Purpose

To determine if United HealthCare (United) remitted all drug rebate revenue to the Department of Civil Service (Department) as required by the contract between United and the Department. The audit covered the period January 1, 2010 through December 31, 2013.

Background

The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to about 1.2 million 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 from January 1, 2008 through 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. For the audit period, January 1, 2010 through December 31, 2013, United remitted approximately $863 million in revenue that was derived from agreements with drug manufacturers to the Department.

The Department’s contract with United allows United to subcontract portions of its responsibilities. Accordingly, United subcontracted key functions of the administration 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. The subcontract required Express Scripts to remit 100 percent of all rebates collected from the manufacturer agreements to United. United, in turn, was required to remit those rebates to the Department.

Key Finding

• Express Scripts improperly retained $1,498,719 in NYSHIP rebates despite its contractual obligation to remit 100 percent of all revenue derived from drug manufacturer agreements to United. Consequently, United did not remit the $1,498,719 in rebate revenues to the Department.

Key Recommendation

• Remit the $1,498,719 in rebates identified by the audit to the Department.

Other Related Audits/Reports of Interest

United HealthCare Insurance Company of New York: Empire Plan Drug Rebates (2014-S-62)
United HealthCare Insurance Company of New York: Empire Plan Drug Rebate Revenue (2013-S-41)
United HealthCare: Payments for Fraudulent and Improper Claims Submitted by Davis Ethical Pharmacy (2012-S-10)
New York State Health Insurance Program: United HealthCare - Payments for Repackaged Drugs Dispensed Under the Empire Plan (2010-S-38)