Purpose

To determine if United HealthCare Insurance Company of New York (United) credited the Department of Civil Service (Department) for all rebate revenue due under its contract with the Department for selected drug manufacturers. The audit covered the period January 1, 2011 through December 31, 2013 and included a review of revenue from five drug manufacturers.

Background

The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to active and retired State, participating local government, and school district employees and their dependents. The Empire Plan is the primary health benefits plan for NYSHIP, serving about 1.1 million members. The Department contracted with United to administer the Empire Plan’s prescription drug program between January 1, 2008 and December 31, 2013. In accordance with the contract, United is required to negotiate agreements with drug manufacturers for rebates, discounts, and other considerations and pass 100 percent of the value of the agreements on to the prescription drug program. United subcontracted key functions of the prescription drug program to Medco Health Solutions, Inc. (Medco), including the negotiation and collection of rebates offered by drug manufacturers. In 2012, Express Scripts Holding Company (Express Scripts) acquired Medco. During our audit period, January 1, 2011 through December 31, 2013, United credited the Department for $139 million in revenue derived from agreements with the five drug manufacturers included in our audit.

Key Findings

We identified $710,284 in rebate revenue that was not credited to the Department. The audit found:

• United did not credit the Department $371,635 in rebates because manufacturer agreements utilized to obtain rebates for the Empire Plan’s prescription drug program did not meet or exceed Express Scripts’ best existing rebate agreements for other clients, as required.
• Express Scripts did not invoice, collect, or allocate $196,845 in rebates to which the Department was entitled due to errors in Express Scripts’ rebate process.
• Express Scripts retained rebates of $141,804 despite its contractual requirement to remit 100 percent of all revenue derived from manufacturer agreements to United, which should then be remitted to the Department.

Key Recommendations

• Review the $710,284 in rebates identified by this audit and credit the Department for the rebates, as appropriate.
• Formally instruct Express Scripts to remit 100 percent of all rebate revenues attributable to drug utilization under its subcontract with United, without exception; and credit the Department for all such rebates.

Other Related Audits/Reports of Interest

United HealthCare Insurance Company of New York: Empire Plan Drug Rebate Revenue (2013-S-41)
United HealthCare: New York State Health Insurance Program - Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (2012-S-10)
United HealthCare: New York State Health Insurance Program - Payments for Repackaged Drugs Dispensed Under the Empire Plan (2010-S-38)