Purpose

To determine the implementation status of the two recommendations made in our audit report, United HealthCare Insurance Company of New York: Empire Plan Drug Rebates (Report 2014-S-62).

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 New York State Department of Civil Service (Department) contracted with United HealthCare (United) to administer the Empire Plan’s prescription drug program from January 1, 2008 through December 31, 2013. In accordance with the contract, United was 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 Department.

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.

Our initial audit report, issued on December 28, 2015, identified $710,284 in rebate revenues that were not credited to the Department. We recommended that United review the $710,284 in rebates and credit the Department for the rebates, as appropriate. We also recommended that United 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.

Key Finding

• United officials made progress in addressing the issues we identified in the initial audit. This included the remittance of $338,649 in drug rebate revenue to the Department on April 28, 2016. In addition, United officials agreed to remit another $67,386 in rebate revenues. However, at the time of our follow-up, United had not yet made this credit to the Department. Officials stated the remaining rebate revenues that were identified in the initial audit, totaling $304,249, would not be credited to the Department. However, we maintain that the $304,249 in question should be credited to the Department. Of the initial report’s two audit recommendations, one was partially implemented and one was no longer applicable.

Key Recommendation

• 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

New York State Health Insurance Program: United HealthCare Insurance Company of New York - Empire Plan Drug Rebates (2014-S-62)