up report to provide information on any actions that are planned to address the unresolved issues discussed in this report.

Other Related Audit/Report of Interest

Department of Health: Rebates and Discounts on Physician-Administered Drugs (2010-S-72)